Posts filed under ‘General’

Congratulations…I Guess

My wife accuses me of being a beater of dead horses. That’s not true all the time but…

Yesterday, the NCUA announced that it was officially closing down the temporary Corporate Stabilization Fund and setting the normal operating level for the Share Insurance Fund at 1.39%. The bottom line is that if all goes as planned, credit unions will receive what Board member Metzger gushingly referred to as a “historic rebate of more than $736 Million” in the 3rd Quarter of 2018. Here is a temporary rule describing how the funds will be distributed on a pro-rata basis.

Here are some of the Board member quotes which help explain why I am in the minority of those who feel that credit unions should be very cautious in planning how to spend their largess. As explained by Chairman J. Mark McWatters, “While we currently project surplus equity, I want to be clear that the equity ratio could decline between now and the end of the calendar year if additional reserves for credit union failures are needed or if other unexpected developments occur that would significantly affect the equity ratio. This could reduce or eliminate the actual distributions that would be paid. However, to the extent actual performance of the Share Insurance Fund permits, the multi-year process of distributing surplus funds to insured credit unions would therefore begin in 2018.”

Chairman Metsger, at least in his written statement, was much less reserved and sounded very much like a politician taking a victory lap before he heads off into the credit union sunset.

What Chairman Metsger was referring to is that, according to at least one hypothetical presented by NCUA at yesterday’s Board meeting, if the Stabilization Fund was not closed in 2017 and the Stabilization Fund merged into it, the Insurance Fund operating level would have been as low as 1.18%. Remember that the Insurance Fund can be no lower than 1.20%. In other words, credit unions would have had to pay a premium to ensure that the Insurance Fund stays at the normal operating level.

So here is my point. While credit unions deserve a tremendous amount of credit for hard work and sacrifices they made in paying for the corporate meltdown, and I have consistently said that NCUA did a phenomenal job in aggressively pursuing novel litigation against the world’s largest investment banks, there are still plenty of warning signs out there. We have the medallion situation and an overheated economy which, by historic standards is nearing the end of its expansion. I hope we don’t look back a year or two from now and realize that the money being returned to credit unions today could have been put to better use hedging against these uncertainties.

More BS (A)

Here we go again. Financial regulators in the Department of Justice made big headlines yesterday by announcing a $185 million civil penalty to be imposed against US Bank for “willful violations” of the Bank Secrecy Act. Take a look at what the bank did. It intentionally choice to break the law in a way that was so blatant that a compliance specialist a week out of CUNA Compliance School would have known something fishy was going on. To be crystal clear, if a credit union or small community bank for that matter did what this bank did, it would be out of business and its CEO would be retaining a white-collar defense lawyer. In contrast, in the too big to prosecute world in which we live, executives get to write a check, do a mea culpa and go about their day. This is utter garbage.

On that happy note, enjoy the long weekend.

February 16, 2018 at 9:12 am 1 comment

The Incredible Disappearing Bank Branch

I know what you are going to tell me; surveys indicate that your members still want their bank branches but let’s face it, they are turning into awfully expensive and increasingly risky security blankets for your aging membership. According to the Wall Street Journal,  the 12 month period ending in June 2017 saw the biggest decline in bank branches in decades. The biggest banks are closing shop in both suburban and rural areas and regional banks are selling property they once were holding for expansion.

In my ever so humble opinion we are seeing the signs of a fundamental shift in the way services are provided. Technology has made it easier to cost effectively provide banking services in underserved areas. In addition, take a look at how Amazon is revolutionizing the food shopping experience and the question is not if, but when that bank branch is going to be obsolete.

This is why I think credit unions are wrong to dogmatically oppose Fintech partnerships where the Fintech is a bank. Technology makes it possible to provide banking services over a virtual community regardless of where a credit union is located. A physical branch just gets in the way.

February 8, 2018 at 9:44 am Leave a comment

What Makes A Catch A Catch In Football Plus Some Compliance Stuff

Image result for ertz catchBefore I do what I get paid to do, I have to explain to you why I was screaming out Al Michaels and Cris Collinsworth last night as they were mangling the NFL Rule Book. Simply put, Zack Ertz clearly made a catch when he scored the go ahead touchdown against the Patriots last night in what I consider the most entertaining Super Bowl I’ve ever watched.

There actually is a compliance component here. The NFL Rule Book is more complicated than the criminal code but refs are expected to make split second decisions in front of packed stadiums and about half a billion people watching on TV.

Here’s the allegedly controversial play. If you watch it you will see Ertz catches the ball, takes a step and a half and then dives into the end zone. Here how Rule 8-1-3 defines a catch: A player who makes a catch may advance the ball. A forward pass is complete (by the offense) or intercepted (by the defense) if a player, who is inbounds: (a) secures control of the ball in his hands or arms prior to the ball touching the ground; and (b) touches the ground inbounds with both feet or with any part of his body other than his hands; and (c) maintains control of the ball after (a) and (b) have been fulfilled, until he has the ball long enough to clearly become a runner. A player has the ball long enough to become a runner when, after his second foot is on the ground, he is capable of avoiding or warding off impending contact of an opponent, tucking the ball away, turning up field, or taking additional steps.”

Now look at what happens on the play. Ertz clearly catches the ball and then takes a step and a half before diving for the end zone. Now contrast this with what happened in the Pittsburgh game when Jesse James was correctly ruled not to have caught the ball. He is lunging for the end zone at the same time he is catching the ball, which means that in order for him to show that he has possession he has to maintain the ball even after he hits the ground. Now here’s what I get paid to talk about.

Fed Reserve Slams Wells Fargo

In the better late than never category, Janet Yellen in one of her last official acts of Fed Chair, fined Wells Fargo for its gross misconduct in opening up fake accounts. Under the penalty, the Fed will “restrict the growth” of the bank until it demonstrates that it has new controls in place. The bank has also agreed to replace three Board members by April and a fourth by the end of the year. This is exactly the type of penalty which we should have seen more of in the last ten years. It’s also nice to see that Boards are being held to account for their lack of oversight. The real question is, is this a signal of a more aggressive posture by the Fed Reserve Board going forward or is it simply one last shot by Chairman Yellen as she leaves.

Court Dismisses Lower East Side People’s Case

 A Federal District Court in New York dismissed a lawsuit by Lower East Side People’s Federal Credit Union in New York City. The credit union claimed that the Trump Administration acted illegally when it named Mick Mulvaney as the Acting Director of the CFPB. The court ruled that the credit union lacked standing (i.e. it could not prove that it was hurt enough to challenge the appointment.)

February 5, 2018 at 9:54 am Leave a comment

Three Things You Should Ponder As You Start Your Credit Union Day

When It Comes To ADA lawsuits, is the best defense a good offense?

The ever informative CUtoday features an article this morning quoting Becky Landis, CEO of State Highway Patrol FCU in which she argues that the only way credit unions can stop “frivolous” ADA website lawsuits is to litigate. “Yes, you could say that it might be cheaper and less costly for the credit union to roll over and settle, but am I really doing justice to my membership by doing that?”

Great question and I know that it’s one that many credit unions are wrestling with these days. There is certainly a time and place to push back against these lawsuits but just remember that not all of them frivolous. They are annoying, obnoxious and arguably of little utility but a good faith argument can be made that the ADA applies to your website. The real question is, in circumstances where your website is ADA compliant or will be in the near future, should you hand out settlement money just to avoid litigation? There are some great legal issues that have to be litigated if the industry is going to get clarification as to what does and does not constitute as ADA compliance.

DFS Issues Cybersecurity Reminder

New York’s Department of Financial Services issued a reminder earlier this week that institutions subject to its cybersecurity regulations have until February 15th to certify that they are compliant with this regulation. In addition, for those of you subject to DFS Audits, the department announced that proof of your cybersecurity compliance will be one of the issues addressed in those “first day letters” you receive prior to an examination.

Interestingly, a federal credit union that provides mortgages received this notice from the DFS. If other federal credit unions have received a similar notice, please let the Association know.

A Kinder, Gentler CFPB

The amazing makeover of the CFPB continued yesterday. In an op-ed piece in the WSJ, Acting Director Mick Mulvaney says the following: “The CFPB has a new mission: We will exercise, with humility and prudence, the almost unparalleled power Congress has bestowed on us to enforce the law faithfully in furtherance of our mandate. But we go no further. The days of aggressively “pushing the envelope” are over.”

By the way, with his strict adherence to the plain reading of statutes and advocacy of limited government, Mulvaney sounds very much like NCUA’s Chairman J. Mark McWatters, who is widely rumored to be a top candidate to take over the Bureau.

 

 

January 24, 2018 at 8:27 am Leave a comment

High Noon For Medallions?

It appears that High Noon is fast approaching for the NYC medallion industry.

An auction is scheduled for later today which will give us further insight into just how much value New York City yellow cab medallions still have; it follows an auction On January 11 in which six medallions foreclosed on by a New Jersey credit union sold for $185,000 apiece.

To put this in perspective, the latest auction information I found on the NYC Taxi and Limousine Commission website reported medallions selling at auction for over $2 million in March 2014 for a mini fleet of taxis. .  And remember, it was not that long ago that a medallion foreclosure was unheard of.

The rules for this afternoon’s auction also underscore just how far the industry has fallen. Financing of bids is not being allowed.  In addition, the credit union has the right to determine if the “best bid” is for a group of medallions or for each one individually.

With the pace of sales appears  quickening and more prices  publicly available,  individual  credit unions and the industry writ large should soon  have a solid idea of just how much the rise of Uber and Lyft will cost.  This could impact everything from how much money examiners expect credit unions holding medallion loans to put aside to your credit union’s contribution to the Share Insurance Fund. Stay tuned

January 16, 2018 at 9:17 am Leave a comment

Employers Given Feb. 15 Deadline To Update Tax Tables

Hello folks,

This morning I’ve decided that the most important thing I can tell you about is a change to the  tax table.   Take some coffee; here goes.

Moving at the speed of a midterm election, the Trump Administration yesterday unveiled new withholding tables to be used by employers no later than February 15 2018.  The tables reflect the rate changes made in the tax cut legislation passed by Congress in December. Many voters, I mean employees, wouldn’t otherwise see the direct benefit of the tax cuts until they file their tax returns next year.

The W-4 is the form you filled out when you started your job in which you indicated the federal income tax you wanted withheld from your paycheck. You might not have bothered looking at it since then and you should take this opportunity to review your withholdings and see if it is time to make some changes. In a reflection of just how quickly the Treasury Department wants people to see the impact of tax reform on their paychecks, the IRS is coming out with the withholding tables even as it has not completed an update to the W-4.

It’s not clear to me what would happen to employers who don’t update their withholding by the deadline. In a press release the IRS says that employers “should continue to use the 2017 withholding tables until implementing the 2018 withholding tables.” But by publicizing these changes don’t be surprised to see a lot of employees giving their paychecks extra scrutiny in the coming weeks.

By the way, for those of you watching the football game on Saturday night don’t turn the game on late. It’s going to be over awfully quick.

 

 

January 12, 2018 at 9:09 am Leave a comment

Why Aren’t More People Talking About This Tax Change?

Although the limits on state and local property taxes has gotten most of the attention, one of the amendments to the tax code will have a potentially large impact on credit unions has to do with loans taken out based on a home equity. Among the changes advanced by the “Stable Genius” running the country – his words not mine – and his acolytes, is one that does away with the deductibility of home equity loans.

I’m really surprised this hasn’t gotten more attention. It means that the member who has been planning to help pay for their kid’s education by taking out some of the equity on their home, or hopes to pay an unexpected medical bill is in for a rude awakening.

While Congress has completely done away with the deductibility of home equity interest, it has also reduced the amount that can be deducted for so-called “acquisition indebtedness.” As the conference report on the tax bill explains, “Acquisition indebtedness” generally means debt incurred in, or that results from the refinancing of debt incurred in, “acquiring, constructing, or substantially improving” a qualified residence. Id. § 163(h)(3)(B)(i). This means that there will still be at least limited interest on the part of some members who are doing a major construction or remodeling job. It also means that you will get members asking their front line staff if they feel the purpose of the loan will qualify for a tax break. Of course my advice is not to answer that question. I’m just here to tell you that your employees will be getting it.

Interestingly, the provision comes at a time when consumers are once again binging on consumer credit. According to today’s Wall Street Journal, “On average, US consumers are living beyond their means, as spending exceeds income.” What’s more according to the Journal, “A sizeable portion of this increase in consumer debt has been funded by credit unions, which made a big push into the sector after the recession.” I’m a big believer that where there is a demand there will be a product design to meet that demand. Remember that the growth of home equity lending is driven in part by Congress’ decision to end the deductibility of credit card debt in the mid 80’s. Creative lawyers and lenders will ultimately always stay one step ahead of the tax code.

Remember, that all this comes with the usual caveat that it is my father who was the family accountant and not me, so please run this by a tax professional.

 

January 9, 2018 at 8:58 am Leave a comment

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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