Posts tagged ‘Banking Development Districts’

Why passage of BDD legislation is a big deal

Good morning folks! As many of you undoubtedly know by now, last Thursday, Governor Cuomo approved legislation permitting credit unions to participate in the Banking Development District (BDD) Program. Here are some initial takeaways.

  • Now comes the hard part. Now that credit unions have the ability to participate in the program, it is incumbent on the industry to take advantage of this opportunity. Here is a link to information about the BDD Program. The Association is, of course, more than willing to help with the process.
  • A win is a win is a win. If the definition of insanity is doing the same thing over and over again and expecting different results, then many credit union lobbyists are pretty close to insane. The BDD Program began in 1996 and credit unions have been arguing for inclusion ever since.   However, persistence gets results and ultimately, the better argument wins the day, even in Albany. It just takes a while.
  • Passage of this bill is an important step toward allowing all municipalities to put deposits in credit unions. Its enactment further undermines the argument that credit unions can’t be trusted with public funds or somehow don’t deserve to play on the same field as banks.
  • Last but not least, this is an important win for New York consumers. Governor Cuomo’s Department of Financial Services originally proposed extending the BDD program to credit unions a few years ago out of frustration that not enough banks were participating in the program. It also recognized that maximizing the number of potential financial partners for local communities in need of economic development was a good thing for New York consumers. The Department was right to propose the bill and the need for struggling communities to access financial partnerships has, if anything, increased in the last few years.

Another big win for CU Field of Membership Case

Credit unions got one step closer to solidifying the decision of the Court of Appeals for the DC Circuit upholding most of NCUA’s 2016 Field of Membership regulations when that same court on Thursday rejected a motion by the bankers requesting that the entire court reconsider the decision en banc. En banc is a motion requesting that an entire circuit court, and not just a three judge panel, reconsider a decision.

The rejection of this motion means that the bankers now must decide whether or not to request that the Supreme Court hear an appeal of a case. My guess is that they will file a petition. After all, if it’s fourth and ten with two minutes left on the clock and your team is down by three points, there is no down side to going for a first down. Also left to be decided is that portion of the decision requiring the NCUA to amend its regulations to prevent racial gerrymandering of credit union service areas.

On that note, have a great Monday!

December 16, 2019 at 7:54 am 1 comment

Robert E. Lee, RBC, the Supreme Court and the FCC

Image result for robert e leeGood morning folks. I apologize for the late blog but I had a tough time waking up this morning after a great weekend.

First off, what everyone’s been asking about is the legislative session. As I’m sure many of you know by now, we came close but were unable to push legislation permitting municipalities to place money in credit unions over the proverbial finish line. Is this disappointing? Of course it is but let’s not underestimate the progress we made by getting the Assembly Banks Committee to vote in favor of the legislation and getting the Chairman of the Senate Banks Committee to agree to this legislation.

In addition, let’s not underestimate how big of a deal legislative approval of credit union participation in banking development districts is. First, credit union involvement in the program will help more consumers have access to banking services. Second, inclusion in credit unions in the program marks the first time that credit unions will be able to accept public funds in New York State. And finally, passage of the BDD bill shows that persistence pays off. The program has been in existence since 1997.

Forget all that stuff about how making laws is like making sausage. Running into an old colleague last week reminded me of one of my favorite analogues the New York legislative process. To really understand what it’s about you have to put yourself in the shoes of Robert E. Lee, who after surveying the battlefield following the battle of Fredericksburg turned to his colleagues and said, “It’s a good thing war is so awful less we grow too fond of it.” The legislative process may not be pretty and can be incredibly frustrating but it’s also the only one we have and we are certainly better off for engaging in the battle even if we don’t always get all the results we would want.

Okay, I’m getting off my high horse now.

NCUA Delays Risk Based Capital Rule

By a two-to- one vote on Thursday, the NCUA Board proposed delaying until January 1, 2022, the effective date of the Risk Based Capital rules. According to the NCUA, they will “allow the Board additional time to holistically and comprehensively evaluate the NCUA’s capital standards for federally insured credit unions.” This is of course good news for those credit unions with $500 million or more in assets which the RBC rule characterizes as complex. The preamble to the proposed delay regulation singles out the potential use of subordinated debt; evaluation of how federal banking legislation impacted the extent to which community banks have to comply with risk based capital requirements under the economic growth, regulatory relief and Consumer Protection Act of 2018 and the need to provide credit unions more time to prepare for complying with this regulation as among the key reasons justifying a delay.

Since I’m in a generous mood, I am going to offer two additional reasons. (1) I continue to believe that NCUA’s fundamental premise- that it was required to put forward RBC regulations in the first place- is flawed. (2) On a policy level show me the proof that RBC is actually the best approach for regulators to take from a safety and soundness point of view. Yours truly continues to believe that a risk based capital framework simply encourages both banks and credit unions to engage in regulatory arbitrage by overinvesting in products and activities based on regulatory speculation as to how dangerous the activities and investments are.

 Supreme Court Underscores Administrative Confusion Surrounding the TCPA

Since I can’t seem to avoid doing any blog lately without mentioning the TCPA, I want to bring to your attention a decision by the Supreme Court last week which underscores just how messed up – that’s a legal term – the TCPA framework is. In PDR Network, LLC. v. Carlton Harris Chiropractic Inc.,  the  question was whether a fax advertising the availability of a free diagnostic manual constituted an advertisement under the TCPA for which recipients could sue the senders? In 2006, the FCC issued an order stating that unsolicited advertisements  promoting free goods violated the TCPA but a district court disagreed with the FCC’s interpretation.

The question before the court was whether another statute, the Hobbs Act, only allowed federal appellate courts and not district courts to reverse FCC rulings. The Supreme Court’s answer to this question? It’s not sure. It sent the court case back to the lower courts to determine whether the FCC’s 2006 ruling was a “legislative rule” in which case the District Court went beyond its authority or if the FCC’s ruling was more analogous to a court’s interpretation for the statute in which case, a district court has more freedom to come to its own conclusions.

I know this is in the weeds stuff but given the importance of administrative rulemaking procedure in establishing the rules to which all credit unions are subject, it’s actually important to pay attention to.

June 24, 2019 at 9:57 am Leave a comment

Just What Is a Robocall Anyway?

As really hardcore readers of this blog know, my wife has suggested that I am a beater of dead horses. While I respectfully disagree some issues really do get under my skin and right now one of those is the recent ruling by the FCC banning robocalls. A recent decision by the Court of Appeals for the 9th Circuit underscores that the FCC did not ban robocalls. Instead, it made it even more difficult to reach out to members using equipment that could make robocalls. I’ve explained this before but the 9th Circuit decision underscores just how unworkable the 1991 statute has become. Duguid v. Facebook, Inc., No. 17-15320, 2019 WL 2454853, (9th Cir. June 13, 2019)

When Congress decided to clamp down on unsolicited marketing phone calls it decided to do this by placing restrictions on the equipment used to make such phone calls. Consequently the TCPA’s consent requirements are triggered any time “equipment which has the capacity—(A) to store or produce telephone numbers to be called, using a random or sequential number generator; and (B) to dial such numbers.” 47 USC 227(a)(1)(A).

The plaintiff in this case brought a claim under the TCPA after receiving several unsolicited messages for Facebook even though he belongs to that rare group of people such as your faithful blogger who has never belonged to Facebook and never will. No one seems to know how or why he got these messages. In seeking to dismiss this lawsuit, Facebook made a frontal assault on the breath of the statute and the way some courts and regulators have chosen to interpret it. Specifically it complained that under the existing interpretation of the TCPA it could be understood to include smart phones because they can store numbers and use automated response technology. Consequently, any use of a smart phone triggers the TCPA.

In rejecting Facebook’s argument, the 9th Circuit basically said that the statute says what it says and if it is being interpreted too broadly then this is an issue for Congress to address and not the courts. It explains that the text of the statute “provides no basis to exclude equipment that stores numbers including cell phones.” In other words, if you are calling up your member to inquire about a late bill payment or you are emailing a member to tell them about a loan product you think they may be interested in, the TCPA is implicated unless you are using a roto dialer.

Now why does this annoy me so much? Because despite of the uncertainty regarding the proper interpretation of the TCPA, the FCC rushed out regulations allegedly clamping down on robocalls. But this simply isn’t true. What the FCC actually did was clamp down on the use of equipment which could be used to make robocalls. But that doesn’t fit as neatly into a headline. It really is time for Congress to clean up this mess but then again the election is a mere year and a half away. No time for any work to get done.

One Down One To Go

Around 9:30 last night a weary Assembly passed legislation giving credit unions the right to participate in banking development districts for the first time since the legislation was passed in 1997. It now goes on to the Governor for his signature. Passage of the bill is a tribute not only to the tenacity of credit unions but to pioneering institutions like Lower East Side Federal Credit Union in Manhattan which were created specifically to address the needs of consumers who found themselves in banking deserts as banks began to contract branches.

As for the Holy Grail, our municipal deposit bill is still in the Assembly Ways and Means Committee. We will keep you posted on developments throughout the day. It still looks as if the legislature will be in town beyond today but we won’t know for sure until an official announcement is made. We will keep you updated on developments throughout the day. Let’s keep our fingers crossed.

June 19, 2019 at 8:43 am 2 comments

D-Day For Robocalls?

I found myself yelling at my radio this morning as either NPR or Bloomberg was reporting that the FCC was poised to take final action today on a proposal to make it easier to block robocalls.

I was yelling at the broadcast because the proposal does much more than that. I might be able to live with the regulation if we could come up with a legitimate definition of what a robocall is but alas, the definition is dependent not on the nature of the communication but on the type of equipment used to make the robocall.

Second, by giving telephone service providers the authority to block all the member’s unwanted calls unless they opt in to receiving them, the proposal raises a host of compliance conundrums. For example, by the end of the day today you may very well find it more difficult to reach out to delinquent homeowners who the CFPB says you have to discuss loss mitigation options with. And what’s going to happen when there is a conflict between the documented approval you have received to contact members and the fact that the member has not affirmatively opted in to receiving electronic communications.

By the way, the FCC is taking these steps notwithstanding some great work by CUNA and the industry. As this article report from Fox Business makes clear CUNA was able to place itself in the forefront of these legitimate concerns notwithstanding the great next speed at which the FCC is determined to jam this regulation through. Stay tuned.

The Chase Is On

The Albany Business Review is reporting that Chase plans to open several new branches in the Albany Metropolitan area marking its first aggressive push into the market. The Review notes that the move reflects a broader strategy on the part of the bank to both consolidate branches and concentrate on growing in the major metropolitan areas.

BDD Bill Advances

Finally some good news to report this morning. The efforts of credit unions to become eligible for participation in the state’s banking development district program took an important step forward yesterday when the legislation was voted out of the Bank’s Committee. It now goes on to Ways and Means. We will keep you posted on future developments.

June 6, 2019 at 9:02 am 2 comments

Banker Hypocrisy At Its Worst

Image result for bankerI love bankers and banker lobbyists. Some of my best friends are banker lobbyists but the display of hypocrisy that will no doubt be on display at the State Capitol in the coming days is a ritual of which I am tiring.

Assembly bill 6949-B has been put on the Assembly’s debate list, which means that it can be debated and voted on notwithstanding the objections of opponents. The bill would allow localities to participate in Banking Development Districts with credit unions. For more than two decades the BDD program has allowed localities in need of banking services to jointly apply with interested financial institutions for designation as a BDD. In return for opening up a branch in the area, the financial institution receives incentives including low-interest deposits from the comptroller. Despite these incentives, banks have been less than enthusiastic in embracing the program and last year the Governor proposed extending it to credit unions. Nevertheless, the word on the street is that banking lobbyist were scurrying around legislative offices yesterday with memos in opposition to this bill. Don’t get me wrong, I’m not the slightest bit surprised but at some point enough is enough.

I haven’t seen this year’s version but I’m sure it’s the same old song, maybe with a slightly different tune. Credit unions don’t pay taxes – they do, just not corporate taxes – because they are after all not for profit corporations. That’s right, credit unions pay a host of taxes like any other employer in New York State.

I love the fact that bankers become so concerned about tax policy as soon as credit unions enter the conversation. Today’s Wall Street Journal is pointing out that some of the nation’s largest banks, including Wells Fargo, which has done so much to earn the public’s trust over the last couple of years, are among the big winners of the so-called tax reform. I would love to know how much of this tax windfall – $2.5 billion and counting – is going to be returned to consumers in the form of cheaper products and more compliance services, but I’m not holding my breath for an answer.

But having heard the same old arguments for almost two decades now, first in the legislature as a staffer and now as a member of the Credit Union Association, there’s only so much time we should be wasting on responding to tired old arguments. BDD districts should be extended to credit unions because they are potentially innovative economic development tools that help people in areas in need of investment. What I’ve always liked most about the program is that it reflects a three-way consensus between local, financial and state stake holders about the best way to bring needed financial services to an area in need.

In my last blog, I talked about the Lower East Side People’s Federal Credit Union. Even though it was started precisely to serve the areas that banks have historically shied away from serving, it cannot participate in this program. Why? Because the banking industry is increasingly devoid of a positive legislative agenda and instead is obsessed with zero-sum politics in which if credit unions lose, they win, consumers be damned. In fact, if anyone reading this blog today is approached by a banking lobbyist explaining why this bill should be opposed, please ask that lobbyist what positive, constructive proposals the banking community has to make financial services better for New York State consumers?

Of course, the banking lobbyists are just doing their job. It’s time for legislators to stop hiding behind their increasingly hollow rhetoric and do what’s right for the New York State consumer.


April 18, 2018 at 9:06 am 1 comment

And down the stretch they come…

With the legislative session scheduled to end sometime tomorrow, this is the time when most of the really important stuff is voted on, amended, or left to wither on the vine until next January.

While there are a bunch of bills that I will be talking about in the coming weeks there is of course one that continues to grab the attention of all faithful bloggers; I am talking about the Banking Development District bill which continues to advance. Yesterday it passed the Assembly without being laid aside for debate. The final tally was 83 to 9.

Remember now is the time to be contacting all those Senators and debunk all the nonsense the banks have been telling them. For one thing, credit unions do pay taxes, lots of them. You may also want to point out that this bill does nothing more than allow credit unions to participate in a program that would assist areas with a dearth of banking services.

A second issue that came up yesterday doesn’t deal with legislation, but it is a pressing concern not only in NY, but to anyone who offers mortgage loans across the country. State Comptroller, Thomas DiNapoli, issued a report calling for enhanced state/federal coordination of water quality standards. This gives me the opportunity to sound off on one of my personal pet peeves.

No one is ever going to accuse me of being a tree-hugger, but my research of issues surrounding the water contamination in Hoosick Falls and the potential ramifications of hydro-fracking has demonstrated to me that lenders must get clearer guidance from the federal government and the GSE’s in particular about baseline environmental standards including water quality.

As it stands right now any time a mortgage is sold to the secondary market the seller is making strict liability guarantees regarding the environmental safety of the area in which the property is located. If these warranties are breached the lender can be made to repurchase the mortgage. Obviously, this makes sense if someone is selling land in love canal, but most environmental issues are not as clear cut as the extreme cases that get national attention. The result is that lenders who work with the GSE’s are forced to make tough decisions about the long term environmental impacts dealing with issues such as water quality and mediation, often with little guidance from the Federal Government.

Furthermore, many of the areas in need of environmental remediation are already suffering from economic decline. The hesitancy of lenders to lend in these areas (even for a short time) makes these declines even more dramatic.

I applaud Comptroller DiNapoli for highlighting the importance of this issue, but I would suggest that any comprehensive analysis is incomplete unless it also highlights the need for the GSE’s to work more closely with lenders, lending in areas where the water quality is in need of mediation. One of the most basic things they can do is limit the scope and or length of warranties.


June 20, 2017 at 9:44 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

State Deposit Bill on Senate Banks Agenda

Our banking lobbyist friends have been scurrying around Albany like a cat on a hot tin roof since around 4:00 yesterday afternoon, which is when the Senate Banks Committee added two key credit union bills to this morning’s agenda. S. 3616 by Senator Funke would authorize the Comptroller and the Commissioner of Taxation to deposit state funds in credit unions.  A second bill, S. 5521-a by Senator Montgomery would authorize credit unions to participate in the Banking Development District program.  This bill has been around longer than my teenaged daughter.

Both bills would help consumers while putting New York credit unions on a level playing field with their banking counterparts. For example,  currently the Community Bank Deposit Program authorizes but does not require the Comptroller and the Commissioner of Taxation to place up to $250 million in state funds in community banks “in recognition of the  economic benefits and stimulus which result from the placement of deposits in local banks” (N.Y. Banking Law § 85).  The Funke bill would give the State the same authority for credit unions.  A companion bill, A. 774 by Assemblyman Rodriguez has already been voted out of the Assembly Banks Committee.

By the way, when this bill was floating around last year, there was a fair amount of nonsense about it. This is not a municipal deposit bill.  In addition, the bill doesn’t take money away from community banks which are still eligible to receive up to $250 million.  The vast majority of state funds are currently held by approximately 11 large banks.  The key is that money placed in a credit union is money which, by definition, will go to help local communities grow.  In contrast, state funds deposited in a large national bank may go to funding a loan in Idaho.  I have nothing against Idaho, I like watching the Boise State football team, but I just don’t know why my tax dollars should go to Idaho.

Banking Development Districts have been around since 1997. In return for banking institutions opening  branches in financially underserved areas, banking institutions receive public funds for which they have to pay low-interest.  If the goal of the program is to benefit poor communities, then allowing credit unions to participate in these districts makes perfect sense.  There is no shortage of areas that could benefit from broader access to financial services.  Unfortunately, since 1997, banks have exercised a monopoly over the program and its benefits. A companion bill to the Senate proposal, A 3521-b/ Robinson, has already made it to the Assembly Rules Committee.

Whom Do You Dislike the Least?

Well, the fat lady has sung. With her primary victories in California and New Jersey, Hilary Clinton will take on Donald Trump in what promises to be the most watched reality T.V. show in history with the survivor getting to live in the White House.  I don’t know what it says about the American Electorate that it has chosen two finalists for the most important job in the world are among the most unpopular candidates ever chosen by either party, but it can’t be good.

House Republicans Unveil Banking Reform Proposal

Saying he wanted “economic growth for all and bank bailouts for none” House Financial Services Chairman Jeb Henserling unveiled an election year manifesto to scale back Dodd Frank and implement major banking reforms including providing a way for banks to opt out of Basel III’s risk-based weighting requirements provided they have adequate capital.   Among the reforms most beneficial to credit unions would be a mechanism for institutions to appeal exam findings “without fear of bureaucratic retaliation;” an extended 18-month exam cycle for certain credit unions and the vesting of the powers currently held by the CFPB’s director into a commission.

Joint Statement on Interbank Cybersecurity Issued

The NCUA released a statement from the  FFIEC this morning reminding banking institutions  to  “actively manage the risks associated with interbank messaging and wholesale payment networks.” The statement comes in the aftermath of high profile cyber thefts involving transfers between some of the nation’s largest banks and even the New York Fed  involving  the SWIFT network.





June 8, 2016 at 8:20 am 1 comment

The Last of the Community Banks

According to press reports, Mayor Bloomberg is considering supporting a City Council proposal that would rate banks seeking to hold the City’s municipal deposits on their investment and banking activities in the City.  The reality is there is only so much that even the largest governments can do to make banks care about those communities in which they happen to have a branch.  Their fiduciary obligation is to maximize profit on a regional, national, and even global scale.

If enacted (no doubt over strenuous objection from bankers), the measure would require that banks seeking to manage the city’s municipal deposits or to apply for Banking  Development Districts be rated, among other things, on their efforts to address the credit needs of small businesses, working with homeowners to restructure their delinquent mortgage loans and developing financial products for low and moderate income communities and individuals. 

It is not surprising that Mayor Bloomberg has spoken out publicly in favor of allowing credit unions to accept municipal deposits.  Money given to a credit union in the city is going to be reinvested in the city.   What’s more, a credit union simply isn’t placing a branch in a new neighborhood to gain a tax exemption (one of the many things commercial banks receive when they participate in Banking Development Districts) but because it believes it can get people to visit that  branch, buy the credit union’s services and ultimately help grow its membership.   

No amount of government prodding of the banking industry is going to replicate that committment or the benefits it brings to local communities.

Say Goodbye to Paper Savings Bonds

The NCUA announced yesterday that, effective December 31, 2011, savings bonds will no longer be available for sale by credit unions and banks over the counter.  Members will instead be directed to purchase their bonds online.  This change undoubtedly makes perfect sense, but as my wife just pointed out, a generation of bond buying grandparents is going to be inherently suspicious of this development.  I would suggest getting the word out to your members as soon as possible, so that your member service representatives can start explaining to members that their existing bonds are still good, the system will work the way it always has, and that the new electronic format is safe. 

September 29, 2011 at 7:00 am Leave a comment

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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