Posts filed under ‘Political’

Two Bills Worth Knowing About

Bloomberg news is highlighting two bills passed by Congress yesterday that I think are worth knowing about.

First there is H.R. 1457. This bill would set a national standard for financial institutions, including credit unions that want to accept online account applications. The bill establishes a national standard for the acceptance of scanned driver’s license or identification card when individuals are applying for a banking product or to open an account. I actually thought that the acceptance of scanned personally identifiable information was no longer an issue but according to Bloomberg there are still some state laws that stand in the way of fully optimizing online account opening.

The second bill has absolutely nothing to do with credit unions but speaks volumes about how much the banking industry has evolved since the expansion of interstate banking. H.R. 1426 would create a new type of financial institution called a Covered Savings Association. These entities would be allowed to exercise many of the same powers of a nationally chartered bank without having to go through the formal charter conversion process.

Why is this bill more important than it seems? Go back a generation ago and there were fierce jurisdictional battles between community banks and savings associations on one side and national banks on the other. In fact, this tension was helpful to credit unions since it meant that banks had something to do other than think of ways of hurting our industry. Times have changed. We are fast approaching the point when credit unions and national banks are the only two financial charters left standing.

January 30, 2018 at 9:00 am Leave a comment

Joint Tax Committee says Banks and CUs aren’t all that Different Anymore

I learned something new this morning as I skimmed a report by the Joint Committee on Taxation detailing the provisions of HR 1, the House Republican tax legislation.  According to the Committee, “While significant differences between the rules under which credit unions and banks operate have existed in the past, most of those differences have disappeared over time.” (Page 150) Say What?

Is it possible that the Committee staffers never heard of SEG group requirements? Or don’t know about the MBL cap or Restrictions on community expansions? Is it possible that the committee doesn’t think that the inability to  issue stock is a big deal? I doubt it or though it would explain why our tax code is such a mess.

What banking lobbyist got this gratuitous fallacy tucked away in what is supposed to be an objective analysis of a tax bill which doesn’t impact the CU tax exemption?

On the one hand I’ll be happy if this is the worst thing that comes out of the tax debate; besides, its a waste of time to respond to every claim hurled at the enemies of the industry. But when I find these charges imbedded in an important analysis, presumably one that will be used by bleary-eyed legislators and staff  scrambling for additional revenue in the coming weeks,  it is worth responding to

I was reading the   report to get a sense of how the proposed UBIT amendments could impact state charters. FCUs are categorically exempt from the UBIT tax.  According to the analysis,   Sec. 5001 of the legislation  would  define unrelated business taxable income to include any expenses paid or incurred by a tax exempt organization for qualified transportation fringe benefits, a parking facility used in connection with qualified parking or any onsite  athletic facility.

As longtime readers of this blog know,  it’s not a coincidence my father is the accountant in the Meier family and not me. Please take a look if you think this could impact your CU.

November 8, 2017 at 9:08 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

Another Day, Another Massive Data Breach

Equifax, one of the big three credit reporting agencies, yesterday disclosed a “massive data breach” that may impact half the U.S. population. The breach includes the compromise of social security numbers, birth dates and up to 290,000 credit card numbers.

Let’s face it. It’s the same old song with a different tune. This is yet another example of why we need national standards and a national framework for dealing with data breaches and their consequences. In fairness to Equifax, it’s too early to know if the breach was a result of mistakes on its part or simply the end result of some talented hacking carried out in spite of adherence to prudent safeguards. But when I hear Equifax’s CEO explain that he is “deeply disappointed” by the break in, my guess is a lawsuit isn’t too far away.

Unfortunately, it’s far from clear precisely how much liability Equifax will face even if it was negligent in safeguarding this sensitive information. In 2016, the Supreme Court held in Spokeo, Inc. v. Robbins 136 S.CT. 1540 (2016) that in order for a plaintiff to have standing to sue in Federal court, the harm caused must be “concrete and particularized and actual or imminent, not conjectural or hypothetical.”

The standard has been a particularly tricky one for the courts to deal with in the context of data breaches. In a decision in August, Attias v. Carefirst, Inc., 865 F.3d 620 (D.C. Cir. 2017), the U.S. Court of Appeals for the D.C. Circuit held that the lawsuit against health insurer, Care First, Inc. could go forward. It ruled that so long as customers could prove that their names, birth dates and email addresses were compromised, they were being harmed by the imminent risk of a data breach. Similar logic was adopted by the 3rd Circuit In re Horizon Healthcare Servs. Inc. Data Breach Litig., 846 F.3d 625 (3d Cir. 2017)

However, not all circuits agree. In re SuperValu, Inc., No. 16-2378, 2017 WL 3722455, at *1 (8th Cir. Aug. 30, 2017), the 3rd Circuit Court ruled that consumers whose information may have been compromised by a data breach, lacked standing to sue the company. A reason that a mere possibility that an individual’s data may be used against them does not constitute enough harm to bring a lawsuit.

My guess is, the Supreme Court will take up this issue, maybe as early as this upcoming term. In the meantime, at some point Congress will come to its senses and pass meaningful comprehensive data breach protection legislation…and people say I’m cynical.

NCUA Releases Second Quarter Performance Data

The industry received its second quarter report card. It continues to show strong performance by the credit unions in the aggregate but it also continues to show that if you’re not big, there’s a good chance that your credit union is struggling. On that cynical note, I expect you all to enjoy your weekend and do nothing on Sunday but watch football. I hope to see some of you Monday at our annual Legal and Compliance Conference.


September 8, 2017 at 8:48 am 1 comment

Lessons Learned From Sandy Can Help Houston Recover

As I watched the news of the devastation caused by Hurricane Harvey last week, I couldn’t help but think back to the lessons learned by New York lenders as they dealt with the aftermath of Hurricane Sandy. Here are some of the key ones to keep in mind as we deal with yet another epic natural disaster.

  • There is no such thing as too much communication. Many banks and some credit unions I believe were unfairly criticized for failing to quickly disperse insurance funds on damaged property on which they held a mortgage. By all means, lenders should move as quickly as possible to cut checks and approve payouts in situations where they are an insured payee on mortgage property damaged by Harvey. But the need for speed must be balanced against the need to ensure that needed repair work is actually being done. This process will take time. I believe a lot of confusion could have been avoided in New York had lenders been more proactive in explaining not only to members of the public, but to legislators the role that lenders play in the insurance process.
  • This no time for sectionalism or political posturing. The national discourse hit a new low when, in the aftermath of Hurricane Sandy, conservative hard-liners in the House of Representatives initially baulked providing disaster funds to the northeast. Fortunately, commonsense prevailed. Events such as Harvey are national disasters that need national solutions. Not everything has to be political.
  • The most immediate concern is that the National Flood Insurance Program expires on September 30th of this year. On the one hand, Harvey will undoubtedly provide the needed impetus to get the program reauthorized. On the other hand, we need to take a real serious look as to how this country protects itself against floods and storm damage. On paper the existing system makes sense. Homeowners wishing to buy property in communities prone to flooding are required to get insurance. In addition, lenders must ensure that the appropriate insurance is maintained. In reality, the system is woefully inadequate. As storms such as Harvey, Sandy, and Katrina become the “new normal”, policy makers have to recognize that there simply is not enough money stashed away to adequately insure against future disasters. They must either make some tough choices to limit where people can live or they have to make a national commitment to a much more robust insurance framework.

September 5, 2017 at 8:41 am Leave a comment

What You Need to Know About HMDA Before I Go On Vacation

Greetings! I’m going away on vacation for a week. Before I do, I wanted to give you a heads-up that the Bureau That Never Sleeps (AKA the CFPB) finalized last second amendments that kick in for covered institutions for mortgages that close on or after January 1, 2018.

Most importantly, our national trades deserve a round of applause. Under the regulations as initially proposed, HMDA reporting would have been required for institutions that do 100 or more home equity lines of credit. The CFPB agreed to a two year transition period during which the reporting will only be required for institutions that originate 500 or more HELOC’s.

The Bureau also finalized amendments to deal specifically with New York’s CEMA loans. NYS §255 enables borrowers to utilize a three-step process for modifying loans. Generally, a supplemental mortgage laying out new terms of an existing mortgage loan is created; a new mortgage loan, often made with the same lender includes cash out for the borrower; and finally these two new loans are consolidated into a new loan document. Borrowers pay a mortgage tax based only on the amount of the new monies advanced, as opposed to the paying based on the combined amount of the original mortgage plus the new funds. The Federal Reserve Board traditionally interpreted HMDA as not applying to CEMA loans, as the original note is not fully extinguished. In its 2015 amendments to HMDA, the CFPB departed from this traditional interpretation of HMDA Regulations and concluded that “both assumptions and transactions completed pursuant to New York CEMAs represent situations where a new debt obligation is created in substance, if not in form” ( Home Mortgage Disclosure (Regulation C), 80 FR 66128-01.

With these regulatory amendments, the CFPB is amending the regulations to clarify that new funds advanced under CEMA transactions are reported only in so far as they are part of the total amount of the new consolidated CEMA loan. The entire transaction must be completed in the same calendar year.

The final rule also makes several other technical but important changes, including providing further clarification on how to comply with the expanded requirements for reporting a mortgage applicant’s race and ethnicity. Incidentally, this is one of the key operational changes that you should be discussing with your front line mortgage staff as it prepares to comply with HMDA. This is an issue that I will be blogging on in the near future. Don’t get too excited.

                                                                     Another Ugly Game of Chicken

President Trump raised the stakes on the debt ceiling debate yesterday when he criticized House Speaker Ryan and Senate Majority Leader Mitch McConnell for refusing to tie legislative priorities to the raising of the debt ceiling. The national debt is effectively America’s credit card. If the government doesn’t raise its spending authority by the end of September, it will be unable to pay bond holders who finance the country’s national debt. Even a short delay in payments could have severe economic consequences for the country as a whole and financial institutions in particular. Let’s hope that common sense prevails. Refusing to pay your bills doesn’t make you more conservative, it makes you more reckless.

Blog Hiatus

Yours truly will be off on his annual late summer blog hiatus. If all goes according to plan, I will be taking my 8 year old to the Baltimore Orioles game against the Seattle Mariners on Wednesday and getting to Alexandria, Va. in time for my nephew’s wedding on Saturday. When I return on September 5th, I will be bright-eyed and bushy-tailed, ready to start my 7th year of blogging. Thanks for reading!

August 25, 2017 at 9:08 am Leave a comment

Banking Development District Bill Gains Traction

Legislation that would allow credit unions to participate in Banking Development Districts (BDD) (S.6700 -Hamilton)/A.6494B -Zebrowski) for the first time in two decades is gaining traction in both houses of the Legislature as we enter the final week of session. This is good news for anyone in need of greater access to financial services. The bill has advanced to the Assembly floor and has been introduced by the Senate Rules Committee, which means it can be voted on at any time by the full legislature.

The BDD program has been in existence since 1997 with the first district authorized in 1999. The basic idea of the program is that localities and financial institutions jointly apply to the DFS for designation as a BDD. In return for opening up a branch in an area underserved by banking institutions, banks and other depository institutions are eligible for low interest deposits.

The program is a great idea since it makes it more cost effective for financial institutions to provide banking services in areas which are currently lacking access to depository institutions. Unfortunately, as the DFS noted earlier this year, banks and other financial institutions “have submitted a modest number of applications over the last twenty years.” In addition, a 10 year review of the program by the Banking Department concluded that it could be “dramatically improved.” Allowing credit unions to participate in the program could provide the jolt it needs to be truly effective.

Shock of shocks, the usual suspects are trying to kill the bill. The kneejerk opposition of the banking industry, while utterly predictable, is even more cynical than usual. Despite the fact that the industry has demonstrated a lack of interest in participating in the program for almost 20 years, it is fighting to keep credit unions from enhancing the program.

This is the latest example of banks being so opposed to credit union that they are putting their own perceived interests above consumers. Despite the fact that we live in one of the wealthiest states in the nation, there are millions of New Yorker’s who have no choice but to turn to check cashers and payday lenders. Anything the Legislature can do to encourage and help persons of modest means get their monies deposited in to a financial institution is in everyone’s best interest.


June 16, 2017 at 9:23 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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