Posts filed under ‘Political’
As readers of this blog know, the Legislature authorized Transportation Network Companies such as Uber and Lyft to start operating in New York State locales beyond NYC as part of the recently approved budget. Thanks in no small part to the efforts of the Association, the legislation includes some important protections for credit unions. However, there are still additional steps that I would take to maximize your credit union’s collateral protection, particularly as ridesharing is taking hold at the same time that the 72 month car loan has become common place. Remember this is just one person’s advice and not a substitute for running this by your own counsel.
Ever since plans were laid for TNC networks to come to New York, insurance has always been a big issue. Remember that your typical car insurance policy contains a livery exception, meaning that a driver isn’t insured for accidents that happen while logged into the network to pick up passengers. The legislation addresses this issue by mandating that TNC drivers applying to join a network be informed of the need for additional insurance and mandating that the TNC’s make sure that these drivers are, in fact, properly insured.
While these are important protections, in talking to credit unions I am suggesting that there are still additional steps they should consider taking. Most importantly, I would amend your car loan language with a provision informing the borrower that the use of a vehicle being financed in a TNC without the insurance mandated under NYS Law shall constitute a breach of the lending agreement and may result in the entire amount of the loan being due immediately.
What does this accomplish that New York State’s Law cannot? For one thing it is more expansive than the protections afforded by the law since its prohibitions would apply even to members who are not currently logged in to a TNC Network but who are TNC drivers.This is important because if you have reason to believe that a member is operating as a TNC driver you can call the loan without waiting for an accident. It also provides an additional notice to your members that special TNC insurance is required. Finally, it provides you some level of protection in the event that your member somehow gets to join a network without getting adequate insurance. But under this later scenario I would consider going after the TNC Company for your losses. New York’s TNC legislation takes effect in approximately three months.
By the way, since we are on the subject of TNC’s, I had the pleasure of dropping off my two daughters at Kennedy Airport Monday morning for a flight down to North Carolina. For those of you, who haven’t had the “pleasure” of going to Kennedy, think of those chaotic scenes in third world capitals where a mass of humanity ignores all laws. The one thing noticeably absent from this scene was anything more than a handful of traditional yellow cabs. If I had taken this trip just 5 years ago they would have been everywhere. With the caveat that I have always been accused of being a skeptic when it comes to the future of the medallion industry, all you have to do is go to NYC to realize that the medallion industry as we know it is destined to become an exhibit in the Smithsonian. I am also happy to report that my two kids didn’t witness paying passengers being dragged off the plane and assaulted.
On that upbeat note enjoy your day!
Expect “debt collectors” to have more interest in buying your delinquent loans as opposed to simply contracting for a percentage of collection recoveries if, as expected, the Supreme Court rules in favor of Santander Consumer USA, Inc.
Oral arguments were heard on the case yesterday, in an important collections case, and we can expect a ruling sometime in June. You can also expect states like New York to take a renewed interest in strengthening state level restriction on debt collection practices.
The FDCPA was passed by congress to deter abusive debt collection practices. It was intended to crack down on third-party collectors which is why it does not apply to banks and credit unions which are collecting on their own loans. The question is who exactly is a debt collector under 15 U.S.C.A. § 1692a (West). Under the statute, a debt collector is any person….”who regularly collects or attempts to collect, directly or indirectly debts owed or due or asserted to be owed or due another.” Santander purchased billions in car loans and set about collecting on those that were delinquent. Borrowers alleged that their aggressive collection practices violated the FDCPA, but when they tried to sue Santander for violations it successfully argued before the Court Of Appeals for the Fourth Circuit. Their argument was that since it was collecting on debt it owned, the statute didn’t apply to its activities.
According to press reports, justices weren’t buying the argument of the borrowers yesterday, who argued that Santander was taking advantage of a loop hole that is inconsistent with congress’s intent when it passed the FDCPA.
No matter how the Federal Law is interpreted, New York is one of several states that has a state level DCPA modeled after the federal law. In a brief submitted to the Supreme Court, New York joined several such states in arguing that existing state level prohibitions aren’t adequate. The brief noted for example, that New York’s debt collection statute (NY General Business Law § 600 et. seq.) has traditionally been interpreted in reference to the federal law and that it does not permit consumers to bring a lawsuit.
Stay tuned – this provides another classic example of how a change in direction in the federal level is often met with push back on the state level.
Yesterday the Senate evoked the so-called nuclear option, by changing the senate rules with a simple majority to force a vote on Supreme Court nominee, Neil Gorsuch.
This is one of those issues that have been screaming at my newspaper about, so let me take a break from talking about the financial issues of the day to tell you why I am so agitated. When I hear people wax nostalgic about the filibuster, it is kind of like hearing a movie critic extolling the virtues of the play he saw at Ford’s Theatre. Or, better yet, it is like the guy at the bar drowning his sorrows who fondly remembers the good times with his “crazy “girlfriend who was, in fact, crazy.
The simple truth is that the filibuster is an antiquated vestige of a bygone era that increases voter disenchantment with the legislative process by imposing a super majority requirement on the passage of bills no matter how important they may be. Yesterday’s rule change only applied to Supreme Court nominations but it is only a matter of time before the senate moves to limit the filibuster’s use in stalling l legislation. For me the change can’t come soon enough.
Today’s filibuster isn’t Jimmy Stewart’s filibuster which required a dedicated group of legislators to publicly refuse to yield the senate floor so long as they could stand up and keep talking.
By the mid 1970’s a senator didn’t have to be physically present to vote to continue a filibuster and senate procedures introduced a dual track. Under this approach, the senate can move on to other legislation while the filibustered legislation remains frozen.
All this means is that the modern day filibuster is no longer about a determined minority willing to take a stand against legislation it doesn’t like; rather it is a de facto requirement for a 60 vote super majority to pass legislation.
This isn’t a recipe for thoughtful deliberation but an invitation to obstruct on a grand scale. It’s what keeps a simple majority from voting to restructure the CFPB or reconsider the Durbin Amendment.
For those of you, such as the Association’s Vice President of Governmental Affairs, who insist that the filibuster ensures that the legitimate points of the minority party can’t simply be ignored. I say this has more to do with changing political realities than with any procedural safeguards.
The filibuster has never been what made the senate a collegial body. Just a generation ago, you had liberal northeast republicans who worked with southern democrats and conservative Dems who worked with republicans. Today such bi-partisanship is an invitation to be primary.
I am glad I got that off my chest, thanks for listening.
Have a great weekend.
Wells Fargo continues to be the gift that keeps on giving, for consumer advocates anxious to argue why we are all better off with the CFPB.
Yesterday, The Occupational Safety and Health Administration (OSHA) ordered the bank to pay $5.4 million in back wages to an employee they fired in 2010, after reporting suspected incidents of mail and wire fraud by “bankers” under his supervision.
Although a written decision didn’t accompany this news there is wide-spread speculation that the whistle blower was disciplined for reporting instances related to the opening of phony accounts without customer permission. Remember, the CFPB was the regulator that discovered and fined Wells Fargo for this misconduct.
Incidentally, if you’re wondering why OSHA is fining Wells Fargo, it’s because it was given the authority to enforce Sarbanes-Oxley’s whistle blower protections provisions. Go figure.
The Sarbanes-Oxley Act makes it illegal for a publically traded company to discharge, suspend, threaten, harass, or discriminate against any employee who provides information to assist in the investigation of a violation of certain Federal Laws (18 USC 1514A). The bank has the option of appealing OSHA’s fine. It should quit while it’s behind; but somehow I don’t think that is going to happen.
Of course, the fact that Wells Fargo has engaged in misconduct discovered by the CFPB doesn’t make the CFPB’s structure anymore constitutional or prudent. But try telling that to the Elizabeth Warren’s of the world.
New York Extends Budget till May 31
In what is new ground for the Cuomo Administration the legislature and the Governor have agreed to a temporary budget extending until May 31, while they continue to work on a budget plan for the 2017-2018 fiscal year. This sure does have a back to the future feel to it.
So much for large scale regulatory reform!
Speaking before the US Chamber of Commerce (that unabashed bastion of capitalism in DC), Senate Banking Committee Chairman Mike Crapo acknowledged the obvious and said that in the near term a broad based overhaul of Dodd-Frank is out of the question. He is quoted in Today’s American Banker as saying “In the near term, we are working to identify bills with bipartisan support that we can move quickly and put points on the board,”
Maybe it is the gloom of a dreary late season wintery mix but this doesn’t sound like the type of agenda that would include scaling back the CFPB’s power, but hopefully I can be proved wrong. On the bright side, he did predict that he and Senator Sherrod Brown, of Ohio would find common ground in areas where they can move pieces of legislation quickly.
What really bothers me is the Senator’s comments, as paraphrased in the article, that larger regulatory changes will have to come from the independent agencies, which will eventually be headed by Trump appointees.
Is this really what representative government has become? Have our elected representatives’ become so comfortable delegating legislative authority to un-elected regulators that they openly pin their hopes for big changes on personnel decisions about who will lead government bureaucracies? I guess I have to re-read the constitution, or simply start ignoring it all together in order to understand what is happening in Washington.
Will there or wont there be an on-time state budget? I was hoping to dedicate this blog to an overview of the 2017-2018 Fiscal Year New York State Budget which kicks in at 12:00am tomorrow. Instead, all I know for sure is that there are a lot of rumors floating around but nothing set in stone yet. As of right now the Assembly isn’t scheduled to go into session until 12:00 this afternoon and the Senate gavels in at 3:00, so it is hard to see how the Governors streak of “on-time” budgets will remain intact.
Those issues that could impact credit unions include insurance requirements for Uber drivers to ensure that car loan collateral is protected, expansion of authority for financial institutions to block transactions involving financial abuse of the elderly and disabled, and language either expanding or clarifying (depending on how you want to interpret it) the regulatory authority of the DFS over licensed individuals and institutions. It is also possible that none of these issues will be dealt within the budget.
By the way, don’t make the NYS budget process more complicated than it is; for more than 30 years budget negotiations have been first and foremost about education aid: when the parties decide on how much school districts will get to spend, and how the pot will be divided – there will be a budget.
I am in D.C. this week and this town feels very strange. In fact, it’s kind of a cross between a jilted lover blindsided by a breakup he didn’t see coming and a Harry Potter novel in which Voldemort succeeded in killing Harry and taking over Hogwarts. You walk onto K Street and still see high-on-the-hog lobbyists and eager young people anxious to get their hands on power. But, look a little closer and you see that almost everyone is out of sorts. After all, you come to D.C. to talk politics, but for the first time in my life, people are timidly broaching the subject unsure on which side of the Great Divide their acquaintances stand. Why, last night, I found myself apologizing to someone from Iowa for talking politics at the bar!
Into this void comes the credit union industry and in many ways, it is both the best of times and the worst of times. It’s the best of times because as we talk to those anxious to scale back government, we have an agenda that does just that. Scores of credit unions have gone out of existence since 2008 and if Washington doesn’t do something soon, only the largest credit unions will be able to absorb the cost of well-intended mandates that miss the mark.
It’s the worst of times because whereas Washington is filled with a lot of well-intentioned idealistic individuals who believe in government, Trumpism is not simply a “throw the bums out” movement. It is a spasm of populist hatred for almost everything Washington stands for.
Many of the members you will be talking to on the Hill today and tomorrow are people genuinely fearful of what they see happening to their country. As a result, credit unions have to temper their message of mandate relief with the reassurance that what we are seeking is not to destroy government, but to make it better.
On that note, I’ll see some of you in a few minutes. Enjoy your day.
New York State’s budget typically does not have a major impact on credit unions. This year is an exception. Among the Governor’s proposals is one authorizing financial institutions to impose transaction holds when they believe that individuals are being victimized by financial exploitation? The bill would have major operational implications for credit unions by giving them substantial new power and responsibility when dealing with suspected financial abuse.
Under the proposal financial institutions would be empowered to impose a transaction hold based on a good faith belief that exploitation of a vulnerable adult; may have occurred, may have been attempted or is being attempted. Interestingly the transaction holds can be placed not only on the vulnerable adults account, but also to accounts of which such person is a beneficiary, including trust and guardian accounts. Within a day of placing a transaction hold, institutions would have to report the transaction hold to Adult Protective Services and to “a law enforcement agency.” A vulnerable adult means an individual who, because of mental and/or physical impairment is potentially unable to manage his or her own resources or protect himself from financial exploitation. The Department of Financial Services would be authorized to develop a certification program, but it does not appear that training would be mandatory.
One of the key questions that I always have when analyzing a proposal like this one is how much protection financial institutions will have? After all a poorly drafted statute, no matter how well intended, could make a credit union subject to litigation for every bad financial decision made by an elderly or disabled individual. The only opinion I will offer about the draft proposal so far is that the liability protections should be strengthened.
The good news is the governor is proposing to shield institutions that impose transaction holds from criminal, civil and administrative liability for all good faith actions, including determinations not to apply a transaction hold on an account. The bad news is this protection only applies where there is a reasonable basis for such a determination. It also does not apply where an employee or financial institution acts recklessly or engages in intentional misconduct in making the determination, or the determination results from a conflict of interest.
As I have explained in previous blogs, the most unequivocal protection from liability that I have seen for credit unions is for the filing of suspicious activity reports. Comparing these protections to what NYS is proposing shows why more work has to be done if the ultimate goal is to create an environment in which institutions are confident that they can protect their vulnerable members without exposing themselves to liability.
This year’s Super Bowl pick
My Bet the Mortgage, Super Bowl pick, which is already recognized as acceptable supplemental capital for complex credit unions is…. Falcons 31 – New England 24. The Falcons use a ball control offense to keep the ball out of Brady’s hands and ultimately score a couple of late touchdowns.
There will be no blog on Monday as I am a celebrant of the new DASB, Day After Super Bowl holiday!