Posts filed under ‘New York State’

Do Vacation Policies Help Prevent Fraud?

In 1996 New York’s Banking Department issued a guidance strongly encouraging financial institutions to mandate two weeks of consecutive vacation for employees holding sensitive positions.  Its rationale was that two weeks would provide adequate time to uncover malfeasance on the part of employees who would not be able to cover up their mismanagement away from the office. 

It seems that about for as long as the policy has been in existence, state chartered credit unions and banks have argued that the guidance is an outdated relic of a bygone era which needlessly burdens financial institutions and does little to accomplish its laudable goal of detecting insider abuse. 

So yours truly was pleased to see that on January 4th DFS issued this request for information seeking feedback from financial institutions about potential changes to this guidance.  The Association has already talked to some of our state charters and will certainly be commenting to the DFS as it considers changes. 

Just rereading the guidance demonstrates how outdated it truly is.  For example, it explains that mandatory vacation policies should apply to “… those officers and employees involved or engaged in transactional business or having the ability to change the official records of the institution. This policy should also cover all other staffers who are capable of influencing or causing such activities to occur.”

Suffice it to say that a lot has changed since 1996.  Many of us still did not know what the internet was, let alone conceived of online banking.  It was 11 years before Steve Jobs introduced the iPhone!  And today, average consumers can electronically deposit checks and expect almost immediate access to their funds.  As a result, virtually every employee can, on some level, be considered a key employee who holds a sensitive position and a fraudster can do in a matter of minutes what used to take two weeks. 

The NCUA manages to address the same issues that New York addresses without adopting a stringent two week requirement.  It’s time DFS follows suit.  The existing guidance hinders both big and small institutions. 

January 20, 2022 at 9:22 am 1 comment

NCUA, Gov Hochul Outline Key Spending, Supervisory Priorities

When you combine unprecedented spending by the federal government, huge bonuses for the Wall Street crowd and an economy running at inflationary speed resulting in revenue for local governments, what you end up with is an unprecedented opportunity for New York State to devise a budget which incorporates a $5B surplus.  Yesterday the Governor released her proposed spending priorities that provides the framework for budget negotiations over next year’s spending plan. 

New York’s budget process gives a tremendous amount of power to the Governor because it gives the Executive broad discretion to include legislative programs in the budget, provided they are tied to an expenditure of public funds.  In addition, the Legislature can’t simply ignore the Governor’s proposal.  It must either accept it, get the Governor to agree to amend it or override the Governor’s plan which requires a 2/3 vote of the Legislature.  This last scenario hasn’t happened since the waning days of the Pataki administration. 

We will be going through the budget for the next several days, but one proposal that we already want to highlight would increase the ability of Community Development Financial Institutions to participate in the Excelsior Linked Deposit program.  According to the memo accompanying the proposal, the legislation “amends the state finance law to include CDFIs as eligible borrowers under the Excelsior Linked Deposit program and to allow CDFIs to subsequently make loans to small businesses using funds borrowed.” [pg. 104, Part BB of this  bill]

Needless to say, this could provide one more reason for eligible credit unions to consider becoming CDFI’s.  I will keep you posted.

NCUA Outlines Supervisory Priorities

Yesterday, NCUA issued its annual guidance detailing its supervisory priorities for the coming year.  This is a must-read for anyone reading this blog. 

Credit Risk Management tops the list of concerns this year.  This should surprise no one.  Inflation is at a 40 year high, we can expect a series of interest rate hikes and we still have members struggling as a result of the pandemic economy.  Many of these trends are accentuated in New York State.  On the one hand we have members who can afford to buy houses even as housing prices have increased by as much as 20% in some areas.  On the other hand, New York City has an unemployment rate well above the national average.  If your member is a bartender, waiter or hotel worker, they are still struggling.  Make sure you have reasonable policies in place so you can demonstrate to your examiners the steps you are taking to help struggling members while ensuring that your credit union has the resources to withstand sudden changes to the economy. 

On that note, enjoy your day.  Have fun keeping all those balls in the air.

January 19, 2022 at 9:27 am Leave a comment

Are You Responsible for “Take Home” Covid?

Although the decision by the Supreme Court to block OSHA’s implementation of an emergency vaccine mandate/ testing requirement for businesses with 100 or more employees has understandably gotten a lot of attention, all employers should remain mindful of their ongoing responsibility to ensure a safe workplace during the pandemic. A case pending in California demonstrates precisely what I am talking about.

Rose Gomez vs LOGIX Federal Credit Union, et al. involves a credit union employee who is suing the credit union for negligently protecting its employees against Covid resulting in the death of her relative after she contracted the virus. The plaintiff alleges that despite the known risks of Coronavirus spreading after the declaration of local, state, and national emergencies, the Credit Union continued to group employees close together. This case and another in California dealing with a closely related issue are being scrutinized nationally as courts begin to examine employer responsibilities in responding to the pandemic.

Among the issues that are being litigated in New York and other states are the extent to which Worker’s Compensation laws block employees from making claims such as the one being brought against the California credit union and the extent to which these laws also shield employers against the claims of third parties who claim to have been made ill after an employee “took home the Coronavirus.”

And of course because New York is New York there are increased legislative and regulatory requirements of which New York credit unions should be aware. As I have explained in previous blogs, New York’s HERO Act mandates that employers promulgate baseline protocols in response to airborne infectious diseases and authorizes employees to sue over the violation of these protocols.

In other words, if you think yesterday’s decision by the Supreme Court made your life easier you are sadly mistaken. Employers have an ongoing obligation to respond to the Covid pandemic and the courts will be defining the contours of those obligations for years to come.

January 14, 2022 at 9:23 am Leave a comment

New York Introduces Further Remote Notarization Changes

In the closing days of December, Governor Hochul signed legislation permitting the use of remote notarization in New York, but coupled her signature with an announcement that further changes had been agreed to.  Yesterday, the Legislature introduced these proposed chapter amendments.

Although I am not quite ready to take a deep dive into the updated framework, if the Legislature passes these amendments, it means that starting January 31, notaries will be authorized to use remote ink notarization (RIN) to notarize a wide variety of documents, including the recording of mortgage documents that is required pursuant to Article 9 of New York’s Real Property Law. 

In the meantime, the effective date for the use of Remote Online Notarization (RON) will be pushed back to January 2023.  For more detail on the distinction between the two, read this recent blog.

Those of you interested in taking advantage of this increased flexibility should take a close look at this legislation, which, if acted on by the Legislature, will provide the guidelines for using this technology.

New York Clamps Down on Real Estate Agents, Fair Lending Violations

In 2019, Long Island Newsday reported on the results of a multiyear investigation into the area’s real estate practices.  It outlined disturbing evidence of widespread Fair Lending violations such as steering minorities to only certain communities.  In one of her last acts in December, Governor Hochul approved a series of measures passed in response to these allegations and subsequent legislative hearings. 

The bottom line is that the package is narrowly focused on additional education and training for the real estate industry, as well as providing increased funding for testing for Fair Lending violations.  As a result, these measures will not have a direct impact on your credit union, but don’t be surprised if you see a noticeable increase in the number of Fair Lending challenges to which lenders are subject in the coming years.

January 11, 2022 at 9:03 am Leave a comment

New York Readies for Electronic Notarization

In the closing days of 2021, the Governor signed legislation that will authorize the use of electronic notarization in New York State.  But even as she signed the bill, the Governor announced that she had reached agreement with the Legislature on additional changes that will both delay the effective date of Remote Online Notarization (RON) and in the interim, permit the use of Remote Ink Notarization (RIN) as outlined in this March 2020 Executive Order (I can’t believe this has been going on for almost two years).

I just re-read that paragraph and I realize my blog skills are a bit rusty after taking more than a week off, so let me unpack what I just said.  A notary is an individual authorized to swear to the authenticity of a signature.  Traditionally, this function has been carried out by the signor physically appearing before the notary with appropriate identification.  When Governor Cuomo was given Emergency Powers in March 2020, one of the measures he promulgated was an Executive Order permitting notaries to perform notarizations remotely.  This authority ended this past June. 

Now I have to go into the weeds a little.  There are two types of electronic notarizations.  There is Remote Ink Notarization (RIN) and Remote Online Notarization (RON).  The Legislation signed by Governor Hochul at the end of last year establishes a RON system under which a notary is authorized to electronically stamp documents online in real time.  In contrast, under RIN, a notary watches the signatory signing a document but is then sent the document or a facsimile for his traditional ink notarization.

In her approval memo accompanying the signing of the bill, the Governor indicated that amendments had been agreed to under which the State will be given a year, as opposed to six months, to prepare the RON framework and, in the interim, the RIN framework reflected in the Executive Order will once again be permitted.

We will still have to see precisely what the amendments say but once the legislation is approved we will be able to give you a more definitive timeline.

One more thing, remember that even with the passage of this legislation, you are still authorized to notarize documents the old fashioned way.

January 4, 2022 at 9:18 am 1 comment

OSHA Mandate Alive and Well, For Now

Usually I dedicate my last blog of the year to highlighting what’s best about the credit union movement, but recent events have made me feel like an extra in a movie where Scrooge meets Groundhog Day. Here’s more news on the OSHA mandate with which employers of 100 or more individuals must be in compliance with, starting January 10th.

On November 5th OSHA issued an Emergency Temporary Standard (ETS) generally requiring employers with 100 or more employees to either mandate all of their employees wear masks and agree to get tested on a weekly basis or mandate all of their employees get vaccinated.

Groups opposed to this standard ran to court quicker than the Omicron variant is spreading. The Court of Appeals for the Fifth Circuit issued an order banning OSHA from enforcing the emergency standard. On Friday, the Court of Appeals from the Sixth Circuit reversed this ruling meaning that you should be preparing to comply with OSHA’s mandate. The next stop is the Supreme Court.

Remember that the core legal issue that the courts are ultimately deciding is not whether employers can mandate that their employees get vaccinated or wear a mask but whether OSHA has the legal authority to issue health and safety standards related to a pandemic. In the meantime none of this has any impact at all on New York City’s mandate requiring employers to mandate that employees working in an office be vaccinated starting December 27th.

This is not a very merry note on which to end my last blog of the year, so Merry Christmas, Happy New Year, thanks for reading and let’s hope that 2022 is a heck of a lot better than the last two years that have preceded it.

December 22, 2021 at 9:09 am Leave a comment

High Noon for Key Legislative Priorities

Good morning, folks.  Under New York State law, as interpreted by its Court of Appeals, all bills passed by the Legislature must be presented to the Governor by the end of the year. As a result, while many normal people are getting ready to take a long winter nap, those involved in the legislative process are experiencing an outburst of legislative activity. I wanted to highlight some of the key bills we are still keeping an eye on as we head into the Christmas break.

Later this week, we will find out whether the Governor has approved legislation which will legalize remote online notarization [S1780-C Skoufis] for New York State starting next April. This legislation has been a major priority of the industry. If it is signed by the Governor it will allow New Yorkers to get documents notarized without leaving their homes while permitting those credit unions that choose to do so to continue to provide notary services the old fashion way. In addition to being a huge benefit for the disabled and elderly, as well as individuals who live in communities that lack access to notaries, this legislation will bring us one step closer to a virtual mortgage transaction.

On the negative side of the balance, the Governor has yet to act on legislation which would reduce to 2% the amount of interest that can be charged on money judgments involving consumer debts. [S5724-A  Thomas]

Let’s say your credit union offers credit cards.  A member goes delinquent and ultimately your credit union gets a legal judgement against her for the outstanding debt. Under existing law you can charge up to 9% interest on that debt. If the Governor signs this law it will impact this process in two ways:

First, it will reduce the maximum interest rate from 9% to 2%. Even more controversially, however, the 2% cap would retroactively apply to judgements that have been entered but not yet executed. Operationally, I haven’t heard a good explanation yet of how this is going to be implemented.

Last but not least, the Governor is considering what action to take on Senate bill S1579A Parker which would require lenders and mortgage servicers to take responsibility for maintaining homes subject to delinquent mortgages earlier in the foreclosure process. Specifically, under the law, servicers and lenders would be responsible for maintaining property that is or becomes vacant or abandoned at the commencement of a foreclosure. Currently lenders and servicers must take on these responsibilities only for vacant and abandoned property after approximately 90 days.

December 20, 2021 at 9:54 am Leave a comment

The Direct and Immediate Impact of New York’s COVID Mandate

Yours truly gives himself a wide scope to delve into when it comes to material for this blog. But, I never thought I’d be delving into New York’s Public Health Law as part of my research. But then again we live in strange times, don’t we?

As I’m sure you know, on Friday Governor Hochul announced that businesses are required to either insist that individuals show proof of vaccination or require everyone to wear a mask before entering a building.  This has a direct and immediate operational impact on your credit union.

Most importantly, it applies to your credit union regardless if it is state or federally chartered. In addition, unlike the proposed OSHA mandate which is currently being litigated, it applies to all businesses regardless of how many employees they have.  It also applies to all credit union branches.  You can comply with this new mandate by either requiring all persons entering a branch to show prove that they have been vaccinated or, more realistically, by requiring all persons entering a branch to wear a face mask. 

The new mandate can be enforced by the Department of Health and also by the Department of Labor. Remember that under New York Law, your employees have an explicit right to bring issues regarding the spread and prevention of airborne infectious diseases to your attention and sue you in the event that you fail to take appropriate remedial action.

What I am getting at is that New York’s new mandate will have a more direct impact on your credit union than the proposed OSHA mandate. And whereas the OSHA mandate may never make it through the legal gauntlet, states such as New York have long had the statutory and regulatory framework needed to directly address public health issues. Remember, pandemics have been around for hundreds of years but states and localities have historically had the primary responsibility to deal with them.

On that note, put that mask on and enjoy the day.

December 13, 2021 at 9:13 am 1 comment

NY’s Hero Act Takes Center Stage

With the emergence of the omicron variant (doesn’t that sound like something out of a bad Arnold Schwarzenegger movie?), it may very well feel like we are extras filming a bad sequel, but I’m here to remind all of my faithful readers that the newest surge is coming about under a new statutory mandate which will impact your credit union’s operations regardless of whether you are a state or federal credit union.

I’ve talked about the Hero Act in the past but I think it is worth one more mention as businesses prepare for potential restrictions even as the legality of federal mandates continues to be litigated.

The Hero Act refers to New York State legislation which created minimum state level standards for businesses responding to an airborne infectious disease. Think of it as a state level OSHA mandate but only for airborne infectious diseases as declared by NY’s Department of Health. When the legislation was first enacted in April 2021, we were hopeful that employers would simply have to adopt an infectious disease plan and file it away. In September, however, the Department of Health declared COVID-19 and airborne infectious disease. Now with the emergence of a potentially more infectious variant which may be resistant to existing vaccines, employers should remind themselves of what they have committed to in their workplace policies and the consequences for non-compliance.

For example, in your policies you’ve detailed protocols on a broad range of issues ranging from mask wearing protocols to the appropriate distances between employees.  These are more than aspirational goals. As a matter of New York State law, employees have the right to bring violations of these workplace policies to their employer’s attention. If the employer fails to “cure these conditions” an employee may ultimately refuse to work based on a good faith belief that continuing to do so would expose them to an airborne infectious disease. You can also face fines and litigation.

The bottom line is that not only should you have an airborne infectious disease plan in place but you should make sure that it is being followed and that you have a procedure in place for documenting and responding to employee concerns.

In the meantime, the State has not imposed any additional health and safety requirements for your credit union at this time. However, yesterday Governor Hochul did urge businesses to “encourage” their employees and patrons to wear masks indoors. 

On that happy note, enjoy your day.  Yours truly is going to be scheduling his booster shot.

November 30, 2021 at 9:29 am 1 comment

Fast And Furious: New COVID Guidance

Remember how in early July we were deluding ourselves into thinking that we were fast approaching a post-COVID nirvana in which we could all frolic freely without needing face masks, debating vaccine mandates or worrying about holding backyard barbecues?

Fast forward to mid-November and regulators are adjusting to a world in which COVID is a chronic condition and we have to adjust to this new normal. For credit unions in general, and compliance folks in particular, this means updating policies and procedures to make sure that you are keeping up with the latest COVID inspired dictates. Here are some of the latest developments I’ve spotted over the last week and a half:

  • The NCUA announced that it was extending the authority of federal credit unions to hold meetings remotely provided they have adopted the appropriate bylaws and send the appropriate notices to their membership. Remote flexibility is one of the good things to come out of the pandemic and I for one am glad to see that credit unions can continue to take advantage of this common sense measure.
  • Federal regulators, including the NCUA, recently announced that mortgage servicers were no longer going to be given a “get out of jail free card” when it comes to complying with RESPA’s mortgage servicing rules.

              In April of last year the same group of regulators issued a joint statement explaining that, “the current crisis could cause temporary business disruptions and challenges for mortgage servicers, including staffing challenges.” As a result, the regulators announced that they were giving servicers greater flexibility to comply with Regulation X. The same group of regulators now feels that the adjustment period has ended. The other day they announced that “servicers have had sufficient time to adjust their operations… agencies will apply their respective supervisory and enforcement authority to address any non-compliance with Regulation X”.  This one is a bit of a head scratcher to me because I could swear there is still plenty of evidence that staffing shortages persist and that members are still in need of enhanced forbearance assistance.  At least according to the CFPB.   

  • Never to be ignored, on October 28th New York’s Department of Financial Services issued its own guidance detailing its continuing expectations for mortgage servicers to work with consumers impacted by the pandemic. The guidance also encouraged servicers to participate in a new program being unveiled to provide financial support for eligible borrowers. I will have more about this program in the coming days.

On that note, visualize your post-COVID happy place and get to work.

November 16, 2021 at 9:24 am Leave a comment

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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.

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