Posts filed under ‘Political’

NY Employers Face Extensive New Mandates Under the HERO Act

The Legislature has passed a bill that would require all employers in New York state to adopt comprehensive workplace policies outlining basic obligations related to combating airborne infectious diseases.  The bill is currently before the Governor. 

The HERO Act (S1034B) requires that all New York employers, regardless of their size, adopt minimum policies which address, among other things employee health screenings; availability of PPE; regular cleaning of office equipment and effective social distancing for employees and customers which includes consideration of flexible work hours and remote services. 

Employers would be prohibited from taking action against employees who raise concerns regarding violations of these policies and could face both legal and regulatory actions for policy violations.  The Commissioner of Health will be responsible for developing model policies which take into account industry specific concerns; presumably this means that policies adopted for banks and credit unions would be different than policies adopted for restaurants, for example.  Your credit union will have the option of either adopting these model policies or developing its own policy that meets the requirements of this legislation.    

A second part of the bill creates a framework for a joint employer-employee workplace safety committee applicable to all employers with ten or more employees.  This committee will be empowered to review and comment on workplace safety concerns.  Selecting this committee won’t be as straightforward as you might think.  Employee members of the committee shall be selected by, and from among, non-supervisory employees. Committees shall be co-chaired by a representative of the employer and non-supervisory employees. 

As drafted, it is not entirely clear when these mandates will take effect.  The bill is effective thirty days after it is signed, but the Health Department will have to develop model policies.  What is clear is that employers will have six months to get the workplace committees up and running. 

Go West Young Man

The Census confirmed what we have all known for a while: people are moving to the mountain west.   This will result in a further diminishment of New York’s political power.  The state is slated to lose a Congressional District.

April 27, 2021 at 9:59 am Leave a comment

A Few Quick Thoughts to Start Your Credit Union Day

CitiBank Settles CARD Act Violation 

My takeaway from the Tampa Bay Buccaneers destruction of the Kansas City Chiefs is that, for all of life’s complexities, we should never lose sight of the basics. With that as my big thought of the day, I want to bring your attention to a recent settlement reached between CitiBank and a group of states for violating the lookback provisions of the CARD Act. As you erstwhile veterans of compliance may recall, the CARD Act was the first major piece of legislation passed by Congress as it scrambled to punish banks as the effects of the mortgage meltdown were coming into focus.

Under the CARD Act, if a creditor increases the annual percentage rate applicable to a credit card account based on factors including the credit risk of the card holder, among others, the creditor should review whether such factors have changed at least every six months (15 U.S.C. section 1665c). In 2018, the CFPB reached a settlement with the bank for misapplying its lookback factors. The announcement of the state settlement resolves similar claims brought against the bank by attorneys general, but the bank refused to concede that it had violated state-level consumer protection laws. My takeaway? Given the complexities of Regulation Z, periodically reviewing your lookback procedures is something that should be on your to-do list if it isn’t already.

Is New York the Center of the Political Universe?

No. But it promises to be one of the most highly contested battlegrounds for 2022 as Republicans and Democrats fight for control of the House of Representatives. Yesterday, Democrat Anthony Brindisi conceded defeat, bringing an end to one of the closest congressional races in the state’s history. Incumbent Brindisi was defeated by Claudia Tenney, who previously lost the seat to Brindisi during the 2018 cycle. Tenney is a good friend to many of our credit unions, and she is certainly aware of the key issues having previously served on the House Financial Services Committee. Taking a look at the big picture, with Democrats in charge of both the Assembly and the State Senate, the House of Representatives within striking distance for Republicans, and New York consistently having multiple competitive congressional elections, get ready to see an awful lot of campaign ads in the run-up to 2022.

February 9, 2021 at 9:56 am Leave a comment

Three Cheers for the 20th Amendment!

I’m exercising blogger privilege today, and in honor of the quadrennial transfer of power, I’m dedicating this blog to an issue that has absolutely nothing to do with credit unions. Regardless of where you fall on the political spectrum, what cable news channel you watch, or what radio station you tuned into this morning, I hope we can all agree that the interregnum, the period between election and today, has been one of the wackiest since 1876. Imagine if all this mayhem didn’t end until March 4th, and a lame duck Congress filled with members who had lost re-election were still in charge. This is where the 20th Amendment comes in.

1932 was a particularly momentous year. The Depression was raging on, President Hoover was historically unpopular but doubling down on his economic policies, and internationally, previously democratic countries were beginning to backslide. Fortunately, Congress agreed that it made no sense for the country to continue to suffer during the huge delay between election day and the new administration. By early 1933, 28 states had already ratified the amendment, although it did not take effect until Roosevelt’s second term. As a result of its passage, this year’s Congress was sworn in on January 3rd, and by March 4th, we will be well on our way to seeing how successful the new administration is going to be in charting a new course for the country.

January 20, 2021 at 9:36 am Leave a comment

Three Things to Ponder As You Start Your Credit Union Week

Good morning, folks. Here are some things to keep in mind as you start what promises to be an extremely eventful truncated week. 

Meet the New Boss

With the Supreme Court ruling that the director of the CFPB serves at the pleasure of the President of the United States, President-elect Biden has announced his pick to head the Bureau. Even with the Supreme Court ruling, no one in government has as much power to shape the regulations of the consumer financial sector than will Rohit Chopra.

Judging by the press reports I read over the weekend, there are few regulators who will have as much running room at the start of the Biden presidency as the CFPB. The conventional wisdom is that the CFPB was made “toothless” (New York Times) under the parting director Kathy Kraninger. While this is not true, perception is reality, and the list of top priorities is already emerging. Get ready to work on proposals dealing with overdrafts, student loan disclosures, mortgage forbearances and payday loans. All this will be in addition to a much more aggressive use of regulation through enforcement action. 

NCUA and CFPB Enter Into A MOU

David Baumann of the Credit Union Times reported Friday that the CFPB and the NCUA had agreed upon a Memorandum of Understanding. According to the NCUA, the purpose of this agreement is “to improve coordination between the agencies related to the consumer protection supervision of credit unions over $10 billion dollars in assets.” But we won’t know for sure, at least for a while, as the NCUA is making the CUTimes file a FOIA request to learn the contents of the memo.

Under the Dodd-Frank Act, the Bureau has direct supervision over institutions with $10 billion or more in assets. An institution is subject to this supervision once it reports four consecutive quarters of $10 billion or more in assets. If I was at or near this threshold, I sure as heck would want to know what was in the MOU. After all, institutions have a right to know what’s expected of them; what regulators are overseeing them, and precisely with whom their supervisory information is being shared.

It’s Budget Day at the Capitol!

For New York Legislative geeks, today is like Christmas morning. You finally get to know what surprises are under the Budget tree, and there’s sure to be a few lumps of coal. Many of the big picture items are already being debated, such as online gambling and marijuana banking. And of course, the great wild card in all of this is the extent to which Congress will be able to ease New York’s fiscal woes. Goody gumdrops. 

Merry Christmas, Happy New Year, and enjoy your day.

January 19, 2021 at 9:43 am 1 comment

Georgia On My Mind

Hello, folks. Your blurry-eyed blogger has gotten off to a slow start this morning after watching John King and his magic wall detail what appears to be Senate victories that will put Chuck Schumer in charge of a 50/50 split Senate. Before I get to my regularly scheduled information, I can’t help but offer a few thoughts on what is occurring. 

Most importantly, with the exception of Georgia, no state stands to benefit more from the election results than New York. First, it raises the very real possibility that the Congress could agree on another round of stimulus funding, which trades liability protection for businesses for increased aid to state and local governments. With New York State facing a deficit of approximately $15 billion, this could translate into lower property taxes. We might also see a push to reinstitute the deductibility of state and local taxes in excess of $10,000, which was repealed as part of Congress’ federal tax cuts. 

Secondly, having a New Yorker in charge of the Senate is a big deal. In fact, keeping in mind that the President has changed his residency to Florida, Senate Majority Leader Schumer will become the highest-ranking New York Democrat since FDR. Not only that – the Senator is uniquely qualified to represent New York having worked in the Assembly and the House of Representatives before moving over to the Senate. He is New York politics through and through, and he has consistently told any credit unions that will listen that they’ll lose their tax-exempt status over his dead body. But even as we ponder what may happen, there are still a lot of new developments that your credit union will be responsible for implementing operationally. On that front, here is some good news. As I explained in this blog, the National Defense Authorization Act included legislation championed by New York Congresswoman Carolyn Maloney, which will make businesses responsible for identifying beneficial owners as part of the account-opening process. Under existing regulations, your credit union is responsible for finding out this information as part of the process. Under Section 6403, regulations will now be promulgated imposing reporting requirements on individuals identified as “beneficial owners,” a designation earned by any individual that “directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise (i) exercises substantial control over the entity; or (ii) owns or controls not less than 25 percent of the ownership interests of the entity.” The Treasury has two years from the date of passage to implement necessary regulations.

January 6, 2021 at 11:32 am Leave a comment

It’s Back! The Paycheck Protection Program, That Is

The government program everyone loves to hate, and then love again – is back in a third iteration. If everything goes according to plan and the President signs the $900 billion stimulus plan (does it concern anyone that no one seems to know what the exact number is? Then again, when you’re dealing with $900 billion, does a $100 billion here or there matter all that much?) Within 10 days of its enactment, we will be seeing regulations for new, improved, simpler and ultimately much needed rejuvenation of the Paycheck Protection Program. I’ve taken a look at the program, the guts of which you can review in Subtitle B – Community Development Investment on page 358 of this act. Suffice it to say this is not your mother’s PPP – whereas the initial legislative thrust was concerned with keeping people employed at a moment in time when we thought things would be back to normal by next June, the new program greatly expands the expenses for which loans are eligible. For example, eligible businesses can use the money for, among other things, cloud computing services. In addition, a new provision of the law makes businesses eligible for a second loan. Finally, the maximum loan size has been reduced from $10 million to $2 million, and only businesses with 300 or fewer employees are eligible for the loans. 

Now for my soapbox moment. When looking at the value of providing PPP loans, please keep in mind not only the impact on your credit union’s bottom line, but the value to the industry of the prominent participants in this program. In addition, for those of you who can go forward with these loans, please share your stories with your trades. Congress and the public are heavily invested in this program. How they perceive financial institutions engaging consumers will, in my ever so humble opinion, shape the regulations and legislation to come. One other quick note about the legislation – although some of the money is allocated towards education, it falls far short of the funds that states like New York were looking for to help offset pandemic-related costs. Brace yourselves for another unique year as the Legislature continues to operate remotely and budgetary concerns dominate even more than usual. 

On that note, yours truly is signing off until next year. Thanks for reading, with a special shoutout to those of you who took the time to comment on my musings along the way. 

December 22, 2020 at 9:26 am 1 comment

Washington’s Decisions Have Direct Impact on New York State

There have been few instances where machinations in Washington have had a more direct impact on New York State than what we’ve seen unfolding in the last few days. Pay attention, because for those of you who join the Association in Zoom Advocacy on both the state and federal level, this will impact what we say and how we say it. 

First, there is the news that Congress is coalescing around a relief package south of $1 trillion. While this is good news for persons peering over the unemployment cliff at the end of the year, it is safe to say that the reported size of the package leaves little room for the type of massive infusion of federal funds Governor Cuomo was hoping for just weeks ago. I’ve read widely varying estimates of just how big a deficit New York faces, but we could easily be talking about a $14 billion hole. A deficit of this size could lead to layoffs of state workers in the Capital Region and exacerbate local employment trends. It will also mean that now more than ever, the state should look to implement cost-free mandate relief in the form of localities being authorized to place public deposits in their credit unions. 

Second, it looks like another Democratic New York Congressman is about to gain a national profile. Hudson Valley Rep. Sean Maloney has been elected to lead the Democratic Congressional Campaign Committee. This is a plum assignment for any ambitious member of Congress in normal times, but with 2022 shaping up to be a critical election cycle for the House Democratic Majority, Maloney has taken on a high-risk, high-reward responsibility. Not only will he have to reshape the party’s messaging in the aftermath of its disappointing performance this year, but he will be doing so with Republicans in reach of retaking the majority. He will also be helping to coordinate campaigns in an election cycle that will be the first impacted by redistricting. 

Speaking of New York Congressional Representatives, we are still waiting to see the results of one of the nation’s closest races in NY-22 between incumbent Rep. Anthony Brindisi and challenger Claudia Tenney, the former Republican Congresswoman unseated by Brindisi in 2018. 

The Financial Stability Oversight Council (FSOC): The Big Get Bigger in CU Land

The FSOC used its annual report to Congress to highlight the continuing risk to financial stability posed by the pandemic. 

Though policy actions to minimize the effects of the pandemic have been effective at improving market conditions, risks to U.S. financial stability remain elevated compared to last year. In addition, the global outlook for economic recovery is uncertain, depending on the severity and the duration of the ongoing pandemic.

In the section of the report dealing with the credit union industry, the Council highlighted consolidation trends. It noted that the number of credit unions with less than $50 million in assets fell to 2,811 in the second quarter of this year, meaning that there has been a 28% decline in the number of credit unions in the last five years. On the bright side, total industry assets have grown at an average annual rate of 8.4% over the same period. According to a report, the financial performance of credit unions has been “relatively solid” – how’s that for a mealy-mouthed compliment? Incidentally, you can find the interesting credit union information on page 93 of the report. 

On that happy note, enjoy your weekend. Make sure you set aside time on Sunday to watch the New York Giants, the worst first place team in the history of the NFL as they continue their unstoppable march to the playoffs with a 4-7 record.

December 4, 2020 at 10:15 am Leave a comment

FCU’s Can Access Federal Courts

Executives at larger credit unions have one more thing to be thankful for as they celebrate Thanksgiving on Thursday. The Court of Appeals for the Fourth Circuit reversed an earlier lower-court ruling which would have denied federal credit unions access to the federal courts in most circumstances. This may not sound like a big deal, but as credit unions grow larger and serve members in multiple states, the access to federal courts is crucial for these institutions going forward.

Federal law provides that a corporation  “shall be deemed a citizen of every State and foreign state by which it has been incorporated and of the State or foreign state where it has its principal place of business.” 28 U.S.C. § 1332(c)(1) (emphasis added). 

Navy FCU was suing a company based in Florida, Delaware and New York to which it sold some of its loans for violating its contract by reselling the loans to another party. The defendant successfully argued that under 1332, a federally chartered credit union was not able to obtain jurisdiction or access to the federal courts. In the type of argument that thrills textualists on steroids, the district court interpreted the statute as requiring that a credit union must be both chartered by a state and have a principal place of business in order to be eligible to start a suit in federal court. Federal credit unions are chartered by the federal government, not states.

Fortunately for the home team, common sense prevailed. In reversing the lower court, the Fourth Circuit reached three conclusions that are fundamental to credit union operations. First, credit unions are corporations even though they are cooperatives. Second, the statute covers federally chartered credit unions which are either chartered by a state or have a principal place of business in a state. Third, as a result, Navy FCU with it’s C-suite of top executives located mainly in Virginia, qualified as a Virginia resident. This decision is not binding on other federal circuits. Still, it does represent persuasive authority if, and I believe when, federal credit unions face similar challenges in places like New York. 

After Further Review…

It took a mere three weeks to figure it out, but at long last, the electorate in New York has solidified Democratic control in the State Senate. Yesterday, Senate Majority Leader Stewart-Cousins and her top deputy Michael Gianaris announced that when all the votes were counted, Senate Democrats would hold at least 42 seats, but with other races still to be decided, this majority may grow. 42 is a magic number not just because it was worn by Jackie Robinson, but because it is also the threshold for a supermajority in this chamber, giving the Senate the ability to override a Governor’s budget proposal. The Assembly already has a supermajority. 

On that note, enjoy your Thanksgiving. I’ll be back next week.

November 24, 2020 at 10:01 am Leave a comment

Congress Moves Closer to Providing AML Relief

On Thursday, Congress moved closer to passing legislation which would relieve banks and credit unions of the most burdensome new Bank Secrecy Act requirement imposed on them in recent years. Negotiators have tentatively agreed to include the Corporate Transparency Act in the National Defense Authorization Act, which provides military funding for Fiscal Year 2021. It is considered must-pass legislation, although given the dysfunction in Washington, is there really any such thing anymore?

Enactment of the legislation would be a major victory for longtime Manhattan Congresswoman Carolyn Maloney, who has advocated for the passage of legislation like this for several years. In 2018, regulations took effect which required banks and credit unions to identify the beneficial owner of corporations and trusts. The intent of the regulation makes an awful lot of sense. One of the easiest ways for people to hide money is to create corporations that act as a front for their personal use. But the smartest way to get this information is to place disclosure requirements on the corporation. 

Under Representative Maloney’s bill, an applicant for a corporation or a limited liability company (LLC) would be required to file a report with FinCEN containing the identities of an entity’s beneficial owners. Under this legislation, as is required by existing FinCEN regulations, a beneficial owner is an individual who, directly or indirectly, controls a corporation or LLC; owns a certain percentage of such an entity; or generally receives “substantial economic benefits” from the company. We should know in a few weeks if this is going to become law. 

Drama at the NCUA

Maybe there was something in the water in our nation’s capital, but governing dysfunction has even infected the three-person NCUA Board. In case you missed it, J. Mark McWatters resigned on Thursday, ending a colorful six-year run in which he became the de-facto gadfly at the agency with his strict adherence to the plain text of NCUA’s regulation and governing law. You always got the feeling that he was not completely comfortable at NCUA. As early as 2016, he was in line to take another job at the Export-Import Bank of the United States. According to David Baumann, if McWatters did not resign, he was going to be fired by the White House, which it had the authority to do as McWatters’ term had already ended. If all goes according to plan, McWatters’ seat will soon be filled by Kyle Hauptman, but nothing seems to go smoothly in Washington these days.

November 23, 2020 at 9:30 am 1 comment

Election Post-Mortem, Continued Gridlock Means Tough Times Ahead

One thing that Barack Obama and Mitch McConnell agree on is that elections have consequences. Although the final results won’t be known for weeks, what appears to be clear from this election is that it did little more than confirm a deeply divided status quo with all sides able to point to evidence that they were the actual victors. For credit unions, this has important consequences which will shape the industry in both the near and medium term. Here is a list of some of those consequences:

  • PPP Relief Delayed – Yesterday, the Federal Reserve once again tinkered with its regulations for the Main Street Lending Program, which was designed to encourage banks and credit unions to make loans to medium-sized businesses not eligible for PPP loans. At the same time, Federal Reserve Chairman Powell issued this extremely thoughtful release in which he once again stressed that without fiscal intervention, the Fed is at the outer limits of what it can do to support a slowing economy. Although Mitch McConnell is committed to getting a stimulus bill through Congress, I really don’t see this happening with a disgruntled, lame duck President Trump in charge and two Senate elections outstanding. This delay has real consequences. The market as a whole is welcoming the apparent gridlock, but investors in regional banks are now recognizing that business activity and consumer spending will almost certainly decrease in the months ahead. 
  • The pandemic continues to spread – In case you missed it because you were glued to John King’s magic wall of vote counts, America experienced its worst single-day count of COVID-19 cases. As Federal Reserve Chairman Powell pointed out, the economy can’t get back to full strength as long as people have to worry about contracting the virus. The good news is that in the coming months, perhaps we will move away from this false dichotomy between economic growth and the need to contain the virus. The bad news is that this means one of the top priorities for your credit union, or any business for that matter, has to be discussing, maintaining and monitoring the criteria you will use in determining how to run your operations during the Second Wave. 
  • Tough times ahead in New York – Let’s be honest. The more democrats have control of the US Senate, the more aid that will come to New York State. Anyone who pays property taxes knows how badly we need it. But with hopes for a big Senate victory fading, New Yorkers are facing an unappetizing choice between budget cuts and tax increases at a time when we need more, not less, stimulus. On the bright side, the economic vice the state may well find itself in underscores the value of giving localities mandate relief in the form of credit unions being allowed to accept municipal deposits. 
  • Let’s Go Get Stoned – Five additional states legalized marijuana in some form or another on election night. Not only did New Jersey legalize cannabis, but even red states have now decided it’s time to take a puff, with Montana, Mississippi and South Dakota joining the ranks. I don’t know what it says about America that pot legalization is one of the few issues we can all agree on, but I will now bet that by the end of the next legislative cycle, banks and credit unions will have clear legal authority to provide banking services to these businesses. If you haven’t already discussed how actively your credit union wishes to engage this business or taken a deep dive into the compliance implications, now is the time. Full disclosure: I made the same prediction two years ago. 
  • Credit Union Tax Exemption is in Play – I’m always hesitant to put too much emphasis on the threat posed to credit unions and their tax exempt status. Too often, I think it distracts us from other more pressing issues. But there are four dynamics which make the coming years particularly treacherous for the industry. Even without subsequent stimulus packages, the country has gone on an unprecedented spending spree which will have to be repaid; democrats are going to be pushing hard for tax reform, especially as the pandemic exacerbates economic inequality, three – banks have already been laying the groundwork for a targeted attack against so-called “larger” credit unions and lastly – they may find common ground with the younger, more progressive AOC wing of the democratic party, which is increasingly looking to other entities – such as the Post Office and CDFIs – to provide financing for the underserved. The action points for credit unions are obvious, but if I could make myself king for a day, I would mandate that every credit union draw up a concrete list of the products, services and activities it undertakes as a result of its tax exemption. As an industry, we like to say that we don’t pay corporate taxes because we are not-for-profit institutions. In fact, we don’t pay taxes because of a policy judgment by Congress that the financial value of having not-for-profit financial institutions available to the American public outweighs the fiscal benefit of taxing credit unions. Each and every institution benefitting from that tax exemption can, should and ultimately will have to demonstrate this fact in concrete terms to elected officials anxious for cash. 

Believe it or not, there are many other points to raise, but it’s a beautiful day and I’ve depressed my readers enough. Besides, I still have to brace myself to watch the Giants play the Washington Football Team. Perhaps Ron Rivera will hand us another victory. Have a good weekend. 

November 6, 2020 at 10:25 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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