Posts filed under ‘New York State’

Why Our Tax Exemption Is At Risk

One of my pet peeves about the industry is that, on occasion it lets its fear over losing the tax exemption venture into the realm of paranoia with the result that we crowd out other important legislative initiatives. Then again, in the immortal words of Henry Kissinger, “Even paranoids have enemies” This time I’m leaning with the paranoid group.

There are several factors that make our tax exempt status more vulnerable now than at any point since the last round of major tax reform back in 1986. Here’s why:

By a 51-49 vote last night, the Senate pushed through a budget resolution setting the stage for a detailed debate over tax policy. It includes authority for a $1.5 trillion tax cut while maintaining a commitment – on paper anyway – to balancing the budget in ten years. While the budget resolution doesn’t mean all that much, it does underscore the bizarre dynamics which are going to make this one of the most unpredictable legislative debates any one of us has seen in our lifetime. I say that with full knowledge that many credit union veterans have been around a long time.

First, this is the most partisan environment in which Congress has ever operated in. Coming up with a deal on tax reform is tough enough but in 1986, democrats like Dan Rostenkowski, Tip O’Neill and Bill Bradley were able to cross the aisle and deal with Ronald Reagan without being accused of being political apostates and putting their careers on the line. Today, the budget debate will largely be an internal Republican struggle which makes it all the more likely that last second deals will have to be cut in order to achieve the goal of a tax cut at all costs.

Second, who are our credit union champions? The Affordable Care Act was saved recently, at least in the short-term, because a handful of Republican senators were willing to buck the party establishment. Who in the Senate Republican majority is willing to stand up for credit unions even if it means making tax reform less likely? Remember, this is the same Congress which seriously considered putting NCUA under congressional control just a few weeks ago. It is also the same Congress that is open to considering changes to the deduction of state and local taxes which will directly impact the Northeast and West Coast. A party willing to write off entire regions of the country can’t be entirely trusted.

Third, the banking lobby has never been as powerful as it is today. Back in ’86, community and independent banks still represented a substantial counter weight to large banks. But with the growth of interstate banking and the repeal of Glass-Steagall, banks today have morphed into capitalist oligarchs.

Fourth, the credit union industry itself is vastly different than three decades ago. As credit unions have justifiably and understandably grown bigger and more sophisticated, it has become easier for banks to question the tax exemption. There are responses to each one of these arguments but let’s not fool ourselves into thinking that the responses don’t have to be made.

Hopefully I’m all wrong. Republicans will ultimately figure out a way to get massive tax cuts without engaging in much tax reform but it is better for the industry to be safe rather than sorry. This is one of those times when we all have to be ready to go to the ramparts and defend the industry.

DFS Provides Important Guidance For State Chartered Credit Unions

In case you don’t know yet, the New York Department of Financial Services has released an important guidance streamlining the process for state chartered credit unions to receive low-income credit union designations. This simple change  will make it much easier for credit unions wishing to serve low-income areas.

October 20, 2017 at 9:37 am Leave a comment

New York State Proposes Expanded Student Branching Powers For State Charters

Good morning, folks.

New York State’s Department of Financial Services continued to signal its increased support for the State credit union charter by providing notice that it intends to allow state chartered credit unions to operate student branches to the same extent as their Federal brethren. The proposal will provide much needed guidance and flexibility for state chartered credit unions interested in offering such branches. The beauty of wild card is that it also provides assurances to existing Federal charters that if they were to flip to the state’s oversight they can be assured of exercising the same powers.

While state charters have long had the ability to operate student branches in New York State (See §450-b) Federal credit unions have much more flexibility in operating such branches as I explained in this previous blog under the DFS’s proposal, state charters will be able to open student branches provided they give the Department at least 30 days prior notice. Eligible members would include all students enrolled in the school as well as teachers and staff.

If approved, this would be the most important use of the wild card power ever authorized on behalf of credit unions so comments in support of this notice would be appreciated. Remember, a strong state charter helps both Federal and State credit unions.

NCUA Board Meeting Today

The NCUA has a Board meeting scheduled for today. If all goes according to plan, NCUA will quickly be finalizing its proposal to create a more formalized appellate process for credit unions challenging material examiner findings. I think this is potentially a very big development but I will talk about that more in tomorrow’s blog. Incidentally, tomorrow’s blog should be timelier than other blogs have been in recent days as there’s no Yankee game tonight. For those of you interested, the next game is tomorrow night.

 

 

October 19, 2017 at 9:11 am Leave a comment

Five Things I Have To Tell You Before The Yankee Game

Don’t tell anyone but If all goes according to plan, I’ll be sneaking out of the office a little early today so I can be comfortably ensconced in my leather recliner with my opened IPA and my perfectly positioned remote control by 5:08 p.m. so I don’t miss a pitch in Game 5 of what’s turning into an epic battle between the Yankees and the Astros.

But in the meantime, just in case you don’t care about baseball or actually need to get some work done before the game starts, here are five things I should tell you about before I sneak out.

1. New York Finalizes Tough New Title Insurance Regulations

New York State’s Department of Financial Services continued its crackdown on what it perceives as abuses by the Title Insurance industry. Yesterday, it finalized a set of regulations which generally further restrict the fees that title insurance companies can charge and further narrow the flexibility that title insurance companies have to enter into affiliation relationships. Some of the specific prohibitions include limits on “ancillary fees.” For example, it caps so-called ancillary fees or other discretionary fees such as fees for bankruptcy and municipal searches. New York State is concerned that title insurers get around existing limits on premium charges by charging additional costs for such services. The regulation also places new limits on the activities of title insurance agents or corporations from affiliated persons or corporations. This means, for example, that if your credit union has a title insurance CUSO it should reexamine how this relationship is structured.

2. Trades Call On Congress And Justice Department To Provide Clarity On Website ADA Compliance

CUNA urged Congress and the Justice Department to clarify once and for all the obligations of companies to provide accessible websites under the Americans With Disabilities Act. The call comes amid a wave of lawsuits against credit unions and other financial institutions for failing to comply with the ADA. In 2010, the Department of Justice issued an Advance Notice of Proposed Rule Making which provided guidance on websites in the ADA but the regulations have gone nowhere. On the legislative front, CUNA voiced its support for HR 620, the ADA Education and Reform Act of 2017.

3. Temporary Exceptions To Appraisal Requirements In Storm Impacted Areas 

If you provide mortgages in an area impacted by Hurricane Harvey, Irma, and Maria then you should know that Federal regulators including the NCUA issued an order specifying that financial institutions will not be required to obtain appraisals for affected transactions. The agencies will not require financial institutions to obtain appraisals for affected transactions (1) if the properties involved are located in areas declared major disasters; (2) if there are binding commitments to fund the transactions within 36 months of the date the areas were declared major disasters, and (3) if the value of the real properties support the institutions’ decisions to enter into the transactions.

4. NCUA Budget Briefing Today

Don’t forget that NCUA is holding a briefing on its proposed 2018 budget from 2-4pm. The briefing is more important than usual for those of us in Region I as it may provide us with additional information about the cost savings to be generated from shutting down operations in the Albany area. By the way, if NCUA doesn’t want to remain my neighbor then they shouldn’t expect a Christmas card from me this year.

5. Rally Chants That Didn’t Make The Cut

Yours truly ran out of time to get a blog out yesterday. I had to get downtown to participate in the credit union rally hosted by the Association. Thanks to all of you credit union people who showed up. While the rally was a success, I remain a little upset that some of my proposed chants and slogans were not incorporated into the rally. So here they are:

  • All’s Well That Ends Wells!
  • Credit Unions Rule, Bankers Drool! (Courtesy of my 8-year-old.)
  • 100 Years Of Opening Accounts that People Actually Know They’ve Opened

October 18, 2017 at 9:23 am 2 comments

Time To Make Your Website ADA Compliant

Image result for ADATwo recent developments demonstrate that it’s time to start making your website ADA compliant if you haven’t done so already. 

 First, the Credit Union Times reported recently that at least nine credit unions have been sued in recent weeks because their websites allegedly violate the Americans With Disabilities Act (ADA). Second, there is now a district court decision in the 2nd Circuit, which has jurisdiction over New York State that websites must comply with this federal law.  Andrews v. Blick Art Materials, LLC, — F. Supp. 3d –, 2017 WL 3278898, (E.D.N.Y. Aug. 1, 2017).

To state a claim under Title III of the ADA, a disabled plaintiff must prove that a defendant owns, leases or operates a place of public accommodation and that the defendant has discriminated against him by denying him a full and equal opportunity to enjoy the defendant’s services. The key issue, increasingly involving credit unions, is whether or not a business’s website is a place of public accommodation.

 For example, I pulled down the complaint to one of the lawsuits to which the CU Times is referring. The legal argument in Carroll v. Roanoke Valley Community Credit Union is a straight forward one. The plaintiffs are visually impaired consumers who argue that the credit union’s website lacks basic software that enables the visually impaired to navigate and utilize web services. Specifically, they point to standards promulgated by the International Website Standards Organization which have been “successfully followed by numerous large business entities to ensure that their websites are accessible” and which the credit union has allegedly not adopted.

Despite the ubiquity of the internet, the courts have still not come to a consensus as to whether or not a website is a place of public accommodation covered by the ADA. Very generally speaking, some courts argue that the ADA can’t apply to websites because they are not physical locations such as buildings. Other courts have concluded that the ADA should be read broadly as including websites at least to the extent that they assist individuals wanting to enjoy a business’s physical location.

This is why the Andrews decision is potentially so important. It marks the first time that a New York Federal Court has directly ruled on the issue of whether Title III of the ADA applies to a retailer’s website. If appealed.  It will give the Court of Appeals for the 2nd Circuit the opportunity to provide clear guidance to credit unions and other businesses about what their website obligations are. If the case is upheld on appeal, it clearly stands for the proposition that your website must be ADA compliant.

 

October 11, 2017 at 9:48 am 1 comment

First Monday In October Starts Quietly For Legal Geeks

With the Supreme Court back to nine members, this promises to be one of its most prolific terms in several years as the high court takes on hot button issues ranging from refugee policy to the right of businesses to deny services to same-sex couples. But, as it stands right now, I don’t see any cases on the docket that would have much of a direct impact on credit unions. This may change.

Typically there are at least some issues that impact the way credit unions go about their business. For example, last year the Supreme Court decided cases ruling that merchants challenging the legality of credit card surcharge bans were entitled to first amendment protections and it also ruled that banks could be sued by municipalities for violations of the Fair Housing Act, albeit under very narrow circumstances. No such issues are up for review so far.

This is not to say that there aren’t some key issues out there that will most likely be reviewed by the court if not this term, then the next. For example, PHH’s case challenging the constitutionality of the CFPB’s one director structure is still at the appellate level. Once this case is decided, the losing party will undoubtedly appeal.

Then there is the issue of how much harm consumers have to prove in order to sue companies responsible for data breaches. Circuit courts have already split on this issue and it’s only a matter of time before the Supreme Court feels the need to explain how its Spokeo decision is to be applied in the context of data breaches. Specifically, does a consumer have to prove that their personally identifiable information was compromised in a data breach or do they also have to prove that their data was used to facilitate identity theft?

Finally, there’s the issue of the TCPA and how it is to be interpreted in the age of the cell phone and texting. One case that I believe cries out to be reviewed is the recent 11th Circuit ruling holding that members could partially revoke the authorization of third-parties to contact them.

Speaking of the TCPA, CUNA on Friday filed a petition with the FCC requesting that informational calls to the cell phones of members with whom they have an existing relationship be exempt from the TCPA.

Key Changes In NY Committee Leadership

New York Assembly Speaker, Carl Heastie announced appointments to several key committees last week. The changes were triggered by the retirement of long time Manhattan Assemblyman, Denny Farrell, who retired after 42 years, during which time he rose to lead the Assembly’s Ways and Means Committee.

Most importantly for our purposes, Assemblyman Jeffrey Dinowitz moves to the Assembly’s Judiciary Committee, which has jurisdiction over many issues of operational concern to credit unions such as foreclosures and levy and restraints. He replaces Assemblywoman Helene Weinstein who was recently named the first woman chairman of the Ways and Means Committee. Generally speaking, any bill with spending implications must go through this committee.

October 2, 2017 at 9:20 am Leave a comment

Five Things You Need to Know This Friday

With apologies for the late start, here are five things you need to know:

Show Me the Money 

As you probably already know, at yesterday’s board meeting, the NCUA announced that it was closing down the Temporary Corporate Credit Union Stabilization Fund on October 1, 2017 The decision sets the stage for credit unions to see a rebate of between $600 million and $800 million in 2018.

Now for the bad news: NCUA is forging ahead with plans to raise the Normal Operating Level to 1.39%. Under federal law, NCUA can set the Normal Operating Level anywhere between 1.20 and 1.50 provided that any funds in excess of the NOL are returned to CUs.

In his statement, Chairman J. Mark McWatters broke down the 1.39 rationale this way

There are three key risks to the equity ratio for which the 1.39 percent normal operating level accounts. Specifically, the 1.39 percent level accounts for the following:

  • Four basis points to reflect the risk posed by the remaining obligations of the Corporate System Resolution Program;
  • Two basis points to reflect the projected decline in the equity ratio through 2018 that will occur even without a recession; and
  • 13 basis points of protection for risks to the equity ratio posed by insured credit unions.

GOP Tax Plan Takes Dead-Aim at NY

 Credit unions in states with high local and state taxes—I’m talking to you New York, New Jersey and Connecticut—have more to more to worry about then protecting the credit union tax exemption as Congress debates tax reform. The tax cut blueprint announced by GOP leadership earlier this week ends the deductibility for state and local taxes. In addition, by doubling the standard deduction to $24,000 for married taxpayers filing jointly, and $12,000 for single filers, members will find it less attractive to itemize for the mortgage interest deduction. This could impact the mortgage businesses, particularly downstate.

By the way, contrary to popular belief, New York State gives a lot more money to the federal government than the federal government gives to New York State.

Advertising Relief

The Share Insurance Fund wasn’t the only thing on the minds of the NCUA yesterday. It also released proposed regulations amending signage requirements. OK, this might not be the most exciting thing in the world, but it does affect what goes into your advertising disclosures.

Association Testifies On Data Breach Solutions  

 In the aftermath of the Equifax Data breach, the State Senate’s Consumer Protection Committee held a hearing to examine steps that could be taken to strengthen consumer data protections. The Association was among those groups invited to testify. Our key points were:

  • We need baseline security standards for all businesses that hold large amounts of consumer information.
  • The Legislature should not impose additional obligations on financial institutions such as credit unions, which have been taking steps to prevent identity theft for more than a decade.
  • Consumers and credit unions need the right to sue businesses for the direct and indirect costs of data breaches.
  • More needs to be done to enhance consumer education in schools.

Why Dentists Are the Best Marketers In The World

 The brilliance of the dental industry is that it has figured out a way to have parents pay thousands of dollars for the right to inflict medieval treatments on their children that would make an inquisitor squirm. My eight year-old recently got an expander, which, as far as I can tell, is the equivalent of sticking a pair of pliers in your kid’s mouth for a couple of years and seeing what happens.

On that note, have a nice weekend.

September 29, 2017 at 11:15 am Leave a comment

NY Gets Ready To Ramp Up Enforcement Of It’s Marquee Regulations

New York’s Department of Financial Services is signaling that it is getting ready to ramp up enforcement of two high-profile regulations.

Last Wednesday, it announced that it was launching a series of information sessions to tell local governments about New York’s law requiring banks and credit unions above certain thresholds to maintain vacant and abandoned property. This announcement was coupled with a new guidance reminding impacted mortgagees of their basic obligations, such as that they are responsible for securing boarded windows or doors that are loose or forced open. In addition, mortgagees are required to register vacant or abandoned property to the department. They were also reminded of the obligation lenders have to report abandoned property to the state. §1308 (c) of the Zombie Property Law gives municipalities the right to enforce this law. Don’t be surprised if you begin to have more discussions with your local officials.

Remember that the obligation to maintain property under §1308 only applies to mortgagees which reach thresholds further described in this blog. This is distinct from the obligation to report vacant or abandoned property.

New York’s second major regulation imposes cyber security requirements. As readers of this blog will know, this regulation imposes baseline data security protocols on covered institutions. It applies to “any Person operating under or required to operate under a license, registration, charter, certificate, permit, accreditation or similar authorization under the Banking Law, the Insurance Law or the Financial Services Law.” Institutions covered by the regulation, such as a credit union mortgage CUSO or a state chartered credit union have to register with the state by using this link, the portal is on the upper right hand side and the Q and A’s provide some guidance: http://www.dfs.ny.gov/about/cybersecurity.htm.

I know originators have started to receive notices that they must comply with Part 500’s registration requirements by September 27th. The good news is that individuals who work for businesses subject to Part 500 are exempt from these requirements provided that the institution for which they work is properly registered with the state and has received permission to register on behalf of its employees. The bad news is that unless they work for an institution that has 50 or more employees, each individual still must indicate to the state that he or she is exempt from the regulation’s requirements by filing a notice of exemption.

 

 

September 26, 2017 at 9:36 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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