Posts filed under ‘Legal Watch’

Can Better Training Reduce Workplace Harassment?

In a previous life,  I was working in the legislature when New York became one of the first states to mandate the schools do more to not only respond to but prevent school yard bullying.  I was skeptical that Government could do anything about bullying.  After all, some kids are just jerks.

A generation later  bullying hasn’t been eliminated but  it’s no longer acceptable for school administrators to sit idly by as students get taunted and teased. Kids are much more sensitive to the fact that other kids are being mistreated and are much more likely to tell a teacher or administrator than they would have been a generation ago.   I was wrong.  New policies and new approaches made a difference.

What’s the tie-in? In June  the chairs of a task force appointed by the EEOC   to investigate work force harassment issued a report with several recommendations.  Bond Shoeneck & King suggested in their blog yesterday that HR people should give it a read:  They have a point.  Although the report is designed to prevent harassment, and as such includes recommendations that go beyond existing legal requirements, it has been my experience that today’s recommendations   become tomorrow’s mandates.  Plus,  while you probably won’t agree with all of its conclusions and recommendations, it does have some ideas worth considering.

This brings me back to my bullying discussion. Anyone who doesn’t know for example that sexual harassment  is illegal is beyond help.  The bigger question is what is the best approach to minimizing it? We’ve all sat through those  sessions on preventing harassment replete with nervous snickers from the back of the room and awkward sideways glances.  While they are good to have from a legal perspective,  I was pleasantly surprised that the report’s authors acknowledged that “much   of the training done over the last 30 years has not worked as a prevention tool – it’s been too focused on simply avoiding legal liability. We believe effective training can reduce workplace harassment, and recognize that ineffective training can be unhelpful or even counterproductive. However, even effective training cannot occur in a vacuum – it must be part of a holistic culture of non-harassment that starts at the top.”

One of their suggested improvements intrigues me: “Workplace civility trainings focus on establishing expectations of civility and respect in the workplace, and on providing management and employees the tools they need to meet such expectations. The training usually includes an exploration of workplace norms, including a discussion of what constitutes appropriate and inappropriate behaviors in the workplace. The training also includes a heavily skills-based component; including interpersonal skills training, conflict resolution training, and training on effective supervisory techniques.”

Would this really make a difference? I don’t know but providing a mechanism for employee’s to understand and discuss workplace norms and expectations is worth a shot. Done properly,  employees would better  understand that a harassment free workplace is not simply based on obeying the law but on proactively treating those around you with a baseline of respect and professionalism, expecting the same in return, and not being afraid to intervene when these norms aren’t being followed.

Am I concerned that we may be seeing the scope of harassment claims expanding ever so slightly? You bet.   But it’s clear that there are workplaces where employees and employers just don’t get the message.  If our kids can foster create school environments where bullying is frowned upon than maybe we should expect more of ourselves to foster harassment free environments in the workplace

August 23, 2016 at 9:37 am Leave a comment

UPDATED Three Things All The Cool Kids Should Know

Another Day, Another Merchant Data Breach

In case you missed it, on Thursday, outdoor clothing retailer Eddie Bauer announced it was a victim of a data breach involving point-of-sale credit and debit card transactions between January 2 and July 17, 2016.  And here you outdoor types thought your biggest worry was the Zika virus.  Here’s the good news.

The general public has clearly caught on to the fact that merchants and not financial institutions are often the parties responsible for the data breach. Why else would Eddie Bauer explain that the security of customer information is a “top priority” and that they have been working closely with the FBI and cyber security experts to resolve the issue?

It wasn’t too many years ago when the merchant playbook was to barely acknowledge that a breach occurred let alone suggest that it bore some responsibility for mitigating its effects. I’m in an optimistic mood this morning.  Now that the public understands that merchants share in the responsibility to protect data breaches it should be easier to convince legislators that merchants should pay their fair share when it comes to the costs imposed on card issuers every time a store is breached.

Get off of my cloud.  I’m dreaming?

Uber Class Action Settlement Rejected

With apologies to those of you who hate football metaphors, the various pending lawsuits against Uber are the legal equivalent of a hurl into the end zone with time expiring. That being said, those of you hoping to derail ride sharing, or at least put it on equal footing with the traditional taxi industry, received at least a temporary stay of execution last week when a federal judge threw out a proposed settlement of a class action lawsuit alleging that ride sharing services were violating the labor law by treating drivers as independent contractors as opposed to traditional employees.

According to the Washington Post, U.S. District Judge Edward Chen concluded that the proposed $100 million settlement was only 10% of what lawyers for the drivers estimate that Uber could owe them and provided only $1 million towards state penalties that could add up to more than one billion dollars.

This lawsuit against Uber is absolutely critical.  If a precedent is established imposing traditional labor obligations on Uber then the ride sharing model crumbles quicker than a Ryan Lochte robbery allegation.  By the way, the proposed settlement is yet another great example of the class action system disproportionately benefitting lawyers, precisely when the CFPB is on the verge of institutionalizing such litigation.

Where Has U.S. Productivity Gone?

It is an article of faith among politicians, along with truth, justice and the American Way, that America has the most productive workforce in the world. This may still be true, but Federal Reserve Vice Chairman Stanley Fisher used a speech on Sunday to highlight worrying signs that something is going wrong with productivity.  For example, business productivity has declined for the last three quarters, its worst performance since 1979.  Furthermore, output per hour increased only 1-1/4 percent per year between 2006 and 2015 as opposed to gains over 2 1/2% per year between 1949 and 2005.

Why does this matter? For one thin we won’t see the economy really takeoff as long as productivity is sluggish and  your members won’t be seeing meaningful  wage.  Furthermore, a long-term decline in productivity translates into greater wage inequality.  The Vice Chairman would like to see Congress do more to stimulate the economy.  I would like to see the Yankees make the playoffs.  Both events are theoretically possible, but highly unlikely.

August 22, 2016 at 8:51 am Leave a comment

Three things All The Cool Kids Should Know To Start Their Week

Another Day, Another Merchant Data Breach

In case you missed it, on Thursday, outdoor clothing retailer Eddie Bauer announced it was a victim of a data breach involving point-of-sale credit and debit card transactions between January 2 and July 17, 2016.  And here you outdoor types thought your biggest worry was the Zika virus.  Here’s the good news.

The general public has clearly caught on to the fact that merchants and not financial institutions are often the parties responsible for the data breach. Why else would Eddie Bauer explain that the security of customer information is a “top priority” and that they have been working closely with the FBI and cyber security experts to resolve the issue?

It wasn’t too many years ago when the merchant playbook was to barely acknowledge that a breach occurred let alone suggest that it bore some responsibility for mitigating its effects. I’m in an optimistic mood this morning.  Now that the public understands that merchants share in the responsibility to protect data breaches it should be easier to convince legislators that merchants should pay their fair share when it comes to the costs imposed on card issuers every time a store is breached.

Get off of my cloud.  I’m dreaming?

Uber Class Action Settlement Rejected

With apologies to those of you who hate football metaphors, the various pending lawsuits against Uber are the legal equivalent of a hurl into the end zone with time expiring. That being said, those of you hoping to derail ride sharing, or at least put it on equal footing with the traditional taxi industry, received at least a temporary stay of execution last week when a federal judge threw out a proposed settlement of a class action lawsuit alleging that ride sharing services were violating the labor law by treating drivers as independent contractors as opposed to traditional employees.

According to the Washington Post, U.S. District Judge Edward Chen concluded that the proposed $100 million settlement was only 10% of what lawyers for the drivers estimate that Uber could owe them and provided only $1 million towards state penalties that could add up to more than one billion dollars.

This lawsuit against Uber is absolutely critical.  If a precedent is established imposing traditional labor obligations on Uber then the ride sharing model crumbles quicker than a Ryan Lochte robbery allegation.  By the way, the proposed settlement is yet another great example of the class action system disproportionately benefitting lawyers, precisely when the CFPB is on the verge of institutionalizing such litigation.

Where Has U.S. Productivity Gone?

It is an article of faith among politicians, along with truth, justice and the American Way, that America has the most productive workforce in the world. This may still be true, but Federal Reserve Vice Chairman Stanley Fisher used a speech on Sunday to highlight worrying signs that something is going wrong with productivity.  For example, business productivity has declined for the last three quarters, its worst performance since 1979.  Furthermore, output per hour increased only 1-1/4 percent per year between 2006 and 2015 as opposed to gains over 2 1/2% per year between 1949 and 2005.

Why does this matter? For one thin we won’t see the economy really takeoff as long as productivity is sluggish and  your members won’t be seeing meaningful  wage.  Furthermore, a long-term decline in productivity translates into greater wage inequality.  The Vice Chairman would like to see Congress do more to stimulate the economy.  I would like to see the Yankees make the playoffs.  Both events are theoretically possible, but highly unlikely.

 

August 22, 2016 at 8:38 am Leave a comment

Court Gives NCUA Green Light to Sue Investment Banks Over Faulty Securities

NCUA notched another important legal victory in its quest to have the investment banks which  sold  residential mortgage backed securities to the corporates prior to the Mortgage Meltdown  pay up for allegedly  not adequately warning of the risks involved in buying these securities. The NCUA announced in April that it had recovered more than $3 billion in settlements.  But remember that the lawyers have to be paid and the litigation could still drag on for many years.

To understand yesterday’s decision it’s necessary to take a not so pleasant trip down memory lane. In 2009 NCUA took over Wescorp, then the second largest corporate credit union, after the RMBS’s  it had purchased tumbled in value.  Remember that these bonds are pools of packaged mortgages and investors are paid off from the stream of mortgage payments.   When homeowners stopped paying their mortgages these securities  became almost worthless, necessitating a lifeline from the Treasury  Department and the creation of the Stabilization Fund that all credit unions had to pay into.

NCUA became the first federal agency to sue the investment banks. Its basic argument is that they failed to properly disclose the risks of buying the securities to the corporates because they knew that many of the packaged mortgages were destined to tumble faster than Donald Trump’s poll numbers.

A central issue in this litigation has been whether or not federal law gives NCUA six years to bring these lawsuits under what’s called the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) or at most  three years under the Securities Act of 1933. If the Securities Act applies  NCUA’s claims are time barred.

Yesterday,  the Court of Appeals for the Ninth Circuit reversed a lower court ruling and ruled that the longer period applied. NCUA can  continue its suit against Wachovia Trust  and Nomura Home Equity.  (NATIONAL CREDIT UNION ADMINISTRATION BOARD, as Liquidating Agent of W. Corp. Fed. Credit Union, Plaintiff-Appellant, v. RBS SECURITIES, INC., FKA RBS Greenwich Capital Markets, Inc., Defendant, & NOMURA HOME EQUITY LOAN, INC., Defendant-Appellee., No. 13-56620, 2016 WL 4269897,  (9th Cir. Aug. 15, 2016) The decision means that two federal circuits have now upheld the right of NCUA to bring these suits which translates into more money for credit unions.  The Tenth Circuit reached a similar conclusion in Nat’l Credit Union Admin. Bd. v. Nomura Home Equity Loan, Inc., 727 F.3d 1246 (10th Cir. 2013).

Of course, everyone wants to know how this is going to impact their bottom line but  the truth is no knows yet.  This litigation could drag on for years.   For instance, the investment  firms could appeal yesterday’s decision to the Supreme Court and the core allegations still haven’t been litigated. But give NCUA credit.  It’s already had more success than many people, including this blogger, thought it would when it decided to call in the lawyers.

August 16, 2016 at 9:12 am Leave a comment

Federal Government: Pot Still Illegal

I’ve written extensively about the hazy state of pot regulation in this country and how it has virtually paralyzed credit unions and banks that might otherwise be willing to provide services to pot businesses.  So I think it is worth noting that sometime today, the DEA will reportedly be rejecting a high-profile petition seeking to remove Cannabis from the Government’s most restrictive drug classification.

New York is one of approximately half the states in the Nation and the District of Columbia that has voted to legalize marijuana to one extent or another.  But banks and credit unions have been justifiably reluctant to provide financial services to pot businesses.  This is because marijuana remains unequivocally illegal under the federal Controlled Substances Act.  In fact, pursuant to the Act, the DEA classifies marijuana as a Schedule I drug, its most restrictive classification.  Critics have argued for decades that this restriction makes it almost impossible to perform the type of scientific research that would determine what medical benefit, if any, pot has.

As explained in this analysis by the Brookings Institute, rescheduling would “not suddenly legalize marijuana” or “solve the policy disjunction that exists between states and the federal government on the question of marijuana legality.”  Those same researchers noted, however, that a successful rescheduling petition would have effects on drug policy since it would be interpreted as recognition by the federal government of accepted medical uses for marijuana.  This is why advocates ranging from U.S. Senators to the National Conference of State Legislatures have endorsed rescheduling.

On a practical level, such a shift may have allayed the fears of regulators who are reluctant to allow financial institutions to enable pot businesses to access the Federal Reserve Banking system.  The decision leaves the status quo intact.  The next big event in the pot wars will come when the Court of Appeals 10th Circuit rules on an appeal from a state-chartered credit union in Colorado that was denied access to the Federal Reserve System and Share Insurance by the NCUA.

America’s Uneven Housing Recovery

Another issue which I have obsessed about in this blog is the state of America’s housing market and the causes that may lie behind its relatively sluggish rebound during this so-called recovery.  Lest you think these are just the concerns of a curmudgeonly blogger with a glass half-empty perspective, you should read the lead story in today’s Wall Street Journal, which explains that the recovery that began in 2012 has “left behind a broad swath of the middle class, threatening to create a generation of permanent renters and sowing economic anxiety and frustration for millions of Americans.”  This is not an op-ed penned by Bernie Sanders, but a front page article that is worth a read.

Hanging with the kids tomorrow.  See you Monday.

August 11, 2016 at 8:53 am 2 comments

Just Who Gets Those Pesky Foreclosure Notices, Anyway?

In Monday’s blog, I talked about new regulations clarifying your responsibility to send out federally mandated notices to Successors-in-Interest in real property – people who have a right to property by operation of law but who may or may not decide to assume responsibility for the property.  The CFPB adopted an expansive definition of successors-in-Interest and wants you to continue to provide them necessary notices – such as loss mitigation options, if their property is delinquent.

The CFPB’s regulations got me thinking about a recent case my colleagues at OwnersChoice Funding, the Association’s mortgage arm, gave me a heads-up on.  It underscores that for those of you responsible for mortgage compliance, you need two separate charts:  one detailing your federal requirements and a second outlining your NYS obligations.

As many of you know, New York Law requires the following:  Notwithstanding any other provision of law, with regard to a home loan, at least ninety days before a lender, an assignee or a mortgage loan servicer commences legal action against the borrower, including mortgage foreclosure, such lender, assignee or mortgage loan servicer shall give notice to the borrower in at least fourteen-point type.  See N.Y. Real Prop. Acts. Law § 1304 (McKinney).  The statute mandates that the notice is to be sent to the borrower by registered or certified mail and by first class mail to the last known address of the borrower.  Proper notice is a condition precedent to a foreclosure. 

Incidentally this notice requirement was imposed long before the general public had any idea who Elizabeth Warren was, let alone her wacky idea of creating a federal consumer watchdog agency. As a matter of fact, New York was one of the states that informed the CFPB’s loss mitigation regulations.

The problem is that the statute doesn’t define who a borrower is and this has created the opportunity for mischief-making as more lawyers get involved in foreclosure defense, which not too many years ago was an oxymoron, as farfetched as a Trump Presidency.  For example, what happens if a parent dies with an outstanding mortgage?  The property is willed to the kids, who become successors-in-Interest, but they don’t assume the mortgage or take out a new one.  A few years later the bank decides it’s time to foreclose on the property.  Do they have to send out a pre-foreclosure notice to the kids? This is exactly what happened in US Bank N.A. v. Levine, No. 54232/2015, 2016 WL 3677195, at *2 (N.Y. Sup. Ct. July 11, 2016).  The court said the answer is no.  The judge adopted the logic of a similar earlier ruling, which explained that “While the statute does not define that term, logic dictates that a ‘borrower’ is someone who, at a minimum, either received something and/or is responsible to return it.”

Chalk one up for common sense.  But all this comes with a huge caveat.  No appellate court – the ones that set most binding precedents – has addressed the issue, so if you find yourself foreclosing on an estate, you may find yourself having to deal with similar arguments for years to come. 

 

 

August 10, 2016 at 9:24 am 1 comment

How Divorce Complicates Your Mortgage Disclosures

Divorce increases the number of pitfalls for lenders who have the audacity to attempt to collect delinquent debt. Nowhere is this more true than in the great state of New York,  where a series of legal landmines masquerading  as consumer protection statutes  are waiting to attack the unaware lender.  Consistently applied and well drafted policies and procedures are crucial when it comes to loss mitigation and foreclosures .

The latest example of the dangers posed by New York’s foreclosure defense laws comes from M&T Bank v. Farrell, 2014-1913 decided July 12 in which the bank moved to foreclose on property  that a separated  Binghamton Dr. and his wife had jointly purchased in 1994.

I’ve talked about NY’s Real Property Actions and Proceedings Law Section 1304 before but it’s worth talking about again. It requires that mortgage lenders “ give notice to the borrower” at least 90 days before commencing a foreclosure. It’s  also important to keep in mind that the notice must be sent “by registered or certified mail and also by first-class mail to the last known address of the borrower, and if different, to the residence that is the subject of the mortgage. Such notice shall be sent by the lender, assignee or mortgage loan servicer in a separate envelope from any other mailing or notice “(N.Y. Real Prop. Acts. Law § 1304 (McKinney).

Remember the pre-foreclosure notice is in addition to the traditional summons and complaint required to start a foreclosure action. Courts have demanded strict compliance with 1304 and as more attorneys get involved in foreclosure defense 1304 defenses are  becoming more frequent.

In this case, at the time the pre-foreclosure notice was sent to the mortgaged property  Dr. Farrell no longer lived at the family  home and a separate  pre-foreclosure. notice was not  sent to his new address.  This invalidated the foreclosure.   M&T argued that it complied with the statute by sending the notice to the mortgage address. But the prevailing view of New York’s courts is that, as explained by the judge in this case,  the 1304  notice must be sent to the borrower’s last known address which may or may not be the mortgaged property. M & T had to start from scratch without passing Go and collecting $200

The case also underscores why it’s crucial to properly coordinate between your staff and your foreclosure attorney.  In this case M & T’s attorney submitted an affidavit stating that the 1304 notice was sent by personal and first class mail.  But this statement was inadequate to demonstrate compliance with the law since the attorney had no “first hand” knowledge of the mailing.

Cases like this demonstrate why your credit union should  have the person who prepares and sends out the 1304 notice on behalf of your credit union to swear out an affidavit the day the notice is sent to the delinquent members demonstrating compliance with 1304 based on her personal knowledge.

 

July 12, 2016 at 9:30 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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