Posts filed under ‘Political’

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

New York continues crackdown on Title Insurance

The Cuomo administration continued its crackdown on the title insurance industry last week by proposing a pair of measures that would tighten affiliation standards and further limit fees that can be charged.

The proposals are the latest step in a long running effort by the DFS to crackdown on perceived industry excesses. The press release issued by the Governor’s office explains that the new protections will “help ensure New Yorkers aren’t forced to shoulder outrageous and exorbitant expenses” while trying to become home owners.

“The industry-wide practices uncovered by Department of Financial Services were nothing short of shocking, and these reforms will help ensure perspective homeowners will be charged their fair share of title insurance fees and not a penny more.” Governor Cuomo said in the release.

I’ve read them both a couple of times now and the provisions could have their greatest impact on credit union CUSOS that offer title insurance. Specifically the regulation stipulates that a title insurance agent or title insurance corporation that accepts affiliated business from an affiliated person shall:(1) Function separately and independently from the affiliated person, including being staffed by its own employees,(2) Engage in all or substantially all of the core title services with respect to the affiliated business; and (3) Make a good faith effort to obtain, and be open for, title insurance business from all sources and not business only from affiliated persons.

The second regulation is similar to earlier proposals put out by DFS. It clamps down on the type of ancillary fees that can be charged. For example title insurance applicants could not be charged more than 200% of the fair market for bankruptcy searches.

Denny Farrell to Retire

Denny Farrell, the longtime chairman of the Assembly’s powerful Weights and Means committee announced that he would be retiring. It is unclear if he will finish out his term at the end of 2018. The 85 year old Farrell has been in the Assembly for a mere 42 years.

May 9, 2017 at 10:06 am Leave a comment

How to maximize your TNC protection

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!

 

 

April 20, 2017 at 9:21 am 1 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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