Posts filed under ‘Regulatory’

New Director Reconsiders Pending Legal Actions

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Although much of the early talk about a Trump appointed Director of the CFPB has centered on the potential for regulatory relief, the place where we will see the quickest and most dramatic shift is in the use of enforcement actions. Let’s not forget that the CFPB has aggressively used its UDAP powers and enforcement authority to take legal actions against alleged wrong-doers. Acting Director Mulvaney is already decisively changing the Bureau’s use of these powers.

Exhibit 1 is Nationwide Biweekly Administration, an Ohio-based company that transmits funds from consumers to their mortgage servicers. They have been sued by the Bureau over claims that it misrepresented the terms of its product, which enables consumers to make biweekly mortgage payments. The Bureau has now announced that it was no longer opposing a company’s request that the CFPB not be allowed to collect a $9 million judgment against it. The Bureau’s decision comes just days after it had filed a motion in opposition to the company’s request for a stay.

Then there is the granddaddy of them all. As readers of this blog know, in PHH Corporation, et. al. v. CFPB, the issue being litigated is the very constitutionality of the Bureau. Specifically, the Court of Appeals for the D.C. Circuit has already ruled that the Bureau’s single director structure is unconstitutional and that the President must be able to fire the Director at will. This case is being appealed but if the CFPB decides not to contest this ruling, it would effectively concede that it is, as structured by Congress, unconstitutional.

While there are many of us who feel that this is precisely the conclusion that the Court should come to, any decision along these lines will create an uproar bigger than the Giants’ decision to bench Eli Manning. Trust me, it was a big deal.

The bottom line is this: the CFPB has not only been an incredibly aggressive regulator but is also an aggressive enforcer of consumer protection laws as it feels they should be interpreted. Again, for those of us who can’t stand regulation through litigation, pulling back on the CFPB’s reigns is a welcomed development. But the number of important enforcement actions and cases in which the CFPB is currently involved underscores why the battle for the temporary leadership of the CFPB is so important.


December 7, 2017 at 9:43 am Leave a comment

4 Things You Need To Know On Wednesday Morning

Image result for things you need to knowA surprisingly busy Wednesday morning, just a few weeks from Christmas. So here are four things you should know:

Reg Relief Bill Advances

More good news on the legislative front. The Senate Banking Committee voted out a bipartisan reg relief bill, which I talked about in this blog. If the bill goes forward, it could really provide some much needed relief from some of the more onerous mortgage lending requirements imposed by the CFPB as well as give credit unions greater flexibility to finance second homes. This is really a bill that is worth pushing for, so follow-up on those calls to action.

WSJ Highlights CU Lobbying Success

I don’t want to say too much about this yet because we’re not quite past the finish line, but yesterday the Wall Street Journal ran this article, highly complementary of the credit union industry’s lobbying efforts to remain tax exempt. It pointed out that in contrast to the last major tax overhaul, this time the industry was so effective that no serious proposal to tax CU’s was put on the table. If you have a Board that wonders if paying for the trades is worth it, you should have them read this article.

NY Credit Union Sues Trump Administration

Lower East Side People’s Federal Credit Union has filed a lawsuit in Federal court in Manhattan seeking to block President Trump from naming Mick Mulvaney as the interim head of the Bureau. In a press release announcing the lawsuit, Linda Levy, CEO of the credit union explained that in contrast to Mulvaney, who has described the CFPB as a “sick joke,” the credit union supports the CFPB as a protector of its members.

FinCEN: Let’s Chat

Sigal P. Mandelker, Treasury Under Secretary for Terrorism and Financial Intelligence laid out a plan on Monday for more briefings between FinCEN and financial institutions to help enhance efforts to further restrict money laundering and terrorist financing. Under this enhanced framework, FinCEN will be holding live briefings throughout the country with law enforcement and financial institutions to give more direct and up-to-date information on emerging threats. The program is the outgrowth of a series of more than a dozen such meetings FinCEN has held over the last couple of years. These are not brown bag lunch invitations open to everyone. Instead, FinCEN will be reaching out to financial institutions to participate based on a variety of factors, including whether they may possess information relevant to a particular topic.

December 6, 2017 at 9:15 am Leave a comment

New York Forges Ahead With More State Charter Improvements

Image result for student bankingI have more good news to report on the state-charter front. Yesterday, New York State Superintendent Maria Vullo gave final approval to a request by state-chartered credit unions that they be able to operate student branches to the same extent as their Federal brethren. This is a huge improvement for those credit unions interested in helping kids learn the basics of banking. Most importantly, under the wild card approval, students who are members of credit unions as a result of a student branch won’t lose their membership just because they graduated. Here is a great joint agency guidance on this issue a couple of years ago.

There Are No Longer Banks Too Big To Fail

That’s the somewhat shocking assessment of Jerome Powell, President Trump’s nominee to head the Federal Reserve Board in testimony before the Senate Banking Committee yesterday.

Perhaps it’s because we’re in a magical season when hope seems to spring eternal, but it’s amazing to me that any responsible banking regulator can say this with a straight face. Look at the statistics. The big banks today are bigger than they were a decade ago and if anything, the economy is more, not less dependent on them. In fact, the greatest political failure of the last decade has been the unwillingness of a political system to take on a banking system run amuck.

Statements like these have real consequences. There will be another banking crisis and the American public needs to know that as things currently stand, they are just as likely to have to bail out the big guys as they were in 2008.

On that happy note, enjoy your day.

November 30, 2017 at 8:31 am Leave a comment

Five Things You Need To Know On Tuesday Morning

Here is a roundup of some of the other news that happened over the last week when I wasn’t doing the blog and the CFPB had only one Director:

Uber Data Breach

Most importantly, ride sharing app Uber disclosed, all be it belatedly, that it had been victimized by a data breach about a year ago. The breach affected at least 57 million accounts and compromised the phone numbers and emails of 600,000 US driver licenses. It ended up paying more than $100,000 in ransom money to hackers. Uber’s announcement, conveniently made as people prepared for the Thanksgiving holiday, is the latest and most blatant example of companies failing to give adequate notice of data breaches in a timely fashion. This is why it is also the latest example of why we need national data breach standards.

High Noon For Tax Reform

The push for the Republican Tax Cut Proposal is nearing another critical stage with the Senate talking about voting on the bill by the end of the week. Today the Senate Budget Committee meets to consider the bill. What’s so interesting about that is that one of the Republicans most outwardly skeptical about the plan, Senator Corker of Tennessee sits on that committee. He has indicated the he plans to vote against the bill unless changes are made. If Republicans hope to pass a tax bill without Democrat support, they can only afford two Republican no votes. Remember, that even if the legislation gets through the Senate, then the House and the Senate will have to agree to and pass a single bill.

CUNA and NAFCU Recognize Mulvaney As CFPB Director

All of this would be comical if it didn’t have real world consequences and involve adults.

CUNA and NAFCU sent letters to Mick Mulvaney congratulating him on being named the interim head of the CFPB. Meanwhile, the Justice Department was granted an extension to prepare a response to Leandra English’s lawsuit claiming that she is the rightful heir to the CFPB throne. Mulvaney also announced a freeze on CFPB rulemaking. Also yesterday, several high-profile Democratic Senators including New York Senator and majority leader Chuck Schumer and Massachusetts Senator Elizabeth Warren indicated that they would be submitting amicus briefs in support of English. All this took place as Mulvaney was passing out donuts to his new employees and English was emailing CFPB employees in between making visits to key Democrats on Capital Hill. And you thought your office was dysfunctional?

Powell To Testify At Confirmation Hearing

Gerome Powell will be testifying today before the Senate Banking Committee as he seeks to be confirmed as the next head of the Federal Reserve Board. Barring any unforeseen developments, he is expected to easily win Senate approval and take over the job when Janet Yellen’s term ends in February. Here is a link to his prepared testimony.

Is Inflation MIA?

When he takes the helm, one of the riddles he will continue to have to deal with is inflation and the lack thereof. As I’ve noted in previous blogs, there is an important debate going on among economists; in one camp are those who argue that inflation is just around the corner and that the Fed has to aggressively act now or it will act too late to control the inevitable spike; the other camp argues that the economy is changing and that the persistence of low inflation may be a permanent fixture of this new world. One of the most interesting articles I’ve read in recent weeks was this one from the WSJ in which Chairman Yellen said that the continued persistence of low inflation surprised her and that policy makers may have to consider that “there is something more endemic or long-lasting that we need to pay attention to.” Expect the Fed to raise rates again in December. But if inflation continues to be sluggish, more and more central bankers will question whether raising interest rates makes sense.

November 28, 2017 at 9:09 am Leave a comment

CFPB Attempts A Regulatory Coup

The attempt of the holdover leadership of the CFPB to extend its reign over the Bureau is the type of legal maneuver that lawyers love and that makes everyone else hate lawyers. At the end of the day, what the CFPB and its most zealous supporters will accomplish is nothing more than to underscore that the Bureau is an out of control Bureaucracy in desperate need of reform.

When Richard Cordray announced that he was leaving the Bureau at the end of the month, speculation surfaced immediately that the trump administration would name former Congressman and current OMB Director Mick Mulvaney as its Acting Director. Considering that Mulvaney has been an outspoken foe of the Bureau, supporters of the Bureau were understandably upset; but in the words of our previous President, “Elections have consequences.”

Fast forward to Friday. Director Cordray apparently was so anxious to get a jump on his Black Friday shopping that he announced that Leandra English who had previously served as the Chief of Staff as his Deputy Director. When Cordray announced his departure, he effectively designated her as his successor until his five-year term ends in July. In a statement explained that “we will continue to benefit from Leandra’s in-depth knowledge of the operational needs of this agency and its staff.” The White House responded with a statement naming Mulvaney as the Acting Director. English has already filed a lawsuit seeking to block Mulvaney from taking up this position.

Now here’s the part that the lawyers love. The CFPB zealots have a good faith argument. Specifically, they argue that under the Dodd Frank Act, the Deputy Director becomes the Acting Director “in the absence or unavailability of the Director.” The problem with this logic is that it is questionable that a voluntary departure constitutes the type of absence envisioned by this provision. In addition, the statute is only relevant if it is not preempted by a competing Federal statute, the Federal Vacancy Reform Act. While this issue has never been litigated, the Trump Administration released a memo from the CFPB’s General Counsel in which he opined that the President had the power to make the interim appointment and that CFPB staff should recognize Mulvaney as the Acting Director.

Let’s take off our ideological blinders and use some common sense here. Does anyone really believe that an unelected Director of a self-funded agency with no Board of Directors consistent with the Constitution exercise greater authority to appoint his successor, then can the President of the United States? Not in my copy of the Constitution.

And besides, what is it the Bureau holdovers truly hope to accomplish? In a best case scenario, Ms. English stays in her job until July. At some point, a new Director will be named who will take the Bureau in a vastly different direction. After all, elections have consequences.

In the long-term, all that this litigation will do is create greater confusion about what regulations should be implemented and how they should be interpreted.

November 27, 2017 at 9:13 am Leave a comment

Two Things You Need To Know Before Thanksgiving

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I’m exaggerating a little with the headline but I’m going on hiatus until next Monday and there are a couple of things I thought you should know about before then.

Mulvaney To Be CFPB Director?

First, if CBS news is correct, former conservative Congressman and current Office of Management and Budget Director Mick Mulvaney will soon be named the interim director of the CFPB. This is big news. Mulvaney made a name for himself as one of the most fiscally conservative members of Congress. This morning, a lot of his quotes bashing the CPFB are getting attention. But for astute credit union junkies, or people paid to follow this stuff, Mulvaney’s name should ring a bell for another reason. He was one of the harshest critics of former NCUA Chairman Debbie Matz’s obstinate refusal to hold public budget hearings. She even suggested at one point that lobbyists pushing for these hearings were not really representing the interest of credit unions. Here is part of his response that I find most amusing: “Are you a CU member? I am,” continued Mulvaney. “And I think they are representing me when they ask for those things. As a member of the credit union, I like the fact the credit union is trying to guard my money and be conservative with that.”

Suffice it to say that if Mulvaney takes hold of the CFPB, we are in for some interesting times.

NY To Propose Work Scheduling Rules

With the caveat that I am not an employment law lawyer, after talking to a workmate who actually does know this stuff (aka Chris Pajak), I’ve decided to give you a head’s up about regulations to be posted by the Department of Labor on November 22, 2017. NY has a 45 day comment period.

This regulation is the accumulation of a series of hearings held by the New York State Department of Labor over the next several months. Employee groups complain that low wage employees are increasingly being given less than a week’s notice of their schedule, making it difficult to make arrangements for accommodations like childcare and these employees often show up for work only to be sent home. Generally speaking, under New York’s existing “Report To Pay” rules, there are circumstances when employers are required to pay employees for reporting to work even if the employer has no work for them. Specifically, a non-exempt employee is entitled to the lesser of four (4) hours of pay or the pay he/she would have received had he/she worked the shift.

On that note, I will be back on Monday. Enjoy your Thanksgiving and thanks for reading.

November 21, 2017 at 7:15 am Leave a comment

What SpongeBob And The Overhead Transfer Rate Have To Do With Your CU Budget

Image result for Mr. KrabsAt yesterday’s November meeting of the Board, credit unions notched another important victory, albeit with a huge assist from NASCUS.

For years the overhead transfer rate (OTR) has been one of those things that everyone complains about but no one does anything about. Plus, the NCUA has traditionally guarded the formula as jealously as Mr. Krabs of SpongeBob guards the secret formula for Krabby Patties. For those of you who don’t have an 8-year-old at home or are simply too mature or embarrassed to admit you find SpongeBob amusing, all you need to know is that we are dealing with a top-secret formula.

NCUA is unique among federal financial regulators in that its Board is responsible for the regulation of federally chartered credit unions and oversees the Credit Union Share Insurance Fund. Imagine the OCC also having the FDIC’s responsibilities. The result is that when NCUA makes its budget, it not only collects fees on the federal charters it oversees, but transfers money from the Share Insurance Fund to cover the cost of regulating state charters for Share Insurance purposes. This creates a potential conflict of interest. After all, the more money taken from the Share Insurance Fund, the less money has to be collected for federal charters.

As a result, if you look back over the history of the Share Insurance Fund – I bet you didn’t know your faithful blogger was an armchair Share Insurance Fund historian – there have been periodic spasms of criticism directed at how NCUA determines the OTR. The latest such outburst started approximately three years ago when NASCUS obtained a legal opinion letter accusing NCUA of manipulating the formula to subsidize federal charters at the expense of state charters. In addition, Chairman McWatters who was then, nothing more than the resident gadfly on the Board, criticized NCUA for its lack of transparency.

Which brings us to yesterday’s Board meeting. According to NCUA’s press release, the OTR used for the 2018 budget will result in a dramatic reduction in the amount of money chipped in by state chartered, federally insured credit unions via the Share Insurance Fund from 67.7% in 2017 to 61.5%. In addition, NCUA is proposing a regulation which will make the process more transparent.

Since I’m a huge fan of transparency and I think the potential of OTR abuse is always going to be there, this is a step in the right direction. At the same time, I don’t think we’ve seen the last of the OTR debates. Given the structure that Congress handed the NCUA an impossible task that not even Solomon could definitively settle.


November 17, 2017 at 9:44 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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