Posts filed under ‘General’

More Good News On ADA Litigation

Carroll v. ROANOKE VALLEY COMMUNITY CREDIT UNION is the latest victory for credit unions arguing that the individuals seeking to bring claims against credit unions because their websites violate the ADA lack standing to bring these suits.

This case involved a blind individual who argued that the credit union’s website. Among other things lacked alternative text which prevented visitors from obtaining vocal descriptions of the credit union’s graphics. However, the court refused to address the merits of the claim, concluding that “Carroll does not allege that he actually uses or plans to use RVCCU’s services. And it is implausible that he would travel more than 200 miles to visit a RVCCU physical location when he has never done so before, has no immediate plans to do so, and falls outside RVCCU’s limited membership field.”

This case is noteworthy because the court rejected the plaintiff’s argument that even though he was not within the credit union’s field of membership, he nonetheless had standing as a “tester.” Under this argument, standing is available to test compliance with the ADA on behalf of others who might be eligible to join the credit union. The court quickly rejected this argument concluding that one status as a “tester” does not by itself establish standing.

Keep in mind that this is the latest example of a very good decision for credit unions that is only binding on credit unions located in the Fourth Circuit, which includes Virginia, Maryland and parts of North Carolina. We haven’t seen much litigation in other areas yet such as the Second Circuit in New York. However, the Fourth Circuit’s ruling constitutes persuasive authority which complicates the ability of plaintiffs to bring successful class action lawsuits in other jurisdictions.

OMB Insider To Be Nominated As CFPB Head

One of the first rules of understanding the Trump Administration is to expect the unexpected. So no one should have been surprised when word came out over the weekend that the Administration would be nominating Kathy Kraninger to head the CFPB. So much for retiring Congressman Darrell Issa and current NCUA Board Chairman J. Mark McWatters.

Now anyone who tells you they know what kind of Director Kraninger would make is either lying or needs a life. All we know from press reports is that she currently is an official at the OMB which is currently overseen by acting CFPB Director Mick Mulvaney. Still that hasn’t stopped the opposing sides in what promises to be a lengthy nomination process from running to the ramparts.

The White House informs us that she will bring a “fresh perspective and much needed management experience” to the Bureau which it contends has been “plagued by excessive spending, dysfunctional operations and politicized agendas.”

In contrast, Carl Fish, Executive Director of Allied Progress informs us that her nomination is “nothing more than a desperate attempt by Mick Mulvaney to maintain his grip on the CFPB.”

If she is ultimately approved, Kraninger will serve a five-year term. Stay tuned. 

Medallion Update

Lately I have unabashedly made this blog The New York State of Medallions blog. According to Craines New York, Nordo Acquisitions, Incorporated bought 131 of the medallions for $170,000 apiece. To put this into perspective, the same group bought 46 of the King’s medallions last September for $186,000. The company is hoping to lease the medallions, between $1,000 -$1,200 a month, for a return of approximately 7% annually. They are effectively betting that the medallions have hit their floor.

The medallions that sold for $250,000 were purchased by buyers who already own the loans and offered them at a price they knew no one would meet in order to maintain control of their assets.

It’s Only Money

Last but not least, New York State’s Attorney General Barbara D. Underwood announced a $100 million settlement to settle claims brought against it by 42 states resulting from its manipulation of LIBOR. “Our office has zero tolerance for fraudulent or manipulative conduct that undermines our financial markets,” said Attorney General Underwood. “Financial institutions have a basic responsibility to play by the rules – and we will continue to hold those accountable who don’t.”

June 18, 2018 at 9:06 am Leave a comment

Three Things You Should Know On A Beautiful Thursday

Image result for darrell issaWith the clock running out, retiring California Republican Congressman Darrell Issa is emerging as the front-runner to lead the CFPB which of course is currently being run by former Congressman turned Budget Director, Mick Mulvaney.

Under the Federal Vacancies Reform Act of 1998, the Trump Administration had 210 days after putting Mulvaney in charge to nominate a director subject to the advice and consent of the Senate. Mulvaney turns into a pumpkin on June 22nd.

In addition to Issa, Bloomberg News is also reporting that NCUA’s very own J. Mark McWatters remains in the running. McWatters was one of the hot names voted for the position several weeks ago but he immediately faced opposition, I believe very short sided opposition, from the Banking Lobby. If they had looked past the fact that he ran the NCUA, they would have seen a free market advocate whose conservative approach to judicial interpretation would have provided a refreshing contrast to that of the previous directors.

Issa joined Congress as one of its richest members in 2000 after having lead one of the largest car alarm systems manufacturers in the country, he is best known nationally for his Chairmanship of the House Oversight and Government Reform Committee where he took the lead in investigating Hilary Clinton’s activities as Secretary of State.

Plain Language Fed Raises Rates A Quarter Point

As expected, the Federal Reserve’s Open Market Committee yesterday raised interest rates another quarter point to 2%. It also signaled that it is on track for a total of four rate rises this year.

In a refreshing break with tradition, new Fed Chairman Jerome Powell started his press conference with what he described as a plain language explanation of the Fed’s actions. He explained that, “The main takeaway is that the economy is doing very well. Most people who want to find jobs are finding them, and unemployment and inflation are low. Interest rates have been low for some years while the economy has been recovering from the financial crisis. For the past few years, we have been gradually raising interest rates, and along the way, we have tried to explain the reasoning behind our decisions. In particular, we think that gradually returning interest rates to a more normal level as the economy strengthens is the best way the Fed can help sustain an environment in which American households and businesses can thrive. Today, we have taken another step in that process by raising our target range for the federal funds rate by a quarter of a percentage point.”

Municipal Announces Firing of Kam Wong

The Board of Directors of Municipal Credit Union announced in a press release earlier this week that it had formerly fired former CEO, Kam Wong amid allegations that he embezzled money from the credit union. Wong has been on administrative leave since February 22nd. He was arrested on May 8th.

Yours truly will be off tomorrow. I am headed down to watch the U.S. Open. Have a good weekend.

June 14, 2018 at 8:41 am Leave a comment

Medallion Auction Sets Market Value

As expected, the sale of medallions in two auctions this week appears to be establishing a market value. In an auction this past Monday, Keith Leggett is reporting in his blog that medallions formerly owned by First Jersey Credit Union and acquired by the NCUA  sold for $180,000 each. He further noted that it is anticipated that a sale of more than 131 medallions scheduled for tomorrow will go for about $170,000 apiece. While it is good news that the price appears to be stabilizing, anything below $200,000 will of course put increased pressure on credit unions with more aggressive valuations to revalue their portfolio and in a worst case scenario could trigger more defaults as owners decide it simply isn’t worth it to keep paying on the medallions.

Keith is also reporting that there was a single bidder for these medallions, raising the intriguing question of who bought them and why?

RDC Litigation Update

As I’ve talked about in previous blogs, several credit unions have been sent letters from United Services Automobile Association (USAA) informing them that they are using RDC technology that infringes on several of its copyrights. I haven’t seen much movement in this area for several months but on June 7, 2018, USAA filed suit against Wells Fargo alleging patent violations. You can read the complaint here: United Services Automobile Association v. Wells Fargo Bank, N.A. This is litigation of which the impacted credit unions should be aware.

June 13, 2018 at 8:31 am 3 comments

Are We Getting Closer To Legalizing Cannabis Banking?

Image result for marijuana bankingA dogs and cat coalition with supporters on both ends of the political spectrum may be coalescing around a proposal that would provide a framework for credit unions and banks to provide marijuana banking service without fear of violating federal law.

Under a proposal put forward by Senator Cory Booker of New Jersey and Elizabeth Warren of Massachusetts ‘‘Strengthening the Tenth Amendment Through Entrusting States Act’’ or the ‘‘STATES Act’’. it would be legal as a matter of federal law to sell, possess and distribute marijuana in states where it is legal to do so. This would presumably provide both banks and credit unions the green light to provide banking services to marijuana businesses. It would also presumably eliminate the opposition of at least some Federal Reserve banks to processing transactions for banks and credit unions offering these services.

There are few things that New York Governor Andrew Cuomo and President Trump agree on these days but in separate statements they have both indicated that they support the legislation. Specifically Governor Cuomo signed onto a joint letter with several Governors which complained in part that “current federal law precludes banks from engaging with legal entities that are complying with state laws. As a result, these companies are forced to become cash-only businesses, creating unnecessary burdens and risks.” This is a big development coming from a Governor who has taken a very cautious approach to the legalization of marijuana.

As for President Trump, before heading to Canada to see how many erstwhile American allies he could antagonize prior to  embracing North Korea’s dictator, he told reporters that he would “Probably end up supporting” the Booker/Warren proposal.

Wells Bans Credit Card Purchases of Crypto Currency

This one is getting a lot of attention this morning. $2 trillion asset Wells Fargo became the latest of the behemoths to ban their credit card holders from using their credit cards to make transactions at crypto currency exchanges and brokerage firms. Wells explained that it is making the decision in part “due to the multiple risks associated with this volatile investment.” JP Morgan Chase, Bank of America and Citi Group have already made similar announcements.

June 12, 2018 at 8:36 am Leave a comment

It’s About To Get Real Ugly For Medallions

Image result for taxi cabI always like to strike a positive note in the first blog after our annual convention but there’s some awfully important stuff going on this week that’s going to make Summer a lot less pleasant for many a credit union CEO. Specifically, later today NCUA will be auctioning off taxi medallion loans. Then later this week, according to Craines New York, on June 14, 139 medallions previously owned by the Taxi King Evgeny “Gene” Freidman will be put on the block. The medallions are likely to be sold at levels inconceivably low just a few years ago and may very well result in many credit unions facing increased pressure to write down the value of their loans.

Just how bad could it get? Craines is reporting that some potential buyers plan on making bids as low as $140,000. Combine this with the fact that drivers are seeing a dramatic decrease in their income and it’s hard to see how NCUA is going to let credit unions get away with aggressive evaluations much longer. It’s going to be pretty clear just what the price of a New York City medallion is.

Obviously this is horrible news for those credit unions holding on to their medallion loans as well as the substantial number of credit unions across the country that have participation interest. For those of you who don’t think this impacts your credit union you are wrong. Ultimately, the cost of failed credit unions is absorbed by the share insurance fund meaning that you have to allow for the possibility that the rebate slated to be handed out to credit unions may be sharply reduced or even eliminated. No one anticipated New York medallion prices going this low.

On that happy note, it was great to see you all this past weekend. Hopefully the situation will not be as dire as I think it might turn out.

June 11, 2018 at 8:33 am 1 comment

MBL Regulation Finalized

In the first tangible sign of the impact that the passage of S. 2155 is having for both state and federal credit unions, the NCUA on Thursday finalized regulations clarifying that mortgage loans non-owner occupied 1-4 family homes are no longer considered Member Business Loans. This is good news for credit unions concerned about going up against the MBL lending cap and also good news for smaller credit unions that can now lend money for second homes without triggering MBL obligations.

As the explained in the preamble to the regulation: the MBL definition “now excludes all extensions of credit that are fully secured by a lien on a 1- to 4- family dwelling regardless of the borrower’s occupancy status. Because these kinds of loans are no longer considered MBLs, they do not count towards the aggregate MBL cap imposed on each federally insured credit union by the FCU Act.”

The regulation is also noteworthy because the NCUA used an exception to the traditional notice and comment period requirements to make the changes. I had no idea before I read this regulation that the Administrative Procedure Act permits agencies to skip notice and comment periods when proposing a regulation is “impracticable, unnecessary, or contrary to the public interest pursuant to the Administrative Procedure Act (APA). Who knew? Perhaps other agencies will use this power to quickly amend regulations which are now inconsistent with the law.

More Municipal Fallout

Also last week the NCUA issued a public notice prohibiting Municipal Credit Union CEO Kam Wong from working in the credit union industry following federal charges that he embezzled millions of dollars from the credit union.

June 4, 2018 at 7:59 am Leave a comment

Handle With Care: New Protections For Financial Institutions that Report Suspected Elder Abuse

One of the many provisions tucked away in S.2155, which was signed into law on May 24, was one providing protections to credit unions and other financial institutions when certain employees act in good faith and reasonable care to report suspected financial exploitations of a person at least 65 years old to law enforcement or selected agencies. While the statute is important, particularly in states like New York, which has among the narrowest of protections for financial institutions reporting suspected elder abuse, implementation is trickier than one might suspect. Read §303 carefully and make sure you put the proper procedures in place.

What has me a little nervous is that for an individual to be given immunity from a lawsuit after reporting a suspected abuse, such individual must serve as a supervisor, a compliance officer or in a “legal function” (which, by the way, includes a BSA officer). The person must make the disclosure in good faith and with reasonable care. This means that only specific individuals can report suspected elder abuse. In other words, if your credit union decides to implement this framework, it is absolutely crucial that frontline staff in particular understand that they cannot, no matter how well-intended they may be, report suspected elder abuse. Instead, they must know what individuals to report suspected abuse to.

Similarly, financial institutions shall only be protected against liability if the supervisor, compliance officer or persons serving in a legal function who make the report has received the necessary training.

And what is the necessary training? Interestingly, the training material shall be maintained and made available by the agency with examination authority over the institution. In plain English, that means NCUA has to get to work. This training has to be provided not later than one year after a person becomes employed by the credit union. The credit union would be responsible for maintaining records of training.

Is the law better than nothing? Absolutely. But there are plenty of potential loopholes and trip wires to deal with.

I’m cynical. I believe this is one area where a good deed will not go unpunished and your credit union will find itself on the opposite end of a lawsuit if it does the right thing and reports a suspected elder abuse enough times.

 

May 31, 2018 at 11:14 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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