Posts filed under ‘General’

Legislature To Pass Coronavirus Legislation

Good morning folks.  If all goes according to plan, the legislature is scheduled to convene today for the first time since two Assembly members contracted the coronavirus.  In normal times, we would be in the homestretch of intense budget negotiations with the state’s fiscal year scheduled to start on April 1st.  But these are not normal times. Instead, one of the most challenging issues facing legislators is how to convene safely.

When the legislature does meet, one of the bills it has tentatively agreed to take up provides leave for all employees who are either subject to  a mandatory or precautionary order of quarantine or isolation issued by New York State, or need to care for someone who is.  This legislation is part of a larger bill mandating that all employees be provided with sick leave.

The Governor in this year’s budget proposal originally proposed the sick leave legislation.  It implements a sliding scale of sick leave benefits depending on the size and income of the employer.

On one end of the scale, employers with four or fewer employees with a net income of less than $1 million dollars would have to provide 40 hours of unpaid sick leave in the calendar year.  In contrast, employers with 100 or more employees in any calendar year would have to provide at least 56 hours of paid sick leave.  This is a tentative deal and if there are changes before the bill is passed, we will let you know.

Incidentally, if the legislators are looking for helpful bills to pass in this time of crisis, one measure they should consider is legislation authorizing remote notarization services.  Many other states already have legislation providing for remote electronic notarization. In tomorrow’s blog, I will provide you all with some information about the impact that the virus is having on mortgage lending – and options that policymakers have to streamline the lending process.


March 18, 2020 at 11:16 am Leave a comment

Seven Ways COVID-19 Is Impacting Your Operations

Greetings from the state that is number one in COVID-19 cases; as of Sunday afternoon.

There have been an amazing number of developments affecting your credit union over the weakened.  I am emphasizing those that you may not have heard about yet.

New York Delays New Servicing Regulations

I actually have some good news to tell you this morning.  I found out over the weekend that New York’s  Department of Financial Services has issued an emergency regulation putting on hold for an additional 90 days new servicing regulations which many credit unions and mortgage bankers were wondering how they were going to comply with.  In announcing the delay DFS Superintendent, Linda A. Lacewell explained that “the volume and complexity” of the new regulations, especially since they require new programing and disclosure requirements for home equity lines of credit, has led the department to conclude that businesses need more time to comply, particularly at a time when they have to concentrate on the pandemic.

A special shout out to the New York Mortgage Bankers Association, which did a great job alerting stakeholders to the difficulties in complying with this regulation.

State Issues COVID-19 Emergency Relief Order

New York’s Department Of Financial Services issued an order exempting state licensed and state chartered financial institutions including state chartered credit unions from some regulations with which they would normally have to comply.  Most importantly, these institutions can now close and relocate branches and offices without first providing notice to DFS.  In addition, licensed individuals such as mortgage originators can work from home with the understanding that they are still subject to New York’s regulations.  Entities are still expected to inform New York State of any relocations.

Additional Developments…

Also over the weekend, the Governor asked businesses that could do so, to voluntarily shut down and allow their employees to work from home.

Finally, the state has imposed limits on the size of mass gatheringsHere is his first order.  This situation is very fluid and we may see further reductions in the authorized size of mass gatherings.

Fed Gone Wild

Just how low can the Fed go?  The Federal Reserve Open Market Committee announced yesterday that it was slashing the Federal Funds rate to zero (!) and “expects to maintain this target range until it is confident that the economy has weathered recent events…”

When the history of this pandemic is written, it will be marked as the end of a unique period in American history during which the Federal Reserve exercised a decisive impact on the American economy.  In 1987, Alan Greenspan calmed the stock market following its dramatic decline; it was the Fed that helped minimize the impact when the dot-com bubble popped; and Ben Bernanke mitigated the impact of the Great Recession of 2008 by going on a mortgage buying binge.

My how times have changed.  Interest rates are already too low to have much of a stimulus impact and they will have no effect in coxing Americans out of their homes to hoard more toilet paper.

The Fed did take one important step recently.  It announced a massive infusion of funds into the repurchase market.  It also announced it would accept a broader range of securities for these arrangements.

The repurchase market plays an absolutely crucial role in the economy.  It is the mechanism by which the largest of the large financial institutions manage their liquidity on a daily basis by getting short-term loans of cash in return for collateral such as bonds.  The system has had some hiccups over the past year and no one quite knows why.  Stay tuned.

With the Fed out of bullets, it is up to Congress and the President to come together and agree on a stimulus package.  On Saturday, the house took the first step in this legislative dance by passing legislation which extends limited family leave protections to some employees and increasing funding for programs such as SNAP.  The precise impact of this proposal is being debated this morning, with critics already complaining it contains too many loopholes to help most workers.  If, as expected, the Senate passes the bill this week and the President signs it, the real contentious debate gets started.  Both sides are already jockeying for position over what should be included in a larger stimulus package.

March 16, 2020 at 10:38 am Leave a comment

Can you Postpone Your Annual Meeting?

Judging by the number of people that asked the Association this question yesterday, I would hope that NCUA would shortly be coming out with guidance and other related issues. That being said, here is my opinion, which is of course, not a substitute for consultation with your attorney.

  1. Can my credit union postpone its annual meeting?

Yes it can. Under both Federal and State law, board members and officers have a fiduciary obligation to work in the best interest of the credit union (see Grand Union Mount Kisco Employees Fed. Credit Union v. Kanaryk, 848 F. Supp. 446, 457–58 (S.D.N.Y. 1994); 12 CFR 701.4. Furthermore, while NCUA decided to put its bylaws in its regulations a little more than ten years ago, it is important to understand that the bylaws are ultimately a framework in which the board carries out its obligations.

Against this backdrop, it is my humble opinion that while you should hold your annual meeting on the date and time prescribed in your bylaws whenever practical, you have the obligation to change plans when doing so is mandated by common sense public health concerns. In this case you have the right and maybe even the obligation to postpone the annual meeting to confront a public health crisis. After all, one of the goals of NCUA is to encourage participation in annual meetings and as a board member you have an obligation to make decisions which you believe are in the best interest of your membership.  No one should have to choose between putting their health at risk and attending a meeting which can be postponed.

2. Can we hold a virtual meeting?

Unfortunately the answer to this question is not as cleat cut as it should be. NCUA recently updated its bylaws and explicitly rejected a proposal to give credit unions the option of holding virtual meetings. The preamble to the final rule explained that a movement towards completely virtual meetings could actually disenfranchise some members. CUNA has requested guidance from NCUA on this very issue. For state chartered credit unions in New York you have more flexibility to interpret and implement your bylaws. I would use that flexibility to permit virtual meetings in this particular circumstance.

3. If we suspend the annual meeting, how will this impact our board elections?

That depends. If your credit union accepts nominations to the board at the annual meeting then I would argue that the election can’t be held until the annual meeting. After all, the board has an obligation not to disenfranchise its members. But if you’re like the credit union I was talking to yesterday, nominations can only be made by the board nomination committee and by petition. The time period for these nominations has passed and only incumbent board members are seeking reelection. In this case there is no need to extend the nomination period simply because the annual meeting will be postponed. After all, members had adequate time to run for the board and chose not to.

These are unique times. School districts are shutting down. Entire countries are being quarantined and President Trump is actually reading entire speeches off a tele-prompter. The purpose of this blog is not to provide definitive answers where there are none, but to underscore the flexibility your credit union has to implement its regulations in a way which both is true to the intent of your bylaws while being consistent with your obligations to work in the best interest of your members. This is the prism through which I believe regulators should, and courts ultimately would, examine your decisions.

March 13, 2020 at 9:52 am Leave a comment

Tawdry Misconduct At NCUA Uncovered By Inspector General

Reports of marijuana consumption, visits to strip clubs and possible sexual harassment involving NCUA’s office of General Counsel are some of the highlights from a report released by the Office of Inspector General on Friday. Some news just speaks for itself.

 Reach Out And Block Someone

There are many times when legislators and regulators use a chainsaw when they need a scalpel. The leading example of this unfortunate impulse continues to be the TCPA and its regulatory framework which not only take aim against obnoxious robo-calls but are also making it difficult for legitimate businesses including banks and credit unions to engage in rudimentary member communication.

Just how big a deal is this? Recently NAFCU and CUNA signed on to a letter with representatives of several other industries highlighting the practical consequences of the FCC’s overzealous implementation of the fatally antiquated federal statute.

According to the letter, callers and consumers “are not receiving proper notice or procedural protections with blocked or mislabeled calls. If left unchecked, these issues will have significant negative impact on consumers…” For example, the letter noted that two factor identification requests are being blocked as are security related messages and fraud alerts. These aren’t all that useful hanging out in your SPAM folder.

Of course all this was predictable. Remember that this past summer the FCC rushed out regulations giving telephone companies greater protections to more aggressively block suspected robo-calls. At the time credit unions and others warned that this proposal would result in unintended harm to consumers. The FCC went ahead with the rule but coupled it with a mechanism to create a “safety valve” to ensure that consumers could alert the FCC to the fact that legitimate calls were being blocked. The letter includes suggested modifications to the blocking techniques of phone companies. Hopefully some of these will be implemented but I’m not holding my breath.

Get Ready for One Wild Financial Rollercoaster

I’ve included a graph of the Ten Year Treasury Note which continues to drop lower and lower and lower. Combine this with a precipitous drop in oil price and the spreading coronavirus pandemic and today isn’t a good day to check out how your 401k is doing.

March 9, 2020 at 9:19 am Leave a comment

No More Ignoring The Coronavirus

Governor Cuomo’s announcement that New York now has its first confirmed case of the coronavirus is simply the latest in a deluge of news indicating that the virus may very well be coming to a credit union near you in the coming months. In addition to the Governor’s announcement, the L.A. Times reported on West Coast cases which included the first case of “community spread”.

All this has me more than a little surprised that we haven’t seen the NCUA coming out with the type of guidance it has released in the past explaining the steps that they expect credit unions to be taking in preparation for a potential pandemic. That being said, any business that isn’t preparing for dealing with a chronic long term public health threat which has already impacted the economy isn’t doing its job.

Against that backdrop in previous guidance responding to earlier potential pandemics NCUA explained to credit unions: that they should have a pandemic preparedness plan to “reduce the likelihood that operations will be affected by a pandemic event” and that the plans should include a comprehensive listing of facilities systems or procedures to continue critical operations “if a large number of staff are unavailable for prolonged periods”.

In an ideal world all you should be doing right now is dusting off your existing protocols since NCUA expects you to be testing your pandemic preparedness on an ongoing basis as well as periodically updating your plans. On the bright side, technology has moved so rapidly in recent years that there are new ways of keeping your members tethered to your branch even if they feel like minimizing the amount of time they spend in public spaces. For example, remote deposit capture in conjunction with your existing online banking ensures that the credit union can continue functioning even if it had to close down a branch for a few days.

Even if the coronavirus threat is ultimately exaggerated, its economic impact is real. The yield on the Ten Year Treasury closed at a miniscule 1.082 on the 28th and Bloomberg Radio is reporting this morning that there is an increasing likelihood that the Fed will make an emergency rate cut of .25%. Furthermore, depressed corporate earnings triggered by China’s aggressive attempts to curtail the virus have already impacted corporate earnings.

All this means more uncertainty for your members and your credit union. In this environment, good luck predicting what conditions you will be waking up to six months from now.

A Legal Giant Steps Down

After 25 years on the bench, Judge Judy is hanging up her gavel at least for a year. Given the current state of politics in DC is it only a matter of time before we hear her name being floated to fill a future Supreme Court vacancy? After all, she had great ratings.

March 2, 2020 at 9:33 am Leave a comment

NCUA’s Bulk Sale Of Medallions Raises As Many Questions As Answers For Impacted CUs

In 1975 the New York Post responded to the news Gerald Ford had rejected New York City’s request for a financial bailout with the headline: Ford To City “Drop Dead”.

I was thinking of this headline as I saw the news that NCUA has finalized a bulk sale of NYC medallion loans to private investor Marblegate Asset Management LLC. The sale will have an impact on the industry as a whole, those individual credit unions holding participation interests, borrowers looking to refinance and the efforts of policy makers seeking a solution.

While we can debate the merits of NCUA’s decision, what is abundantly clear is that the agency wanted out of the medallion market and the potentially high profile role it would have had to play as New York City and potentially the legislature look for ways to help out underwater taxi medallion owners/drivers. As it explained in this Q&A

“After thorough research and careful consideration, the NCUA determined this sale was the most appropriate action to meet its statutory obligation under the Federal Credit Union Act to achieve the least long-term cost to the National Credit Union Share Insurance Fund.

Of equal importance, this sale also provides borrowers and their families greater certainty about the management of their loans. Private entities have specialized skills and greater resources and flexibility to work with borrowers in ways the NCUA cannot.”

Now we have to see how great an impact this has on the credit union industry as a whole as well as those individual credit unions holding interest in medallion loans. Suffice it to say, we are in unchartered territory. Although the NCUA would not disclose the sale price, the WSJ reported Wednesday that the NCUA portfolio included 4,500 loans, 3,000 of which were New York City medallions. The bulk sale was for $350 million. Although NCUA stressed in the above Q&A that the sale does not affect the “carrying values” of the medallions—an accounting term-of-art—it’s important to keep in mind that the fair market value of assets is often different than the “carrying value” of the assets.

Both CUNA and the New York Credit Union Association urged NCUA not to go forward with a sale precisely at the moment when stakeholders in New York are seeking to devise a framework to purchase the loans and presumably stabilize the medallion prices. While NCUA’s sale does not preclude further efforts, press reports indicate that Marblegate is not buying the medallions to sell them but to see if it can modernize the medallion industry into a viable competitor against Uber.

Finally, according to NCUA, Marblegate has committed to working with borrowers. Stakeholders have grumbled for more than a year that NCUA has not been flexible enough in modifying loans. Perhaps with the loans in private hands this will change.

February 20, 2020 at 10:07 am Leave a comment

Gillibrand Proposes Data Protection Agency

Data protection is the legislative equivalent of the weather: everyone talks about it but no one does anything about it. So I was pleased to see that Senator Gillibrand unveiled a bold proposal yesterday to create a Data Protection Agency.

As of ten minutes ago the text of the bill was not yet available online but, according to her press release the DPA’s core responsibilities would be giving Americans greater control of their own data by creating and enforcing data protection rules—ensuring fair competition “within the digital marketplace” and preparing America for the Digital Age by advising Congress on emerging privacy and technical issues. This last proposal is a bit unsettling since I kind of thought that Congress knew we were already in the Digital Age and was reading up about it.

You don’t have to be Nostradamus to figure out that the agency would promulgate a California/European regulatory regime on companies and crackdown on potentially anti-competitive practices of Facebook, Google and Amazon. It would be overseen by a Director serving a five year term.

Now it’s way too early to say whether this is a good or bad idea. But let’s be honest, given the current political divide in Congress, this proposal has as much chance of becoming law any time soon as Donald Trump does of giving up tweeting for Lent. But in the eight years since U.S. Attorney for the Southern District in New York, Preet Bharara, warned of a WWII style cyber-attack against this country, the situation has only gotten worse, not better. We’ve grown so used to the idea of cyber breaches that news that the Chinese government stole personally identifiable information from almost half of America’s citizens is met with a shrug. Anything that wakes us up and gets us talking about taking on data protection issues on a national level is a step in the right direction even if some of the specifics need to be refined.

On that note, enjoy your Presidents’ Day Weekend. I will be back on Tuesday.

February 14, 2020 at 9:09 am Leave a comment

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Authored By:

Henry Meier, Esq., Senior Vice President, 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. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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