Posts filed under ‘New York State’

Tough Times Continue For NYC Medallions

imagesCAYI602KThese are turbulent times for NYC’s taxi medallion industry .

There were several foreclosures and transfers in May and June with one medallion going for as low as $405,000 and another selling for $610,000.  Remember that  this is an industry where, until a couple of years ago,  foreclosures were as rare as a show of humility by Donald Trump.

Keith Leggett predicted in his Credit Union Watch blog that   “These transactions indicate that credit unions with New York City taxi medallion loans will likely see an increase in delinquencies, troubled debt restructured loans, and charge-offs.”     We really won’t know the full extent of the damage until we know whether or not  medallion prices are at their nadir.  Stay tuned

NY Fine tunes Direct deposits  You may want HR to take a look at regulations proposed by NYS’s Department of Labor addressing , among other things, the use of Direct Deposit by employers

Fed OK’s KeyCorp\First Niagara Merger

The inevitable consolidation of the financial services industry is on track to continue as the Federal Reserve Board approved the merger of Buffalo based  First Niagara into Ohio based KeyCorp.

Two days ago Bloomberg news reported that Senator  Schumer,  who had expressed reservations about the merger, signaled he was no longer opposed after KeyCorp  agreed  to cut no more than 250 jobs and to hire at least 500 people in the next three years.   The deal will make KeyCorp the 26th largest bank in the US and will have a direct impact on New York.  The Albany Times Union reported that the merger will result in the closure of  30 branches  with 18 closing as early as  October .

By the way, in reviewing the impact that the merger would have on financial services in the Buffalo area the Fed noted that “nine credit unions exert a competitive influence in the Buffalo market. Each institution offers a wide range of consumer banking products, operates street-level branches, and has broad membership criteria that include almost all of the residents in the market.”

So let me get this straight. According to the Banking industry, Credit union competition is a  bad thing which is why, for instance, NY municipalities shouldn’t be allowed to  place taxpayer money in credit unions;  but if it  helps banks become larger, credit union competition is  a good thing. Got it.

Just how much money will those 250 new  employees be making? JP Morgan CEO Jamie Dimon announced Tuesday that the bank  would be raising the minimum salary of its employees from $12 to $16.50 an hour depending on where they  work.  Dimon explained that “Wages for many Americans have gone nowhere for too long.”  What a guy!

Score on for Bernie Sanders on this one.


July 13, 2016 at 9:14 am Leave a 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

Send in the Clowns

Some divorces are, of course, for the best.  But others leave the divorcees in a temporary state of relief only to realize over time that the grass is not as green as they thought. 

The remarkable decision by the citizens of the United Kingdom to file for divorce with the European Union may very well end up like this.  Britain is the world’s fifth largest economy and by some measures the Capitol of International Finance.  It’s hard to see how breaking away from a free trade zone with which it does a good chunk of its trading is in its long term best interest or that of its citizens. 

Unfortunately for us, Britain’s decision is another in a series of body blows inflicted on the world economy, which help explain why economic growth in this country remains lackluster.  In her prepared testimony before Congress earlier this week, Janet Yellen explained that “One development that could shift investor sentiment is the upcoming referendum in the United Kingdom. A U.K. vote to exit the European Union could have significant economic repercussions. For all of these reasons, the Committee is closely monitoring global economic and financial developments and their implications for domestic economic activity, labor markets, and inflation.”

Governor Signs Abandoned Property Measure

On June 23, Governor Cuomo signed S.8159, the abandoned property bill that I have been talking about in this week’s blog posts.  The Governor’s action means that the law, imposing requirements on mortgage lenders to maintain abandoned property, takes effect in 180 days. 

I’ve also already mentioned the trigger for the threshold for determining whether or not these new requirements apply to your credit union.  You should also be aware that the bill applies prospectively for most impacted credit unions.  Specifically, the bill providers that “for any state or federally chartered banks, savings banks, savings and loan associations, or credit unions which originate, own, service and maintain between three-tenths of one percent and five-tenths of one percent of the total loans in the state which they either originate, own, service, or maintain for the calendar year ending December thirty-first of the calendar year ending two years prior to the current calendar year, the application of this section shall be prospective only.”

The DFS has rule making authority under this law and the sooner it starts explaining what financial institutions are impacted by this bill and to what extent, the better. 

On that note, have a good weekend.  God save the Queen.


June 24, 2016 at 8:36 am Leave a comment

NYS Legislative Wrap-Up

(UPDATED) Well, despite a flurry of last second activity, the Legislative session ended with a whimper and not a bang and as someone who believes that legislators, like doctors, should first and foremost do no harm that is not necessarily a bad thing.  Here is a look at how some of the key legislation played out.

The most problematic legislation  is in part Q of this budget bill passed early Saturday.  It imposes obligations on mortgage holders of  abandoned property.  The good news is that  there is a carve out for cus that maintain a portion of their mortgages and provide less than three tenths of one percent of mortgages in the state.  Obviously there is a lot to parse here but the smaller you are the less you have to worry about.  I’ll have more to say about this tomorrow but for those who think you may be impacted take a look.

Six weeks ago, if I was going to bet on one bill that would pass it would have been a bill to authorize ride sharing services (i.e. Uber and Lyft) to operate outside of NYC with the appropriate insurance coverage.  In the end, the Senate passed a one house bill (S.4108-d Seward) which includes coverage of “motor vehicle physical damage.” This is crucial to credit unions and other lenders that want to make sure that the value of their car loans is protected.  The bottom line is that the status quo, under which Transportation Network Companies (TNC) are subject to regulation within NYC and not authorized outside of the Big Apple remains in place.  What impact this development has on the value of NYC medallions remains to be seen.  Incidentally, your faithful blogger would have also predicted a Golden State NBA championship and an embittered LeBron James departing Cleveland for LA.  He would have been wrong on this one as well.  

Legislation that would have expanded the powers of check cashers by, among other things, working with banks or credit unions to provide loans (S.6985-b Savino/A.9634-b Rodriguez) stalled in the closing days in both the Senate and Assembly.


Unfortunately, despite some late movement, two erstwhile credit unions bills to allow credit unions to participate in banking development districts and to allow the State Comptroller to deposit state funds in credit unions did not get done.

Perhaps the bill that is going to have the most direct impact on credit unions is one that passed a few weeks ago.  If, as expected, it gets approved by the Governor, it will clarify when a mortgage loan is consummated for purposes of complying with mortgage disclosure requirements.

On that note, it was great to see you all in Saratoga.

June 20, 2016 at 8:55 am Leave a comment

Accounting Standards Finalized

Greetings from Saratoga Springs where we are, of course, holding an annual convention.  Incidentally, a very reliable source told me that Saratoga is the birth place of the American Bankers Association.

To the dread of credit unions everywhere, the FASB finalized its Current Expected Credit Loss Standards (CECL).  Why are credit unions so concerned about this?  Because the accounting standards, when fully implemented in 2020, will require financial institutions including credit unions to anticipate potential losses on loans and account for them earlier in the loan cycle.  This means, that if the standard works as anticipated, financial institutions will have to put more money aside to account for losses.  A second concern credit unions have is that complying with the new standard will require them to adopt and invest in sophisticated analytical tools to better project anticipated losses.

The FASB has been adamant that many small institutions will be able to comply with the new standard using their existing practices.   In a document accompanying the release of the final standards yesterday, the Board explained that “most organizations should be able to leverage existing systems and processes to comply with the new standard, and organizations will not need to forecast economic conditions over the entire contractual life of long-dated financial assets.”

I would save this quote for your examiner simply because, while I believe that many fears about this new standard have been exaggerated, I agree with those who argue that the key to the successful adoption of this new standard will hinge on examiner education.  Of course, this is one that you should sit down and discuss with your accountant.

Legislature Goes Into Overtime

The New York State Legislature is still not quite done completing its work so is still in session today.  I will provide a recap of the legislative session in Monday’s blog.  Try to contain your excitement.

June 17, 2016 at 8:14 am Leave a comment

Will Payday Loan Proposal Impact State Regulation?

One of the interesting concerns I’ve heard about the CFPB’s payday loan proposal is that it might water down stricter state-level bans.  Legally, the CFPB is making it absolutely clear that states are free to impose tougher standards for payday loans than those outlined in these regulations.  Politically speaking, however, the establishment of these baseline standards may ironically make it less likely that states like New York will continue to effectively outlaw payday loans.

First, from a legal standpoint the CFPB makes crystal clear in its preamble to the proposal that its intent is to establish a baseline of payday loan protections not a ceiling.  For example, page 141 of the draft document (i.e. the one not published in the Federal Register) explains that Dodd-Frank authorizes the state laws and regulations that provide greater consumer protections than federal laws, provided they are not inconsistent.  It then explains that “it believes that the fee and interest rate caps in these States would provide greater consumer protections than, and would not be inconsistent with, the requirements of the proposed rule.”   It further explains in FN 414 that “The Bureau also believes that the requirements of the proposed rule would coexist with applicable laws in cities and other localities, and the Bureau does not intend for the proposed rule to annul, alter, or affect, or exempt any person from complying with, the regulatory frameworks of cities and other localities to the extent those frameworks provide greater consumer protections or are otherwise not inconsistent with the requirements of the proposed rule.”  As a result, states like New York that cap legal interest rates that can be charged by banks and credit unions would still be allowed to do so.


However, the Bureau’s regulations may have the political effect of undermining the argument for usury caps.  As far back as fifteen years ago, I remember payday lobbyists arguing that payday loans were being made to New Yorkers with or without the state’s approval.  This reality is even more important now that so much lending takes place over the Internet.  If and when the CFPB’s regulations get finalized, these same lobbyists will argue that so long as loans conform with federal requirements, why should businesses based in New York be prohibited from offering them?  After all, if they comply with the CFPB’s standards, then surly these loans should be authorized by state regulators.

Father Knows best

Here is a leave it to beaver morality tale with a bizarre twist.

Anselmo Tapia’s kids were reading an article about a bank robbery in Bridgeview, Ill., a suburb of Chicago, when they realized that the robber in the surveillance photo looked an awful lot like Dad.  The kids confronted him with their suspicions and instead of responding with “What?  Come on you crazy kids, you’re gonna be late for school” he admitted that he was, in fact, the offending party.  He went down to the Sheriff’s office and turned himself in.   I wonder how much time he’s going to get and if the kids will keep up with the news in his absence.


June 14, 2016 at 9:02 am Leave a comment

Thinking of Merging? Read this Blog.

One of the issues of which financial institutions have to be particularly mindful in this increasingly litigious world is how much they say to their attorney is privileged (i.e. shielded from disclosure to third parties).  I have previously talked about in a previous blog how federal law makes it almost impossible for credit unions to shield an attorney’s work product from examiners.  Now, a decision released yesterday by New York’s Court of Appeals, its highest court, underscores just how narrow that privilege is, especially for those of you involved in credit unions that are thinking about merging.

As a general rule of thumb, you can call up your attorney to get legal advice and that communication will be privileged.  Furthermore, if not only you but another credit union face pending litigation or reasonably anticipate a lawsuit, the privilege is extended so that you may work on a common defense.  But if that same conversation takes place with a third party that is not involved in your litigation, the privilege is waived.

In Ambac Assurance Corporation v.  Countrywide Home Loans, Inc. Bank of America was sued and the plaintiffs wanted access to 400 communications that took place between BoA and Countrywide between the time that the two companies had decided to merge but before the merger was finalized.  Plaintiffs argued that while BoA didn’t have to hand over communications between it and its attorneys, any communications between BoA and Countrywide were third party communications for which there is no privilege.

BoA argued to the Court of Appeals that even though it was not facing any litigation involving Countrywide at the time, it shared a “common legal interest” in facilitating their merger.  The plaintiffs argued, and the Court of Appeals agreed, that merger discussions aren’t protected by privilege.  It concluded that when two parties are engaged in or reasonably anticipate litigation in which they share a common legal interest, the threat of disclosure may chill the exchange of information necessary to coordinate a legal strategy. In contrast, “the same cannot be said of clients who share a common legal interest in a commercial transaction or other common problem but do not reasonably anticipate litigation.”  In other words, don’t assume all the information you are sharing to facilitate merger discussions is free from discovery if someone decides to sue you in the future.

Legislative Update

If any of you are involved in funding gift cards, or like your faithful blogger, finds gift certificates tucked away in the top draw  about a year and a half  after they are given to him, then the Legislature passed a bill earlier this week (S. 4771-e  Funke\ A. 7610 Ewith) with which you should familiarize yourself.  The bill increases to 25 months from 13 the amount of time a gift certificate must be dormant before a service fee can be assessed on the balance.  It also stipulates that these fees must be replenished when a member redeems a certificate within three years.  Finally, all gift certificates have to be valid for a period of at least five years.

By the way, in NY a gift certificate is defined as ”a written promise or electronic payment device that: (i) is usable at a single merchant or an affiliated group of merchants that share the same name, mark, or logo, or is usable at multiple, unaffiliated merchants or service providers; and (ii) is issued in a specified amount; and (iii) may or may not be increased in value or reloaded; and (iv) is purchased and/or loaded on a prepaid basis for the future purchase or delivery of any goods or services; and (v) is honored upon presentation.”  N.Y. Gen. Bus. Law § 396-i (McKinney).  The bill now goes to the Governor.

McWatters Nomination to Export Import Bank Blocked Again

The Export Import Bank and the NCUA have about as much in common as Kim Kardashian and Mother Teresa but yet their fates are strangely intertwined. Without J. Mark McWatters, the Ex-Im bank doesn’t have a quorum to operate; and so long as McWatters stays NCUA has a quorum.  Considering that there are proposals like FOM reform still waiting to be finalized, this is a big deal.

Senator Richard Shelby, Chairman of the Senate Banking Committee, a steadfast opponent of the Bank, refuses to take up the  nomination.  Supporters of the Export Import Bank tried to do an end run around Shelby yesterday.  North Dakota Senator Heidi Heitkamp (D-ND) asked the Senate to take up the nomination with unanimous consent. To the surprise of no one, Shelby objected but the maneuver gave Democrats an excuse to voice their increasing frustrations over the stalemate.



June 10, 2016 at 8:44 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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