Posts tagged ‘Medallion’

How NCUA Charges Could Impact Your Credit Union

Late yesterday, the NCUA announced that it was filing seven administrative charges against former Melrose Credit Union CEO and Treasurer Alan Kaufman alleging that he misused credit union funds to benefit himself and close associates. The NCUA is seeking $3.5 million in restitution against Kaufman and a $1 million civil penalty.

The NCUA has determined that Alan Kaufman “has violated the law, breached his fiduciary duties, engaged in unsafe and unsound practices in his role as chief executive officer, treasurer, and member of the board at Melrose Credit Union.”

Melrose is one of New York’s so called “Medallion Credit Unions” which prospered for decades by specializing in making taxi cab medallion loans but, in recent years, has suffered severe losses as medallion prices have plummeted. In 2016, the state chartered institution was taken over by New York’s Department of Financial Services and the Department named the NCUA as conservator.

Among the allegations is that Kaufman improperly solicited and accepted free luxury trips, loans, and housing from Melrose vendors, misled the Melrose board into approving a $2 million naming right agreement “that had essentially no value to Melrose but generally benefitted Kaufman’s personal benefactor,” created a separate medallion brokerage company from which he personally benefitted but for which Melrose personnel were used as employees, and used credit union funds to benefit friends and family by, for example, entering into a decades-long consulting agreement with his father, the former CEO of the credit union, without receiving periodic approval from the board of directors, and using credit union funds to reimburse non-business trips taken by himself and family members. All of this is alleged to have been done in violation of board policy and without board approval.

If I were at a credit union this morning, one of my top priorities would be to review the credit union’s expense and reimbursement policy, discuss it with the board at the next meeting, and update it if need be. The issue is now on the examiner radar.

Having a policy is not enough. I would also review a sample of credit union reimbursements and make sure that they are consistent with the policy and that they have been approved by the board when necessary.

As judges like to say to juries, an indictment is nothing more than a series of unproven allegations and the same is true of NCUA’s assertions against Mr. Kaufman. Nevertheless, credit unions should review the substance of the allegations not because CEOs have engaged in similar conduct, but because I believe the vast majority of them have not and I want them to be in a position to prove it.

August 8, 2018 at 8:58 am 1 comment

Six Things You Need To Know From Last Week

Because of a tight schedule at CUNA GAC and some wrath-of-God weather at the end of the week, yours truly was only able to get out one blog last week. I have a lot to get off my chest and the following is a list of topics I reserve the right to follow up on in the coming days and weeks.

More Taxi Medallion Fallout

In case you missed it, First Jersey Credit Union was shut down by state regulators and the NCUA on Wednesday. Its assets were assumed by USAlliance Federal Credit Union based in Rye, New York. The credit union was done in by an excess of medallion loans. Medallions are currently valued well under $200,000. According to its website, the credit union is open to “Anyone who lives, works, worships or attends school in Bergen or Passaic County, areas of Essex, Hudson, or Union County and family members of existing members, is eligible for membership.”

CFPB Requests Information On Its Information Collection Processes

As someone who has been harshly critical of the CFPB’s use and publication of consumer complaints, this announcement warms my heart. “The Bureau of Consumer Financial Protection (Bureau) is seeking comments and information from interested parties to assist the Bureau in assessing potential changes that can be implemented to the Bureau’s public reporting practices of consumer complaint information.” The Bureau will be accepting comments for 90 days after publication in the Federal register.

Another CU ADA Lawsuit Dismissed

Let’s face it. Judging by the constant discussion of the issue in Washington last week, the industry is in a foamed-mouthed frenzy over ADA website lawsuits. So I’m happy to report that the argument that anyone seeking to sue a credit union must demonstrate they could become a member gained steam recently with another case out of Federal Court in Virginia, dismissing a lawsuit on standing grounds.

Study Calls For Review of BSA “Derisking” Practices

Are the risks of non-compliance with the Bank Secrecy Act severe enough that it is actually making it difficult for persons who live in high risk money laundering areas to obtain banking services? That is the suggestion of this GAO report which analyzed the availability of banking services along the Southwest border. In the coming months, if you see FinCEN reexamining some of its requirements, or regulators taking a closer look at financial institutions which choose not to provide banking services rather than comply with the BSA, this is why.

As Interest Rates Rise So Do Banker Complaints About Municipal Deposits

That is the gist of this article in the American Banker, which reports that banks are bracing for Municipalities to demand more deposit interests now that interest rates are on the rise. It seems to me that states like New York could benefit from increasing the number of institutions that municipalities could turn to for placing their money. After all, if banks truly don’t want municipal business, I’m sure we could find some credit unions that do.

And The Oscar Goes To…

 If you get a chance, you should watch the frontline documentary “Abacus: Small Enough To Jail,” which was nominated for an Oscar. It details the aggressive efforts of the Manhattan DA to prosecute the alleged malfeasance of a small community bank while doing nothing to take on the larger institutions responsible for the mortgage meltdown.


March 5, 2018 at 9:29 am Leave a comment

Are NCUA’s Lending Standards Too Tough?

When state chartered credit union Melrose CU was placed in conservatorship in February, New York’s Department of Financial Services put NCUA in control. Fast forward to Friday: The WSJ is reporting that the Committee for Taxi Safety, a Long Island City-based organization advocating for the medallion industry, sent a letter to NCUA Chairman J. Mark McWatters complaining that, in the aftermath of NCUA’s takeover, Melrose’s medallion loan terms have become too severe. It is demanding large down payments, imposing high interest rates and seeking peoples’ homes as collateral. Neither NCUA nor the DFS was willing to respond publicly to these concerns. According to the committee’s President David Beier, medallion owners can survive, but only if lenders (i.e. NCUA) show more flexibility.

The letter comes at a key time for the medallion industry. One medallion sold for a new low of $241,000, but many within the industry argue that this sale was an outlier and that medallion prices are stabilizing at approximately $550,000.

Department of Homeland Security Issues Warning on Ransomware Attacks

With the world- wide ransomware cyberattack threats likely to continue today, here is a press release from the DHS urging all persons and business to do the following;

  • Update your systems to include the latest patches and software updates.
  • Do not click on or download unfamiliar links or files in emails.
  • Back up your data to prevent possible loss, whether you are at a home, work or school computer.

Movie night at the Meier house

I watched The Founder starring Michael Keaton on pay-per-view last night. Great movie for anyone interested in business, ethics, fast food or really good acting.

May 15, 2017 at 9:21 am Leave a comment

Uber Model Alive and Well after Settlement

Late last week, Uber announced it had settled two class action lawsuits brought by drivers claiming, among other things, that the ride sharing service was violating the labor law by classifying drivers as independent contractors.  For those of you with either a direct or indirect stake in the taxi industry through the financing of medallions, the settlement of these lawsuits is another blow.  Here’s why.

The Uber model is based fundamentally on the assumption that the company is nothing more or less than the provider of an App that enables individuals in need of a ride with those willing to provide one.  In Uber’s view of the world, ride sharing allows the mom on the way to the store to make a few extra dollars by taking Sally down the street along for the ride.  Under this best case scenario, our mom is an independent contractor picking and choosing what rides to take as she makes her way through her busy day.

To critics of Uber and other ride sharing services, the mom is not so much an independent contractor as a poorly paid employee.  For instance, under Uber’s model drivers who consistently turn down rides can be dropped from the service and each ride comes with a suggested price and gratuity. 

If the critics are correct, the Uber model is illegal and the traditional taxi medallion model is alive and well.  This is why the settlement is such a big deal.  Uber agreed to pay drivers up to $100 million and end its practice of automatically removing drivers who refuse too many rides.  At the same time, the drivers will continue to be classified as independent contractors in Massachusetts and California. 

Uber is by no means out of the woods.  Similar lawsuits are still pending.  And just last week California’s Commissioner of Labor ruled that an Uber driver was an employee rather than an independent contractor.  But this ruling is being appeal and is not binding on anyone beyond the employee involved. 

While the settlement of the Massachusetts and California cases leaves the independent contractor issue undecided, in my ever so humble opinion, anyone looking for the courts to provide a silver bullet, at least in the near future, when it comes to regulation of ride sharing businesses is likely to be disappointed.  For those of you who feel that the system should be better regulated in order to put medallion taxi and ridesharing service on an equal footing, the places to look for relief are State legislatures.

April 25, 2016 at 8:29 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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