Posts filed under ‘Legal Watch’

Three Things You Should Know To Start Your Credit Union Day

Municipal Deposit legislation, A8289, gained a key sponsor yesterday when the new Chairwoman of the Assembly Banks Committee became the prime sponsor of the legislation in that chamber.

Assemblymember Pat Fahy is the new chairperson of the Banks Committee. She replaces former Bronx Assemblymember Victor Pichardo who resigned from the Legislature this past summer. Pichardo’s departure means that the legislation will have to be reconsidered by the Banks Committee. Last year the legislation advanced to the Assembly Ways and Means Committee.

Assemblymember Fahy is a familiar face in the Capital Region who represents parts of Albany and Bethlehem. In September, the Association met with her office to discuss credit union priorities.

Court Clarifies Foreclosure Notice Requirements

When it comes to foreclosing in New York, minute mistakes can make a huge difference. Most readers of this blog know that state law requires mortgage holders to mail a 90 day pre-foreclosure notice to delinquent homeowners before commencing foreclosure (RPAPL 1304). When there are multiple borrowers, how is this requirement satisfied? In this recent decision a New York Appellate Court addressed this issue for the first time. It ruled that lenders must mail a separate 90 day notice to each borrower in separate envelopes.

Is this arcane? You bet it is. But if this procedure isn’t followed, a foreclosure will be dismissed, at least in Long Island, Westchester, Brooklyn, Queens and Staten Island over which this court exercises its jurisdiction. Wells Fargo Bank, N.A. v Yapkowitz, 2021 N.Y. Slip Op. 05139, 2021 WL 4448061

Yellen Continues To Push For Transaction Monitoring

Treasury Secretary Janet Yellen continues to insist that requiring banks and credit unions to report almost every account transaction by their members is no big deal. Ironically, she is making this argument even as America wakes up to the danger of Facebook controlling so much of our personal information. People don’t trust the IRS any more than they trust Mark Zuckerberg, although it might be close at this point. 

Yellen’s continued advocacy underscores that we have to continue to tell anyone that will listen that intrusive transaction reporting is a bad idea.

I will be back on Tuesday.  Enjoy your long weekend. This year’s World Series prediction, which has been certified as acceptable Secondary Capital by the NCUA, is the Milwaukee Brewers against the Houston Astros, with the Brewers winning in a seven game classic.

October 7, 2021 at 9:55 am Leave a comment

What To Do When Your Employee Requests A Religious Accommodation

There are three things I know for certain this morning: One is that I will get more sleep with the Yankees not in the playoffs (I have no idea why they have to start games so late).

Secondly, the Bronx Bombers will overpay for marquee talent in the off-season and be proclaimed World Series favorites by the baseball intelligentsia even though they have won only one World Series in the last 19 years.

Finally, your credit union will most likely have to decide how to respond to an employee who wants a workplace accommodation based on their religious beliefs. As much as I would like to continue my Yankee diatribe, I have a sneaking suspicion that the last topic has more relevance to your credit union day. Here is a quick primer designed to get you thinking about your own HR protocols.

First, under both state and federal law, employers are responsible for working with employees whose genuine and sincere religious beliefs conflict with their employment obligations. This means that if your credit union either mandates vaccinations or is ultimately mandated to make sure it’s employees are vaccinated, there may be employees who refuse to get vaccinated on religious grounds. 

What is a genuine and sincere religious belief? Suffice it to say that the courts are not comfortable with employers second guessing what constitutes a religious belief. In one recent case, a West Virginia coal miner successfully sued for religious discrimination after he resigned rather than use a hand scanner to check into work. He explained that hand scanners constituted the mark of the devil. In upholding his lawsuit the court explained that “it is not an employer’s place, nor a court’s place, to question the correctness or even the plausibility of an employee’s religious understandings.” [U.S. Equal Employment Opportunity Commission v. Consol Energy, Inc., 860 F.3d 131 (C.A.4 (W.Va.), 2017)]. On a practical level, this means that if you find yourself debating how religious the employee really is or debating doctrine you are going down the wrong path. You can, however, ask for a connection between the religious beliefs and refusal to get vaccinated. 

Assuming the employee has a genuine and sincere religious belief which conflicts with a vaccine mandate, are you required to accommodate the employee? Maybe, maybe not. Under both state and federal law an employer doesn’t have to accommodate an employee where doing so would constitute an “undue burden.” Under federal law, an undue burden has been defined as any accommodation that requires an employer to make any accommodation for an employee’s religion if doing so would pose more than a “de minimis” burden. Trans World Airlines, Inc. v. Hardison, 432 U.S. 63 (1977).

In contrast, New York has a much higher standard for employers claiming hardship under New York law [N.Y. Exec. Law § 296(10)(d)(1)]. An undue hardship means an accommodation requiring significant expense or difficulty including a significant interference with the safe or efficient operation of the workplace. What standard will ultimately be applied to your credit union may vary depending on the legal basis for a vaccine mandate. For now, keep in mind that as New York employers, your credit union may have to deal with a higher standard. 

So what does all this mean? It means that you are not going to categorically reject an employee’s request for religious accommodation. Instead, you are going to discuss the need for a religious accommodation and assuming that the requested accommodation is genuine and sincere you are going to develop a framework for accommodating employees when it is reasonable to do so and be prepared to explain to both the employee and the courts when you decide doing so constitutes an undue burden. You want to make sure that you treat all accommodations in as fair and equitable a way as possible given the need to run your credit union.

As you can see, these are tricky issues.  If you are confronted with a request, you are being penny wise and pound foolish if you don’t consult with your friendly neighborhood HR attorney.

On that note, Go Rays!

October 6, 2021 at 10:53 am Leave a comment

Just what is an “Item” anyway?

A former President got impeached after quibling over the definition of “is” and today CUS and banks are being sued over the definition of “item.”

That is one of the key questions confronting both credit unions and banks as they continue to make a handful of consumer plaintiff law firms wealthy because of inaccurate disclosures in their account agreements. On a practical level this means that you should review your account agreements to ensure that it actually defines what an item is. This is particularly true if your credit union is large enough to be targeted for class action litigation.

I’ve done blogs for several years now detailing how both credit unions and banks are being sued for inaccurately disclosing how account balances are determined for purposes of generating overdraft fees. For example, if your member has $50 in an account at the time she uses her debit card to pay for her Starbucks latte but 49 of those dollars are subject to pending transactions has your member been given adequate notice that an overdraft fee will be charged based on how the account balance is actually calculated?

A more recent permantation of this litigation has to do with the proper disclosure of NSF fees generated by repeated presentments for payments made by merchants using the NACHA network. Specifically, does your credit union charge a fee every time a merchant presents a transaction for payment and if so is this practice properly disclosed? In Richard v. Glens Falls National Bank, 2021 WL 810218, at *1 (N.D.N.Y., 2021,) the bank charged a separate fee every time a merchant represented an item for payment. The bank’s fee schedule disclosed that an NSF fee could be charged “per item” but did not define what an item was. As a result the account owner argued that the bank was only entitled to charge a single NSF fee irrespective of how many times a merchant presented an item for payment. 

The good news is that your credit union can avoid a similar fate by simply amending its account agreement. For example, the Navy federal credit union got a similar claim dismissed because its account agreement contained language defining what an item was and putting members on notice that they could be charged each time an item is presented for payment. Lambert v. Navy Federal Credit Union

Here is the punchline: your credit union should be having its account agreement periodically reviewed by an outside law firm, preferably one that specializes in defending against consumer class action lawsuits. Consider it an investment especially since I can guarantee you that your account agreement has been reviewed by attorneys looking to sue you over language which may comply with the latest regulations but does not reflect the latest case law. 

On that note, enjoy your day.

September 21, 2021 at 2:06 pm Leave a comment

Will Biden’s Executive Order Apply to Credit Unions?

Yesterday, President Biden took his most aggressive action yet to combat the spread of COVID-19.  First, he ordered the Department of Labor’s Occupational Safety and Health Administration (OSHA) to issue an emergency temporary standard that will “require all employers with 100 or more employees to ensure their workforce is fully vaccinated or require any workers who remain unvaccinated to produce a negative test result on at least a weekly basis before coming to work” and must give employees paid time off to get the vaccine and paid time off to recover from any side effects.  Secondly, the President is ordering the establishment of guidelines mandating that federal contractors be vaccinated.  The precise impact of these orders on your credit union’s operations remains to be seen.

With the exception of certain industries, OSHA has not promulgated federal workplace safety standards in relation to COVID-19.  This is why New York felt the need to fill this gap by passing the HERO Act.  As I explained in a recent blog, New York’s Commissioner of Health has declared COVID to be a highly infectious disease which means that all New York employers must now have health screening protocols in place.  We will have to wait for the OSHA standards to see precisely what is going to be required of larger employers beyond the state mandates.

Another tricky issue that needs to be clarified is whether or not financial institutions are going to be considered federal contractors for purposes of the President’s vaccine mandate.  The President’s Executive Order technically does not mandate vaccinations, but instead mandates that guidance be issued defining precisely who is to be considered a federal contractor.  However, the President’s order stipulates that the definition of a federal contractor will be based on regulations being promulgated by the Department of Labor mandating that contractors provide a $15 minimum wage to their employees.  In addition, there must be a regulatory finding that the President’s actions will advance efficiency in the federal government’s procurement processes.  This last point is particularly important since the inevitable legal challenges to the President’s announcement yesterday will most likely be based on challenging the regulatory authority of the executive to issue these mandates. 

All this means we are weeks, and maybe months away from any additional vaccine mandates.  In the meantime, an increasing number of employers are mandating that their employees be vaccinated.  Of course, check with your attorney, but they are on solid legal ground in doing so, and your credit union would be as well. 

September 10, 2021 at 10:59 am Leave a comment

Can You Answer These Questions?

Just like there are people out there who read the obituaries, taking silent satisfaction from the fact that they are not the ones being written about, let’s face it, there are those of us who are silently relieved when they read the latest blogs and trade press and confirm that their credit union has not been victimized in a way that makes the news. 

Recently there has been a lot of talk in credit union land about the fired credit union employee who plead guilty to taking revenge on her former employer by destroying sensitive information maintained on the credit union’s computer network. The credit union apparently had the right procedures in place but the employee’s access to the computer network was not turned off, resulting in $10,000 in recovery costs.

While you may be relieved that your credit union is not the victim, the incident underscores that, irrespective of your credit union’s size, it is incumbent to know precisely where your information is, and who has access to it. By the way, this is important not only to guard against an employee going mad but because federal and state law will increasingly make it essential for your financial institution to know who has access to what information and why as well as to accommodate the requests of your member’s to transfer or delete information.

With that long winded lead-in, how would you answer these questions?

  • Does your computer network allow you to make distinctions between the level(s) of access provided to employees?
  • Assuming it does, who decides what person(s) get access to the different parts of the network?
  • In your vendor contracts, do you require that vendors only have access to the computer network that they need to perform their job?
  • That vendors will only use the information for the purposes for which they have contracted?
  • That they have protocols in place to ensure that access to your network is terminated when employees leave or the job is done?
  • Do you require your employees to use multi factor identification to access the computer network?
  • Do you hold employees accountable for repeatedly failing to comply with basic cyber security protocols such as repeatedly clicking on suspicious links?
  • Most importantly, do you think Toronto is going to pass the Yankees or the Red Sox to get a wild card spot? I asked that last question to see how many of you were still paying attention.

The point I’m trying to make with all these questions is that your credit union must design safety protocols which limit network access to employees that need the access; that allow you to track where your information is located and that allow you to quickly access this information. No one is capable of anticipating or guarding against all of the wacky ways your network may be attacked, but proper compartmentalization of data will help minimize damage and help prepare you for data portability standards.

September 9, 2021 at 9:57 am Leave a comment

When It Comes to Protecting Your Data, How Well Do You Really Know Your Members?

When the Federal Financial Institutions Examination Council (FFIEC) issues guidance, all financial institutions should pay attention, irrespective of their size and risk profile. After all, the Council represents the combined wisdom, or at least the consensus of financial regulators, including the NCUA, on the issues of most pressing concern. Conversely, it is my ever so humble opinion that these documents are often written in such vague terms with so many qualifiers that they lack the clarity needed to make them truly useful documents.

With this caveat, I present to you a guidance, Authentication and Access to Financial Institution Services and Systems, issued by the FFIEC on August 11th in which it highlights the need for financial institutions to take a holistic approach to protecting unauthorized access to information by third parties. Specifically, this guidance “sets forth risk management principles and practices that can support a financial institution’s authentication of (a) users accessing financial institution information systems, including employees, board members, third parties, service accounts, applications, and devices (collectively, users) and (b) consumer and business customers.”

Whereas a decade ago your red flag risk assessment was primarily concerned with how to prevent unauthorized third parties from accessing your system, in today’s environment you’ll also face threats from within.  Your Board member, negligent customer and of course, your Luddite employee pose as great a potential threat as the most sophisticated hacker.  As a result, these threats should be considered as part of your ongoing risk assessments. Furthermore, layered security protections, which make individuals provide authentication more than once when inside a platform may inconvenience your members and employees but at the very least this inconvenience should be weighed against the need to protect the data on your system.

Remember, you should pay attention to this guidance for both legal and compliance reasons. Legally, these guidelines provide a concise source for courts to use in assessing whether a vendor or financial institution is taking reasonable measures to protect member information (see for example Shames-Yeakel v. Citizens Financial Bank; Bessemer System Federal Credit Union v. Fiserv Solutions, LLC). From a compliance standpoint, you have an obligation to make sure your credit union is periodically assessing and updating its cyber threat assessments. 12 CFR 748 Appendix A

On that note, enjoy your day.

August 30, 2021 at 9:47 am Leave a comment

Life After The CDC Eviction Ban

The Supreme Court yesterday ruled that the CDC exceeded its authority when it enacted a nationwide ban of evictions against tenants who claim to be suffering a COVID-19 related hardship.

The court’s ruling surprised absolutely no one who has been following the issue. Just weeks ago, the court signaled that a similar moratorium was most likely unconstitutional but allowed it to expire so that there was more time to distribute federal aid intended to help states like New York avoid the need for evictions.

The precise legal issue was whether the CDC had the regulatory authority to ban evictions absent Congressional action. The court explained that “it is indisputable that the public has a strong interest in combating the spread of the COVID–19 Delta variant. But our system does not permit agencies to act unlawfully even in pursuit of desirable ends…It is up to Congress, not the CDC, to decide whether the public interest merits further action here.”

The Court’s ruling put the focus squarely back onto the states. Although the Court recently invalidated a New York statute which prohibited evictions of individuals suffering a COVID-19 hardship, the Court’s emergency ruling was not a decision on the merits and the statute under review did not give landlords the ability to contest a hardship determination. 

Without further action by Congress the primary federal regulation of which credit unions have to be mindful is the CFPB’s regulation which takes effect on September 1st, mandating that servicers take additional steps to inform delinquent homeowners of loss mitigation options that may be available to individuals delinquent because of a COVID hardship. Crucially, unlike the eviction moratorium struck down by the Court, the CFPB’s new regulation does not mandate that specific relief be made available.

August 27, 2021 at 9:12 am Leave a comment

What FDA’s Vaccination Approval Means For Your Credit Union

The announcement yesterday that the FDA has given final approval to the Pfizer COVID-19 vaccine puts employers at the center of the debate about how to respond to the continuing COVID-19 health crisis.

The FDA’s decision provides further clarity regarding the rights of employers to mandate that employees get vaccinated as a condition of employment. Before yesterday’s announcement, vaccination opponents had argued, without legal success, that the emergency process used to initially approve the COVID-19 vaccine meant that individuals could not be forced to get vaccinated as a matter of federal law.

Now that argument is irrelevant. Within minutes of the announcement several employers announced that vaccinations would now be mandatory for their employees. Federal guidance already authorizes vaccine mandates and the Supreme Court ruled more than 100 years ago that there is no constitutional right not to be vaccinated. The vaccine announcement also comes at a unique time for employers in New York State. We have a new Governor and in recent weeks the state has largely avoided imposing new statewide mandates. Once again, this means that as employers you have more flexibility than ever before.

Now don’t get me wrong, just because you can legally do something doesn’t mean it’s a smart thing to do. The goal should be to maximize the number of employees who are safe and vaccinated. Whether this goal is best accomplished with a carrot instead of a stick is a case-by-case decision. But now that the legalities have been dealt with, policies should be clarified. Time to get that HR attorney back on the phone.

August 24, 2021 at 9:21 am 1 comment

Another Important Foreclosure Case gives Lenders More Flexibility

A recent decision provides more clarity to New York’s Byzantine foreclosure process. For those of us who believe that the goal of foreclosure should be to ensure that the rights of homeowners are protected while at the same time ensuring that lenders can get access to homes that borrowers can no longer afford to be in, this is a good thing.

When you enter into a mortgage loan with a member, the member is agreeing to pay back the note in monthly installments.  If a member misses a payment, you can actually sue and demand payment for the past due installment, which would be a ludicrous waste of time.  Instead, a payment default is a violation of the repayment contract and the lender has the option of demanding that the member pay the full amount due on the mortgage note. New York has a six year statute of limitations for mortgage foreclosure actions. The six year time period starts when a bank or credit union makes an unequivocal demand on a delinquent homeowner to pay the entire amount due on a mortgage note. Since New York has one of the most intricate and time consuming foreclosure processes in the country, it is not uncommon for foreclosures to take several years to complete and there has been an explosion in litigation in which delinquent homeowners argue that the six years statute of limitations has expired.

As a result, a key issue is how and when a lender can stop the foreclosure clock from running out by withdrawing a demand for full payment of a delinquent mortgage loan. Earlier this year the Court of Appeals decided Freedom Mortgage Corporation v. Engel in which it clarified the circumstances under which lenders could deaccelerate a mortgage note on which a bank had made a demand for full payment. In making its ruling, the court made clear that lenders simply had to put borrowers on notice that they no longer were obligated to immediately pay the entire amount due on their mortgage.

Seems clear enough, but what happens when a homeowner can show that a bank or credit union’s decision to stop demanding full payment of the note was primarily motivated by a desire to simply keep the six years statute of limitations from running out? For example, in Milone v. US Bank a homeowner defaulted on a mortgage note on October 1, 2008 and a demand of full payment for the entire amount due was made in December of 2008. Fast forward to October 21, 2014 when the homeowner received a letter that the mortgage note was being deaccelerated and that its demand for immediate payment of the entire debt was withdrawn.  Instead, our homeowner simply had to start making the monthly installment of payments. 

But in March of 2015 the homeowner sued the bank claiming that it was entitled to have the mortgage note discharged because the six year statute of limitations had expired. The court agreed. It effectively ruled that a decision to halt a foreclosure action did not stop the six year statute of limitations when a financial institution’s primary motivation is not to cease demanding full payment of the debt but to simply stop the foreclosure clock.

Here is the good news.  In a recent decision, 53rd Street LLC v. U.S. Bank, the Court of Appeals for the Second Circuit flatly rejected this logic. So long as a lender unequivocally deaccelerates the amount due on a mortgage note, it has the option of commencing a subsequent foreclosure action, even if the subsequent foreclosure action is filed six years after the initial demand for full payment of the note.

August 18, 2021 at 9:47 am Leave a comment

SC Rules that New York’s Eviction Moratorium Goes Too Far

The Supreme Court on Thursday granted emergency relief to landlords challenging a New York State statute barring them from commencing eviction proceedings against tenants who certify that they are suffering a financial hardship as a result of COVID-19. Although the law in question was set to expire on August 31st, the Court’s decision could have important implications if and when the state chooses to take similar steps in the coming weeks or in response to a future economic downturn.

Part A of Chapter 381 of the laws of 2020 provided that individuals could avoid foreclosures by indicating that they were being harmed by the pandemic. A separate section of the bill which the Supreme Court’s decision did not address extended similar protections to homeowners facing foreclosure. In blocking New York State from enforcing this bill against landlords the court technically did not issue a decision on the merits of the case, but by granting the emergency order a majority of the court signaled that New York’s law was illegal. There was even a dissenting opinion.

In a terse explanation of its decision, the majority explained that New York’s statute violated the “longstanding teaching that no man can be a judge in his own case.” In other words, any future law seeking to block evictions has to give landlords the ability to show that a tenant is not suffering from a financial hardship.

Like I said, although this case dealt specifically with evictions, the same argument could easily be made as applied to New York’s foreclosure ban, also set to expire on August 31st, which provides no mechanism for mortgage holders to contest a homeowner’s financial hardship.

                                                Hochul Transition Picks Up Pace

New York’s Superintendent of the Department of Financial Services announced that she would be resigning on August 24th, the same day the Governor has indicated he will hand over power to Lt. Governor Kathy Hochul. Before becoming the Superintendent, Lacewell served as a top aide to the Governor and remained an active advisor.

As for the Governor-in-waiting, she spent Sunday morning appearing on two Sunday news shows demonstrating, yet again, that in politics a week really is a long time. Virtually overnight, she has catapulted from the lowest profile statewide position in New York State government to a nationally significant politician. 

August 16, 2021 at 9:19 am Leave a comment

Older Posts


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.

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Join 741 other followers

Archives