Posts filed under ‘New York State’
The 100 day milestone of the experiment called the Trump Presidency combined with a Saturday deadline for the country to either expand its borrowing authority or default on the credit card payment called the national debt is conspiring to make this one of the most intriguing political weeks since the election.
Back from its two week Spring break, the House of Representatives will begin to focus in earnest on the roll-out of CHOICE Act 2.0, the radical blueprint for regulatory reform. A Hearing is scheduled for Wednesday, April 26th at 10:00 am. While I am somewhat skeptical that the Senate will have the ability to grapple seriously with the issues raised by this Legislation any time soon, it will provide a wonderful opportunity for credit unions to continue to make the case that Dodd-Frank has done more harm than good when it comes to credit unions and true community banks.
Part 2 of the State Legislative Session kicks off as Assemblymembers and Senators reconvene after their break. Not coincidentally, this coincides with our Annual State Governmental Affairs Conference. The Executive and Legislature have each signaled an interest in taking a fresh look at some old classics. Whether you like politics or find it more distasteful than a glass of orange juice after brushing your teeth, we participate in the most highly regulated financial industry in the country. Everyone reading this blog has an obligation to engage policy makers at the state and federal level in our efforts to provide relief. Besides, on Tuesday morning, you’ll hear a presentation from E.J. McMahon, the Research Director of the Empire Center for Public Policy. I’ve always been a big fan of his since he’s the only man I know in Albany who has been able to make a living being an unabashed Conservative.
As part of this frenzy to solve all the world’s problems in the first 100 days of his Administration, President Trump surprised friends and foes alike when he announced on Friday that he would outline plans for the mother of all tax reform on Wednesday. No one honestly believes that this will be accompanied by anything resembling Legislation anytime soon, but depending on who you talk to on Capitol Hill, if Congress does get serious about a major tax overhaul, everything is on the table.
There may be a lot of sizzle this week, but with Congress’ spending authority about to run out, there will be some serious brinksmanship. This is a particularly common and dangerous game of chicken in which opposing parties threaten to let the nation default if they don’t get a major priority included in the debt extension agreement. The conventional wisdom, as reflected in the Sunday papers, is that the Wildcard this year is the Administration. Democrats and Republicans have quietly worked toward an extension agreement but Budget Director and former-Congressman Mick Mulvaney threw a fly in the ointment when he suggested that President Trump would not sign off on a deal unless it included funding for a Border wall. This is a poison pill for Democrats. By the way, everyone knows that a default on the national debt would be an absolute disaster, but the more commonplace this game becomes, the more likely we are to see it spin out of control.
Last but not least, keep an eye on the outcome of the French elections. Now that the French have decided on the two finalists who will face off for the Presidency, we have another important referendum on whether or not the world still supports the post-WW II order based on free markets and Democratic values or whether people are so angry that they want to blow it up and start from scratch even if they have no ideas for its replacement. Don’t fool yourself, the same debate rages on in this country.
Yours truly has a busy schedule this week, I will be checking back in with you on Thursday.
As readers of this blog know, the Legislature authorized Transportation Network Companies such as Uber and Lyft to start operating in New York State locales beyond NYC as part of the recently approved budget. Thanks in no small part to the efforts of the Association, the legislation includes some important protections for credit unions. However, there are still additional steps that I would take to maximize your credit union’s collateral protection, particularly as ridesharing is taking hold at the same time that the 72 month car loan has become common place. Remember this is just one person’s advice and not a substitute for running this by your own counsel.
Ever since plans were laid for TNC networks to come to New York, insurance has always been a big issue. Remember that your typical car insurance policy contains a livery exception, meaning that a driver isn’t insured for accidents that happen while logged into the network to pick up passengers. The legislation addresses this issue by mandating that TNC drivers applying to join a network be informed of the need for additional insurance and mandating that the TNC’s make sure that these drivers are, in fact, properly insured.
While these are important protections, in talking to credit unions I am suggesting that there are still additional steps they should consider taking. Most importantly, I would amend your car loan language with a provision informing the borrower that the use of a vehicle being financed in a TNC without the insurance mandated under NYS Law shall constitute a breach of the lending agreement and may result in the entire amount of the loan being due immediately.
What does this accomplish that New York State’s Law cannot? For one thing it is more expansive than the protections afforded by the law since its prohibitions would apply even to members who are not currently logged in to a TNC Network but who are TNC drivers.This is important because if you have reason to believe that a member is operating as a TNC driver you can call the loan without waiting for an accident. It also provides an additional notice to your members that special TNC insurance is required. Finally, it provides you some level of protection in the event that your member somehow gets to join a network without getting adequate insurance. But under this later scenario I would consider going after the TNC Company for your losses. New York’s TNC legislation takes effect in approximately three months.
By the way, since we are on the subject of TNC’s, I had the pleasure of dropping off my two daughters at Kennedy Airport Monday morning for a flight down to North Carolina. For those of you, who haven’t had the “pleasure” of going to Kennedy, think of those chaotic scenes in third world capitals where a mass of humanity ignores all laws. The one thing noticeably absent from this scene was anything more than a handful of traditional yellow cabs. If I had taken this trip just 5 years ago they would have been everywhere. With the caveat that I have always been accused of being a skeptic when it comes to the future of the medallion industry, all you have to do is go to NYC to realize that the medallion industry as we know it is destined to become an exhibit in the Smithsonian. I am also happy to report that my two kids didn’t witness paying passengers being dragged off the plane and assaulted.
On that upbeat note enjoy your day!
Expect “debt collectors” to have more interest in buying your delinquent loans as opposed to simply contracting for a percentage of collection recoveries if, as expected, the Supreme Court rules in favor of Santander Consumer USA, Inc.
Oral arguments were heard on the case yesterday, in an important collections case, and we can expect a ruling sometime in June. You can also expect states like New York to take a renewed interest in strengthening state level restriction on debt collection practices.
The FDCPA was passed by congress to deter abusive debt collection practices. It was intended to crack down on third-party collectors which is why it does not apply to banks and credit unions which are collecting on their own loans. The question is who exactly is a debt collector under 15 U.S.C.A. § 1692a (West). Under the statute, a debt collector is any person….”who regularly collects or attempts to collect, directly or indirectly debts owed or due or asserted to be owed or due another.” Santander purchased billions in car loans and set about collecting on those that were delinquent. Borrowers alleged that their aggressive collection practices violated the FDCPA, but when they tried to sue Santander for violations it successfully argued before the Court Of Appeals for the Fourth Circuit. Their argument was that since it was collecting on debt it owned, the statute didn’t apply to its activities.
According to press reports, justices weren’t buying the argument of the borrowers yesterday, who argued that Santander was taking advantage of a loop hole that is inconsistent with congress’s intent when it passed the FDCPA.
No matter how the Federal Law is interpreted, New York is one of several states that has a state level DCPA modeled after the federal law. In a brief submitted to the Supreme Court, New York joined several such states in arguing that existing state level prohibitions aren’t adequate. The brief noted for example, that New York’s debt collection statute (NY General Business Law § 600 et. seq.) has traditionally been interpreted in reference to the federal law and that it does not permit consumers to bring a lawsuit.
Stay tuned – this provides another classic example of how a change in direction in the federal level is often met with push back on the state level.
I just went through my email folder containing ideas for future blog content and there are two things I would like to share with you before heading off to God’s country (i.e., Long Island to visit my family).
First, I have been remiss in failing to inform my faithful readers that the New York State Department of Financial Services recently approved a Wild Card application that will allow state chartered credit unions to limit the oath taking requirements to board members. Let me explain.
Section 468 of the New York State Banking Law requires each “director, officer and member of a committee” to own a credit union share and to take an oath of office when appointed. In recent years this requirement has become increasingly burdensome to state chartered credit unions; it has been interpreted as applying not only to board directors but also to individuals such as lending officers.
The approval of the Wild Card power, under which state chartered credit unions have no greater oath obligations than their federal counterparts, is important not only because it helps state charters operationally, but because it is another example of how Superintendent Vullo is backing up her public commitment to helping makes the state charter option as attractive as possible. Remember, all credit unions in New York State, irrespective of their charter type, have an interest in a strong dual-chartering system.
The second thing I would like you to know was that NCUA recently released a supervisory letter to examiners updating the risk factors that should be considered when evaluating credit union compliance programs. The update reinforces a guidance issued by NCUA 15 years ago when it began to implement a risk focus examination process designed to eliminate the need for annual examinations of well performing credit unions. With the NCUA once again expanding its examination timeline it makes sense to revisit the criteria once again.
On that note, I will be back on Tuesday – enjoy the weekend
Wells Fargo continues to be the gift that keeps on giving, for consumer advocates anxious to argue why we are all better off with the CFPB.
Yesterday, The Occupational Safety and Health Administration (OSHA) ordered the bank to pay $5.4 million in back wages to an employee they fired in 2010, after reporting suspected incidents of mail and wire fraud by “bankers” under his supervision.
Although a written decision didn’t accompany this news there is wide-spread speculation that the whistle blower was disciplined for reporting instances related to the opening of phony accounts without customer permission. Remember, the CFPB was the regulator that discovered and fined Wells Fargo for this misconduct.
Incidentally, if you’re wondering why OSHA is fining Wells Fargo, it’s because it was given the authority to enforce Sarbanes-Oxley’s whistle blower protections provisions. Go figure.
The Sarbanes-Oxley Act makes it illegal for a publically traded company to discharge, suspend, threaten, harass, or discriminate against any employee who provides information to assist in the investigation of a violation of certain Federal Laws (18 USC 1514A). The bank has the option of appealing OSHA’s fine. It should quit while it’s behind; but somehow I don’t think that is going to happen.
Of course, the fact that Wells Fargo has engaged in misconduct discovered by the CFPB doesn’t make the CFPB’s structure anymore constitutional or prudent. But try telling that to the Elizabeth Warren’s of the world.
New York Extends Budget till May 31
In what is new ground for the Cuomo Administration the legislature and the Governor have agreed to a temporary budget extending until May 31, while they continue to work on a budget plan for the 2017-2018 fiscal year. This sure does have a back to the future feel to it.
So much for large scale regulatory reform!
Speaking before the US Chamber of Commerce (that unabashed bastion of capitalism in DC), Senate Banking Committee Chairman Mike Crapo acknowledged the obvious and said that in the near term a broad based overhaul of Dodd-Frank is out of the question. He is quoted in Today’s American Banker as saying “In the near term, we are working to identify bills with bipartisan support that we can move quickly and put points on the board,”
Maybe it is the gloom of a dreary late season wintery mix but this doesn’t sound like the type of agenda that would include scaling back the CFPB’s power, but hopefully I can be proved wrong. On the bright side, he did predict that he and Senator Sherrod Brown, of Ohio would find common ground in areas where they can move pieces of legislation quickly.
What really bothers me is the Senator’s comments, as paraphrased in the article, that larger regulatory changes will have to come from the independent agencies, which will eventually be headed by Trump appointees.
Is this really what representative government has become? Have our elected representatives’ become so comfortable delegating legislative authority to un-elected regulators that they openly pin their hopes for big changes on personnel decisions about who will lead government bureaucracies? I guess I have to re-read the constitution, or simply start ignoring it all together in order to understand what is happening in Washington.
Will there or wont there be an on-time state budget? I was hoping to dedicate this blog to an overview of the 2017-2018 Fiscal Year New York State Budget which kicks in at 12:00am tomorrow. Instead, all I know for sure is that there are a lot of rumors floating around but nothing set in stone yet. As of right now the Assembly isn’t scheduled to go into session until 12:00 this afternoon and the Senate gavels in at 3:00, so it is hard to see how the Governors streak of “on-time” budgets will remain intact.
Those issues that could impact credit unions include insurance requirements for Uber drivers to ensure that car loan collateral is protected, expansion of authority for financial institutions to block transactions involving financial abuse of the elderly and disabled, and language either expanding or clarifying (depending on how you want to interpret it) the regulatory authority of the DFS over licensed individuals and institutions. It is also possible that none of these issues will be dealt within the budget.
By the way, don’t make the NYS budget process more complicated than it is; for more than 30 years budget negotiations have been first and foremost about education aid: when the parties decide on how much school districts will get to spend, and how the pot will be divided – there will be a budget.
More than 1.6 million New Yorkers were victimized by data breaches in 2016 as the state saw a 60% increase in the number of data breaches and a tripling of the number of exposed records according to a report released last week by Attorney General Eric T. Schneiderman. Equally troubling, the most frequently stolen information was social security and financial data, meaning that we are likely to experience the consequences of these breaches for years to come.
Interestingly, according to the AG, although hacking remained the leading cause of data breaches (40%); in 2016, “employee negligence, which consists of a combination of inadvertent exposure of records, insider wrongdoing, and the loss of a device or media, nearly tied hacking by accounting for approximately 37% of breaches.”
The AG’s findings are based on required notifications of data breaches mandated by §899-aa of New York Business Law. One quick take-away: the report’s findings underscore why your credit union should have clearly delineated policies about employees bringing their own devices to work, as well as guidelines about which employees are going to get access to smart phones and company equipment.