Posts tagged ‘NCUA’

Here’s An Important Order You May Have Missed

Good morning folks. I am going to assume that there is more than enough information available to you about the federal stimulus package that is scheduled to pass the House later today. Instead, I want to highlight one of extraordinary orders you may have missed this week amidst the onslaught of guidances, emergency regulations, etc.

On March 22, 2020, New York’s Court System was shut down for all but essential services. This means that anyone wanting to file papers to start a legal action, such as a foreclosure action, is out of luck. The good news is that the order does not prevent clerks from accepting mortgage recordings. This order is in addition to New York’s decision to freeze statutes of limitation. This is important for those of you involved in potential legal disputes.

Have you identified your essential employees?

The timing of this guidance from NCUA and the Treasury Department is a real head scratcher. Yesterday, NCUA issued this guidance informing those of us in critical industries, which includes credit unions and banks, of the importance of identifying the employees who are critical to the maintenance of your operations. I’m getting annoyed by guidance that imposes additional burdens on all businesses precisely at the moment when people are already working 24/7 to keep their operations going.

On that note, enjoy your weekend. Social scientist tell us that in the aggregate, human beings are intrinsically optimistic, the rest of us become lawyers. So when all this stuff is over, you will not remember it being as bad as it seems right now and you will actually remember parts of it fondly.

 

March 27, 2020 at 9:08 am Leave a comment

NCUA Releases Annual Meeting Guidance

NCUA yesterday released much needed guidance to Federal credit unions informing them that they had the right to postpone their annual meetings.  NCUA’s clarification is a welcome relief to many credit unions which have been wondering how to both comply with their annual meeting obligations and  state level orders limiting the number of persons who can gather at one space.  In addition, NCUA explained that board members whose terms expire prior to the annual meeting can continue to serve until the rescheduled meeting is held.

In the guidance NCUA also announced that, effective March 16th to March 30th,“all examination related staff are required to be offsite”.  Information will be transmitted through NCUA’s Secure File Transfer Portal.

FinCEN Releases COVID-19 Guidance

Underscoring just how seriously FinCEN takes the reporting responsibilities of financial institutions, it issued this guidance yesterday telling financial institutions to contact FinCEN “as soon as possible” if they have any concerns about reporting delays as a result of the COVID-19 virus.  FinCEN also said to be on the lookout for an increase in scams related to the COVID-19 pandemic.

White House Issues Voluntary Guidance

The White House issued voluntary guidance yesterday which I would strongly suggest making a good faith effort to comply with.  Among the recommendations that caught my eye are ones to not congregate in groups of 10 people or more and to work from home if you can work from home.

On that note, Happy St. Patrick’s Day.  Fortunately, I was able to get a bottle of Jameson before my neighbors hoarded that as well.  Unfortunately, the same cannot be said for toilet paper.  By the way, unless you want to drink a lot, don’t read about yesterday’s stock market.

March 17, 2020 at 9:08 am Leave a comment

Can you Postpone Your Annual Meeting?

Judging by the number of people that asked the Association this question yesterday, I would hope that NCUA would shortly be coming out with guidance and other related issues. That being said, here is my opinion, which is of course, not a substitute for consultation with your attorney.

  1. Can my credit union postpone its annual meeting?

Yes it can. Under both Federal and State law, board members and officers have a fiduciary obligation to work in the best interest of the credit union (see Grand Union Mount Kisco Employees Fed. Credit Union v. Kanaryk, 848 F. Supp. 446, 457–58 (S.D.N.Y. 1994); 12 CFR 701.4. Furthermore, while NCUA decided to put its bylaws in its regulations a little more than ten years ago, it is important to understand that the bylaws are ultimately a framework in which the board carries out its obligations.

Against this backdrop, it is my humble opinion that while you should hold your annual meeting on the date and time prescribed in your bylaws whenever practical, you have the obligation to change plans when doing so is mandated by common sense public health concerns. In this case you have the right and maybe even the obligation to postpone the annual meeting to confront a public health crisis. After all, one of the goals of NCUA is to encourage participation in annual meetings and as a board member you have an obligation to make decisions which you believe are in the best interest of your membership.  No one should have to choose between putting their health at risk and attending a meeting which can be postponed.

2. Can we hold a virtual meeting?

Unfortunately the answer to this question is not as cleat cut as it should be. NCUA recently updated its bylaws and explicitly rejected a proposal to give credit unions the option of holding virtual meetings. The preamble to the final rule explained that a movement towards completely virtual meetings could actually disenfranchise some members. CUNA has requested guidance from NCUA on this very issue. For state chartered credit unions in New York you have more flexibility to interpret and implement your bylaws. I would use that flexibility to permit virtual meetings in this particular circumstance.

3. If we suspend the annual meeting, how will this impact our board elections?

That depends. If your credit union accepts nominations to the board at the annual meeting then I would argue that the election can’t be held until the annual meeting. After all, the board has an obligation not to disenfranchise its members. But if you’re like the credit union I was talking to yesterday, nominations can only be made by the board nomination committee and by petition. The time period for these nominations has passed and only incumbent board members are seeking reelection. In this case there is no need to extend the nomination period simply because the annual meeting will be postponed. After all, members had adequate time to run for the board and chose not to.

These are unique times. School districts are shutting down. Entire countries are being quarantined and President Trump is actually reading entire speeches off a tele-prompter. The purpose of this blog is not to provide definitive answers where there are none, but to underscore the flexibility your credit union has to implement its regulations in a way which both is true to the intent of your bylaws while being consistent with your obligations to work in the best interest of your members. This is the prism through which I believe regulators should, and courts ultimately would, examine your decisions.

March 13, 2020 at 9:52 am Leave a comment

Tawdry Misconduct At NCUA Uncovered By Inspector General

Reports of marijuana consumption, visits to strip clubs and possible sexual harassment involving NCUA’s office of General Counsel are some of the highlights from a report released by the Office of Inspector General on Friday. Some news just speaks for itself.

 Reach Out And Block Someone

There are many times when legislators and regulators use a chainsaw when they need a scalpel. The leading example of this unfortunate impulse continues to be the TCPA and its regulatory framework which not only take aim against obnoxious robo-calls but are also making it difficult for legitimate businesses including banks and credit unions to engage in rudimentary member communication.

Just how big a deal is this? Recently NAFCU and CUNA signed on to a letter with representatives of several other industries highlighting the practical consequences of the FCC’s overzealous implementation of the fatally antiquated federal statute.

According to the letter, callers and consumers “are not receiving proper notice or procedural protections with blocked or mislabeled calls. If left unchecked, these issues will have significant negative impact on consumers…” For example, the letter noted that two factor identification requests are being blocked as are security related messages and fraud alerts. These aren’t all that useful hanging out in your SPAM folder.

Of course all this was predictable. Remember that this past summer the FCC rushed out regulations giving telephone companies greater protections to more aggressively block suspected robo-calls. At the time credit unions and others warned that this proposal would result in unintended harm to consumers. The FCC went ahead with the rule but coupled it with a mechanism to create a “safety valve” to ensure that consumers could alert the FCC to the fact that legitimate calls were being blocked. The letter includes suggested modifications to the blocking techniques of phone companies. Hopefully some of these will be implemented but I’m not holding my breath.

Get Ready for One Wild Financial Rollercoaster

I’ve included a graph of the Ten Year Treasury Note which continues to drop lower and lower and lower. Combine this with a precipitous drop in oil price and the spreading coronavirus pandemic and today isn’t a good day to check out how your 401k is doing.

March 9, 2020 at 9:19 am Leave a comment

Six Take-Aways From CUNAs GAC

Back from another year at CUNAs GAC. Every year I try to highlight some themes that emerge so here is my list of the six (6) things I learned at this year’s conference:

    1. Get those DORs done. Don’t be surprised to see NCUA taking a tougher approach to your credit union when it comes to following up on Documents Of Resolution. One of the big takeaways from the report of NCUA’s Inspector General about the collapse of the NYC taxi credit unions is that NCUA should have acted more promptly to enforce long standing DORs. Anecdotally I talked to a lot of credit union people and some of them said they are already seeing this trend.
    2. Taxi medallions are an even bigger issue than I thought they were. It would have been impossible to be at the conference the last few days without hearing about taxi medallions. This has not been true over the last few years. Both Chairman Hood and Board Member McWatters defended the agency’s decision to sell the medallions to a private equity firm, just as New York State was beginning to focus on ways to stabilize the medallion market. The big questions that remain are: How much flexibility are the new medallion owners going to extend to troubled borrowers? How much is the sale going to impact the sale price of medallions? And precisely why did NCUA feel that now was the best time to sell off these assets?
    3. Alice Through the Looking Glass and the CFPB. In a presentation to the conference, CFPB director Kathy Kraninger laid out an ambitious agenda on issues ranging from qualified mortgages to payday loans even as her own bureau refuses to defend the constitutionality of its leadership structure in a case pending before the Supreme Court. I’m telling you folks, when it comes to the CFPB, be careful what you ask for. Do you really want to wake up in a world in which the legality of all those mortgage regulations you have been implementing for the last 10 years are in doubt?
    4. I know subordinated debt isn’t the most exciting issue but I continue to believe that it is one of the most important facing the industry. The Association will shortly be coming out with a survey seeking feedback on the pending NCUA proposal which would allow complex credit unions access to secondary capital for purposes of meeting their risk based capital requirements while at the same time codifying guidance making it more difficult for low income credit unions to access subordinated debt. The agency has to see if it can balance these competing concerns in a way that does not exacerbate the differences between big and small credit unions.
    5. The more things change, the more they stay the same. There are so many issues on which there should be a bipartisan consensus but Congress is still unable to get things done. I’m thinking about data security and marijuana banking, in particular. We all know that there is a huge political divide in this country; I wonder how many people realize that this perpetual ideological warfare hurts industries and consumers regardless of what party they belong to.
    6. If there is a better politician in New York than Senator Chuck Schumer, I have not met him.

 

February 27, 2020 at 9:33 am 1 comment

NCUA Committed To Gradual Phase In Of CECL

Greetings from Washington DC where I hope to see many of you at our Association Briefing today in preparation for tomorrow’s Hike The Hill.

Although the legislative stuff is a lot of fun to talk about, with Congress gridlocked the most important developments continue to be on the regulatory and legal front. At last Thursday’s Board meeting, NCUA approved a joint agency guidance explaining baseline examiner expectations for banks, credit unions and thrifts as they prepare to comply with the Current Expected Credit Loss Methodology we lovingly refer to as “Cecil” CECL. The best news I have to report in a while is that NCUA included a footnote in the preamble to the guidance in which it reiterated that it has the authority to phase in CECL Compliance over a three year period. In addition, speaking to a group of small credit unions on Sunday, Chairman Hood noted that phasing in CECL is one of his top priorities.

Why is this so important? Remember that the basic idea of CECL is that financial institutions should record expected credit losses earlier in the lending cycle. There are a number of credit unions for whom a decisive shift to this methodology would have extremely negative consequences. For example, how many credit unions would be harmed if they had to report medallion values under a CECL model? A phasing in of CECL compliance in addition to the already delayed effective date applied to credit unions is one more way that regulators can help smooth the transition.

That being said, the transition is coming and there is a lot of work to be done. Take a look at this guidance and you will see that CECL Compliance impacts much more than accounting. It impacts everything from your board governance to your off balance sheet investments. Now really is the time to get started.

Credit Unions Offer Good Mortgage Value

Here is one more point to raise when you talk to your Congressman tomorrow. Home buyers save thousands of dollars by getting their loans from credit unions. This is the conclusion of a report released by NCUA’s economist at Thursday’s Board meeting. It’s always been interesting to me that when consumers think about credit unions they are much more likely to mention a great rate they received on a car loan than a great mortgage they received. Perhaps this report can help broaden the focus of consumers and policy makers particularly as they consider how to ensure secondary mortgage access if Fannie and Freddie ever go away. On that note, have a nice day.

 

 

 

February 25, 2020 at 8:49 am Leave a comment

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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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