Posts filed under ‘General’

Another CU Pioneer Stepping Aside

Linda Levy is about to become a key part of credit union history, at least for New York State institutions. As the New York Times reported in a profile over the weekend, she’s retiring as CEO from the credit union she started in 1982. In direct response to a lack of banking services in certain parts of the Lower East Side in Manhattan.

Today the credit union is $54 million assets and hasn’t lost one bit of its fighting spirit. It recently filed its own lawsuit, since dismissed, contending that President Trump acted illegally in appointing Mick Mulvaney as the acting head of the CFPB. It actively aided and encouraged the Occupy Wall Street movement, even though it meant losing a $5,000 donation from Goldman Sachs.

Her most important accomplishment though is the simple existence of the credit union. It was created in direct response to Manufacturers Hanover bank’s decision to close down a branch. The credit union was created to fill the void. The example it set provided a model for New York state to follow when it implemented the Banking Development District program which provides incentives to banks to set up branches in areas in need of banking services. Ironically, as a credit union, Lower East Side is not eligible to participate in the program, an oversight which continues to be a black mark on New York State’s banking development policies to this day.

Let’s face it, the environment in which credit unions are operating is changing. Increasingly, we seem to be living in a go big or go home environment, in which any credit union with less than $500 million in assets is struggling to grow.

It is also fair to say that not all credit unions think that supporting the CFPB or movements such as Occupy Wall Street are in the long-term interest of consumers. But let’s not ever lose sight of the fact that even as credit unions grow, they owe their existence to institutions from all across the state and country that were started to help the little guy. Today that little guy is still not all that attractive a customer for the largest banks that now dominate the financial landscape.

To be absolutely clear, you don’t have to be small to be a true credit union and there are many credit unions that both grow and help in ways that banks do not. After all, increased resources mean more can be done, ranging from helping out small businesses to providing fair, short-term loans. But let’s face it, one of the great challenges and responsibilities of the credit union movement is to retain the spirit and commitment of the Linda Levy’s of the world, even as it competes in an ever-changing and ever more competitive financial environment. It is that spirit, not a Federal tax break, which ultimately sustains the credit union movement.

Are Medallions Tied In With The Cohen Investigation?

Unless you spend your free time in a bomb shelter, a mile under the Earth’s surface somewhere in North Dakota, you know that Federal prosecutors took the unusual and dramatic step last week of obtaining a search warrant for the office of President Trump’s long time lawyer, Michael Cohen. My brother tipped me off to some news stories over the weekend reporting that the search warrants executed last Monday included a request for documents related to Cohen’s ownership of taxi medallion loans. For example, CNN is reporting that “Cohen has held numerous New York City medallions in his portfolio according to records, where the value has been diminished since the onset of Uber and Lyft.” A similar report was made by NPR over the weekend.

Is it only a matter of time before the medallion loans become the subject of cable news rants? Stay tuned.

April 16, 2018 at 9:31 am 1 comment

Gone Fishing!

Image result for gone fishing pictureYour faithful blogger has headed South for Spring Break. I’ll be back again next Monday with my thoughts on the state budget, the recent  court decision limiting NCUA’s field of membership expansion and some thoughts on why CRA Reform could become a big issue for credit unions.

 

April 2, 2018 at 8:37 am Leave a comment

Citibank Is Wrong To Take Stand On Gun Debate

On Saturday, as kids across the country advocated for gun control measures, Citibank became the first major financial institution in the country to announce that it was placing restrictions on gun retailers with whom it does business. In a blog accompanying the announcement, it explained that its new policy will require retailers to refuse to sell firearms to someone who hasn’t passed a background check, restrict the sale of firearms for individuals under 21 years of age, and not sell bump stocks or high-capacity magazines. Citibank has gotten positive reviews for its actions and even seen an uptick in deposits. I’m giving the bank the benefit of the doubt and saying it’s doing the wrong thing for the right reasons. Its decision to coerce gun retailers will make providing needed services more difficult for all financial institutions, including credit unions, while doing little to achieve needed gun control reforms.

First, let me explain where I am coming from. I actually agree with every policy Citibank is supporting and would like to see even more restrictions on gun use in this country. But the job of a credit union or bank is tough enough without taking sides on the hot button issues of the day. How many of the people applauding Citibank’s actions would applaud if Citibank decided that it was not providing banking services to anyone associated with the NFL so long as some of its players boycott the National Anthem? Perhaps Citibank should take a stand on abortion or even merchants who sell cereal loaded with junk.

My point is that the primary purpose of banking is to provide people and businesses with a safe place to put their money and take out loans; not to pass judgment on how they choose to make a living provided what they are doing is legal. Done properly, this is a noble calling. It helps people save their money and provides a ladder for upward mobility. Credit Unions have the especially unique responsibility of assisting people of modest means. But these worthwhile goals don’t give credit unions or any other financial institution a license to pass judgment on how our customers spend their money or grow their businesses provided that they are doing so legally and in a financially sound manner.

By taking a stand on such a high-profile issue, Citibank has opened the door to litmus test banking in which institutions will be pressured, not only to know their customers but to make sure that their customers only engage in activities that would be approved of at a dinner party in the Upper East Side of Manhattan. All financial institutions have just been put on a slippery slope that it will be almost impossible to get off.

Morelle To Run For Slaughter House Seat

Long-serving Democratic Assemblyman Joe Morelle, who represents the Rochester area, was greeted with a standing ovation as he entered the chamber yesterday following news that the second ranking member of the Democratic Leadership Team has announced he is a candidate to fill the vacancy caused by the recent death of Congresswoman Louise Slaughter. Morelle, who has been in the Assembly since 1990, has been the Majority Leader since 2013. A special election has not been called yet but at the very least a primary will have to be held. Either way, the winner will have to stand for reelection this November.

A special election would receive national attention. Slaughter survived a scare when she ran for reelection in 2014 and Republicans could view the 25th Congressional District as they head in to what promises to be a very tough battle to hold onto their majority in Congress.

 

 

March 27, 2018 at 9:15 am 1 comment

Why Friday Was A Good Day For Your Credit Union

It just got a little safer to call or text your members.

Although the ADA has captured most of the industries’ attention, it’s the Telephone Consumer Protection Act that will ultimately have the biggest impact on your operations, at least if regulators get their way. A statute that was intended to deter telemarketers from interrupting your day with unwanted solicitations has morphed into a litigation tripwire, potentially applicable to almost all businesses in America including your CU.

For almost three decades the TCPA has, with limited exceptions dealing with the collection of government debt and emergencies, made it illegal for persons to make phone calls or send texts without first getting the receiver’s permission when communicating with the help of an Automatic Telephone Dialing System (ATDS.)

What exactly is an ATDS? The TCPA defines it as “equipment which has the capacity—(A) to store or produce telephone numbers to be called, using a random or sequential number generator; and (B) to dial such numbers.” 47 U.S.C § 227(a) (1). In 2015 the FCC further refined this definition with a declaratory ruling explaining that an ATDS is any device that can potentially make random or sequential number generated calls with modifications. Just about every smartphone meets this definition since software can be downloaded giving it this capability.

This means that, unless they still use a rotary, just about every time your employees use a phone, chances are the TCPA is applicable. They better have to have a member’s permission before calling them or be willing to pay a $500 fine for each violation.

On Friday The Federal Court of Appeals DC ruled that the FCC went too far. CUNA and the bankers submitted a brief in opposition to the 2015 clarification.

“The Commission’s interpretation of the term ‘capacity’ in the statutory definition of an ATDS,” the Court decided, is “utterly unreasonable in the breadth of its regulatory inclusion. Nothing in the TCPA countenances concluding that Congress could have contemplated the applicability of the statute’s restrictions to the most commonplace phone device used every day by the overwhelming majority of Americans.”

That’s the good news. The bad news is I have read the decision twice and if I were a credit union, I wouldn’t change my call policies anytime soon. We are a long way from getting regulatory clarity as to when the TCPA applies and to what equipment. As the Law360 blog put it in its headline this morning:

“DC Circ. Delivers Relief, But Not Clarity, With TCPA Ruling”

March 19, 2018 at 10:01 am Leave a comment

Sex, SARs, And Politicians

I knew that would get your attention. I’ll be talking about that soon enough but first, here are some things of more immediate concern.

Senate Begins To Debate Regulatory Reform Bill

The first big test vote for S.2155 is expected to come today. Right now it appears that there is more than enough support to take up the bill on the merits, with Senator Mark Warner, (D-Va.) predicting that the vote for ending a procedural filibuster could pass with 70 Senators supporting it. While it doesn’t appear that New York can count on either of its Senators to support the measure, the increasing likelihood of Senate passage means that the attention will turn quickly to the House. Right now the usual suspects opposed to the bill are focusing on the fact that it raises the threshold before banks are subject to heightened oversight to $250 Billion as opposed to the well-deserved and much needed mandate relief it would give to credit unions and community banks.

Ready Or Not The Amazon Bank Is Coming

Amazon’s well-coordinated, ultimately game changing entry into the banking industry is set to take another step in the coming months. This morning’s WSJ is reporting that Amazon is in talks to open up checking accounts with JPMorgan. As the Journal explains, “With millions of customers, troves of data, access to cheap capital and seemingly unlimited leeway from its investors to enter new businesses, Amazon is a fearsome competitor. It’s more-than $700 billion market value eclipses the combined value of JPMorgan and Bank of America Corp, the two biggest U.S. banks.”

Remember when Walmart was the latest unstoppable threat to capitalism as we know it? Remember the fierce backlash against Walmart’s attempts to expand into banking services? Perhaps it’s just a reflection of changing times but I don’t sense a similar backlash this time. This intrigues me because with 38% of millennials saying they would trust Amazon with their money, the company could do to retail banking what it’s done to retail.

Sex, SARs, And Politicians

Let’s say you have a member who is a lawyer working almost exclusively for the Republican candidate for President. Less than two weeks before the election he withdraws $130,000 and wires it to a lawyer representing a porn star. Is this worthy of a Suspicious Activity Report? Would you go back and review the transaction if you found out that the payment was part of a Non-Disclosure Agreement? It appears that at least for one bank the answer is yes. The WSJ is reporting this morning that a SAR was filed by at least one bank where money was sent to Stormy Daniels who was allegedly threatening to disclose the fact that she had an affair with President Trump after they met at a celebrity golf tournament.

You would think that politicians would learn from the mistakes of other politicians. Remember it was a SAR which helped uncover then Governor Elliot Spitzer’s rendezvous with Client Number 9.

March 6, 2018 at 9:14 am Leave a comment

Six Things You Need To Know From Last Week

Because of a tight schedule at CUNA GAC and some wrath-of-God weather at the end of the week, yours truly was only able to get out one blog last week. I have a lot to get off my chest and the following is a list of topics I reserve the right to follow up on in the coming days and weeks.

More Taxi Medallion Fallout

In case you missed it, First Jersey Credit Union was shut down by state regulators and the NCUA on Wednesday. Its assets were assumed by USAlliance Federal Credit Union based in Rye, New York. The credit union was done in by an excess of medallion loans. Medallions are currently valued well under $200,000. According to its website, the credit union is open to “Anyone who lives, works, worships or attends school in Bergen or Passaic County, areas of Essex, Hudson, or Union County and family members of existing members, is eligible for membership.”

CFPB Requests Information On Its Information Collection Processes

As someone who has been harshly critical of the CFPB’s use and publication of consumer complaints, this announcement warms my heart. “The Bureau of Consumer Financial Protection (Bureau) is seeking comments and information from interested parties to assist the Bureau in assessing potential changes that can be implemented to the Bureau’s public reporting practices of consumer complaint information.” The Bureau will be accepting comments for 90 days after publication in the Federal register.

Another CU ADA Lawsuit Dismissed

Let’s face it. Judging by the constant discussion of the issue in Washington last week, the industry is in a foamed-mouthed frenzy over ADA website lawsuits. So I’m happy to report that the argument that anyone seeking to sue a credit union must demonstrate they could become a member gained steam recently with another case out of Federal Court in Virginia, dismissing a lawsuit on standing grounds.

Study Calls For Review of BSA “Derisking” Practices

Are the risks of non-compliance with the Bank Secrecy Act severe enough that it is actually making it difficult for persons who live in high risk money laundering areas to obtain banking services? That is the suggestion of this GAO report which analyzed the availability of banking services along the Southwest border. In the coming months, if you see FinCEN reexamining some of its requirements, or regulators taking a closer look at financial institutions which choose not to provide banking services rather than comply with the BSA, this is why.

As Interest Rates Rise So Do Banker Complaints About Municipal Deposits

That is the gist of this article in the American Banker, which reports that banks are bracing for Municipalities to demand more deposit interests now that interest rates are on the rise. It seems to me that states like New York could benefit from increasing the number of institutions that municipalities could turn to for placing their money. After all, if banks truly don’t want municipal business, I’m sure we could find some credit unions that do.

And The Oscar Goes To…

 If you get a chance, you should watch the frontline documentary “Abacus: Small Enough To Jail,” which was nominated for an Oscar. It details the aggressive efforts of the Manhattan DA to prosecute the alleged malfeasance of a small community bank while doing nothing to take on the larger institutions responsible for the mortgage meltdown.

 

March 5, 2018 at 9:29 am Leave a comment

The Debt Shall Die With the Debtor, If You Are Lucky

Even though I have arrived in my favorite alternative reality universe called Washington, D.C., the issue that I want to bring to your attention this morning has to do with a proposal by
New York’s Department of Financial Services (DFS). Governor Cuomo has proposed that the sellers of life insurance and annuity must offer products that are in the “best interest” of the consumer. The Association has written a comment letter critical of the proposal. Here is why.

Now is not the time to be making it more difficult for consumers to access financial products that help protect their families if they die with bills to pay. According to one survey, 73% of Americans are dying more than $60,000 in debt. This is not all credit card debt. More and more people are getting 6 year car loans and home equity loans later in life. In fact, if this trend continues, the golden years will be anything but for an increasingly large number of ostensibly middle-class Americans.

It’s not a coincidence that credit unions have offered credit life policies for almost as long as they had been in existence. Properly managed, these policies help consumers by keeping money in the family. They are not a panacea for the disturbing dying with debt trend we are seeing, but they are one part of an overall solution. If my wife and I feel that our children should be protected against certain collateralized losses, then we should have that option.

To be clear, the Governor’s proposal does not ban the sale of this or any other insurance product. But take a look at the nuanced disclosure and underwriting requirements. Credit unions certainly want to make sure that their products work for their members. However,many credit unions will simply decide that the cost and risks of providing this insurance isn’t worth it. In other words, this is another example of credit unions being penalized because of the misconduct of other larger institutions. Fortunately, DFS still has time to make changes exempting credit unions from this proposal.

February 26, 2018 at 7:32 am 1 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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