Posts tagged ‘anti-trust’

Getting Ready For The Legislature’s Stretch Run

Yours truly is back from his Carolina vacation and has caught up with enough e-mail to finally post again.  While there is a lot I want to get off my chest – there is only so much my wife wants to hear about the banking industry during an eight-hour car ride – I think I will start with a description of some of the key legislative and regulatory issues that will be impacting New York state credit unions in the coming weeks. 

Not only is this an election year, but it is an election year following the redrawing of the election map, meaning that the legislature will want to get out of town as quickly as possible, especially with primaries scheduled for June. 

One of the most important issues we are dealing with is a bill that would retroactively impose strict new requirements on lenders foreclosing on property (S5473D Sanders).  As many of our members have already explained to their representatives during our state GAC, as currently drafted, the retroactive application of this bill and the ambiguity regarding the right of lenders and borrowers to negotiate modifications without running out of time to foreclose on property will actually make it more difficult to work with delinquent borrowers.

We are also continuing to advocate for changes to a proposed data portability and privacy bill which does not currently exempt financial institutions (S6701A Thomas / A680B Rosenthal) as well as continuing to express a strong opposition to state level anti-trust legislation (S933A Gianaris) which could negatively impact the ability of credit unions to help provide communities banking services, particularly in underserved areas. 

All this is taking place as New York’s highest court hears an appeal of a case challenging the legality of New York’s redrawn Congressional map which could allow Democrats to pick up four additional seats as they struggle to keep their majority.  Expect a decision to come down shortly.

As for the federal level, there is an interesting article in today’s WSJ reporting that privacy legislation may finally be getting traction in Congress.  This is potentially good news, provided the legislation does not impose additional requirements on credit unions and the legislation preempts state law.  But I still remain skeptical that Congress will be able to get legislation done this year.  Hopefully, I am wrong.

On the regulatory front, we are still waiting to see what will come out of the CFPB’s initiative against so-called “junk fees”.  The president of the American Bankers Association has already taken to publicly accusing the Bureau of going rouge.  My bet is that we are going to be hearing a lot about overdraft fees in the coming months. 

Last, but not least, let’s hope that the NCUA is going to be following up on its reach-out to credit unions by providing additional guidance as credit unions begin to explore the banking issues raised by distributed-ledger technologies and cyber currencies.  On May 11th yours truly will be discussing the state of regulation in this area and how it is going to impact your credit union as part of the Southern Tier’s Spring Chapter Event in Binghamton.  I noticed it’s at an Irish pub, so let’s share a half-and-half as we ruminate on how technology is once again upending the way banking is done.

Full disclosure, my wife and kids won’t be attending.  They already heard enough about how the NCUA needs to move more quickly and provide additional guidance in this area.  It was one of my favorite topics as we drove around North Carolina.

April 27, 2022 at 9:57 am Leave a comment

New York’s Anti-Trust Experiment

On January 12th a diverse group of 60 New York business leaders and legal experts wrote a letter urging the legislature not to pass S933-A Gianaris / A1812-A Dinowitz.  The legislation would establish a first in the nation European style framework for analyzing allegedly anti-competitive conduct and it would impact not only the Googles of the world but also would have a profound impact on the operations of small businesses including credit unions located in New York.  Here is a quick look at what the legislation would do and how it could impact your credit union. 

Currently, New York State anti-trust law is very similar to its federal counterpart.  Both prohibit monopolies which exercise their power to harm consumers.  This also means that businesses in New York are not put at a competitive disadvantage to companies based in competing states since federal law applies to everyone. 

This would all change if the legislature passes and the Governor signs this legislation.  Most importantly, the proposal would introduce an “abuse of conduct” standard under which both the Attorney General and class action lawyers could sue businesses for exercising a dominant position in a given marketplace.

Under the legislation, any business that has “a share of a relevant market of 40% or more” is presumed to have a dominant position.  Furthermore, a plaintiff is not required to provide a definition of a relevant market in order to establish liability. 

Let’s break this down a little.  It means that if you have a credit union that is the only institution providing services in a financially underserved area, be it parts of New York City or the Adirondacks, your credit union could find itself in the crosshairs of litigation.  And whereas traditional American anti-trust law allows defendants to defend themselves by demonstrating the advantages offered by their products and services (generally referred to as a “Rule Of Reason”) New York State would stipulate that “Evidence of pro-competitive effects shall not be a defense to abuse of dominance and shall not offset or cure competitive harm”.  In other words, any credit union would have to think long and hard about whether or not taking in a new SEG, moving into a new community or merging with a struggling neighbor is worth the risk, even though in almost all these examples, these actions expand the availability of financial services.  Furthermore, the legislation also imposes state level restrictions on merger activity that would apply to most credit union mergers.

The legislation is similar to federal proposals primarily intended to crack down on big tech and there are good arguments for updating certain aspects of our anti-trust law on the federal level.  But this is not the type of proposal that can be or should be implemented on the state level.  State courts will be analyzing wholly new legal concepts as opposed to relying on the century’s old analysis of existing anti-trust law and businesses will most likely deal with this uncertainty by more cautiously providing services that consumers may want. 

February 2, 2022 at 9:46 am 1 comment

Why Amazon Is A Threat To Your Credit Union

The announcement earlier this week that Amazon will be joining forces with Goldman Sachs’ consumer bank, Marcus, to offer small business lines of credit to its platform users is an inevitable evolution in the nascent competition that is taking place between banks, credit unions and fintech’s  that will only grow in intensity in the coming years.  It’s time for the industry to start taking a stand against this potentially monopolistic behavior if it hopes to compete on a level playing field in the brave new world of fintech finance.

According to CNBC, small business owners who use Amazon’s platform will be invited to apply for small business lines of credit with interest rates ranging from 6.99% to 20.99%.  The collaboration has been rumored for months. Apparently, Amazon decided not to go it alone because it discovered that being a first class tech company doesn’t qualify you to run a bank.

The announcement comes at a time when Congress an Attorneys General have begun investigating anti-trust issues related to Amazon, Facebook and Google.  This agreement is a classic example of how network affects are increasingly going to make it impossible for all but the largest institutions to offer competitive services.

Some of the issues that need to be addressed aren’t new to credit unions.  For example, a two years ago the supreme court expounded on what constitutes a two sided platform when it dismissed an anti-trust claim that merchants had brought against American Express.

Amazon Marketplace arguably meets the four elements of a transaction platform that the dissent identified were present in the majority opinion, i.e., the platform“(1) offer[s] different products or services, (2) to different groups of customers, (3) whom the ‘platform’ connects, (4) in simultaneous transactions.” (PLATFORM CONDUCT: NAVIGATING NEW GROUNDS; Eric Hochstadt, Yehudah Buchweitz, Eric A. Rivas)

Simply put, the more data Amazon has, the more consumers are attracted to its platform.  The more consumers that are attracted to its platform, the more businesses are compelled to sell on its platform and the more Goldman Sachs has a captive audience to offer its own products.  Today its small business loans, tomorrow similar deals will be struck for a broad array of financial products.

This is a classic anti-trust case conundrum.  Unless regulators step, in lenders of all shapes and sizes will face almost insurmountable barriers to entry.  It won’t be enough to offer good loans at fair prices, because they won’t have the data available to refine their offerings or access to the marketplace where consumers will increasingly turn to shop for financial products.

Can this admittedly apocalyptic view of the future be avoided?  Yes it can, but only if the industries that have a stake in fair competition support measures to create a level playing field.

June 12, 2020 at 9:52 am Leave a comment

For Visa, MasterCard and Merchants, It’s Deja Vu All Over Again

Image result for deja vu all over againIt took me a lot longer than I expected to research today’s blog because when I read the news this morning that Visa and MasterCard had again reached a settlement of their decade old anti-trust legal dispute with the merchants., I had to refresh my aging hard drive of a memory about just how we got here.

For example, if you’re like me you remember what a big deal it was when, in 2013, a settlement was reached under which $7.25 billion was to be handed over to the merchants and other financial institutions had to surrender a portion of their credit card fee income to merchants. Remember, this was the price we had to pay for peace in our times. It didn’t last very long.

The settlement was stillborn. Some of the largest retailers objected to the deal and eventually the Court of Appeals for the 2nd Circuit agreed (In re Payment Card Interchange Fee & Merch. Disc. Antitrust Litig., 827 F.3d 223, 236 (2d Cir. 2016), concluding that a significant proportion of merchants were either legally or commercially unable to obtain the benefits extensively negotiated on their behalf.

As the settlement terms become available it will be interesting to see what additional concessions merchants were able to obtain as part of the new settlement.

Teachers Discusses Melrose Deal

Yours truly is not in the best position to know who got the better end of the deal when Teachers Federal Credit Union on Long Island recently finalized a deal to absorb much of Melrose Credit Union but the next time I’m buying a house I want Teachers FCU to do my negotiating.

As CEO Bob Allen explained in the Credit Union Times, NCUA is keeping all of Melrose’s medallion loans, meaning that in return for taking on the remainder of Melrose’s assets, the $6 billion credit union has obtained the last of New York State’s open charters. This charter permits the credit union to operate anywhere it wants without regard to field of membership restrictions.

What remains to be seen is how great an impact medallion loans will have when they are absorbed into the Share Insurance Fund. As the article notes, “no one really knows whether the value of medallions has bottomed out and betting on their value would have put the credit union in too much risk.”

 

September 18, 2018 at 9:16 am 2 comments


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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