Posts tagged ‘POA’

NY’s POA Changes Have Taken Effect: Now What?

The changes to New York’s Power Of Attorney laws officially took effect on June 13th marking one of the most important operational changes that NY credit unions have seen in a number of years. In my previous blogs on the subject I have emphasized the fact that the changes are designed to encourage acceptance of POAs. This goal is accomplished by mandating that institutions accept POAs that “substantially conform” to New York State Law and allowing courts to award attorney fees to individuals who have to go to court to prove that a POA is valid. In this blog yours truly wants to point out that there are still steps you can take to protect both the credit union and your members.

Under the old Power Of Attorney, certain banking transactions could only be carried out by an agent if a POA was accompanied by a Statutory Gift Rider. Remember that this rule still applies to POAs created before June 13th. The amendments eliminate the requirement that POAs contain a separate SGR form. But, when it comes to making changes to existing accounts such as changing the title on the account or adding a new joint tenant, the authority to makes these changes has to be included in the modifications section of the new form. In other words, the modification requirements are being used in much the same way as the SGR requirement previously was (NY general obligation law section 5-1502D).

Let’s say a relative of one of your members comes in with a POA they pulled off the internet. Under the new law a person that is asked to accept an acknowledged Power Of Attorney may request “an opinion of counsel as to any matter of law concerning the power of attorney if the person making the request provides in a writing or other record the reason for the request.”

And remember, even with these changes there are still grounds for denying a POA. A list of examples in New York State Law where such reasonable grounds would exist includes the refusal to provide the credit union with an original Power Of Attorney document or certified document and a good faith referral of the principal and the agent to the local adult protective services unit [New York general obligation law 5-1504(2)].

The bottom line is that your credit union still has the ability to assure itself that a POA is a valid document. That being said, given the changes to the law and the increased risk of noncompliance, decisions on whether or not to accept POAs should not be made by frontline staff.  They should instead reflect a uniform application of your updated Policies and Procedures.

June 15, 2021 at 9:18 am Leave a comment

Are You Prepared for the New POA requirements?

This is not the most exciting question in the world but the sense I get is that for many of you the answer to this question is at best “not quite” and at worst “what changes?” This is concerning because big changes are coming.  For purposes of this blog, I am assuming that your credit union is being presented with a POA where there are no issues regarding potential financial elder abuse.

On a daily basis every credit union in NYS has to decide whether or not to accept and act on a power of attorney document. In today’s blog I am going to discuss the most basic consequences for your credit unions when confronted with a Power Of Attorney starting June 13th. In subsequent blogs, I will discuss other aspects of these changes. If I panic you into taking further action the Association has a webinar on the subject and you can always give our trusty compliance gurus a call on our compliance hotline.

What exactly am I talking about? Late last year the legislature passed and the governor signed into law legislation and a chapter amendment championed by the bar association designed to make it easier to draft POAs. For our purposes it’s important to remember that one of the primary reasons for these changes was frustration on the part of lawyers that banks and credit unions often refused to accept POAs because of what they contend were immaterial drafting defects.    

Specifically, under existing law to be valid a POA must contain “the exact wording” contained in the general obligation law. This gave credit unions and banks a tremendous amount of flexibility in determining whether or not to accept POAs and over the years many went so far as to mandate their own forms.

Starting on June 13th this standard is changing. Specifically, POAs are now valid provided they “substantially conform” to New York law. In other words minor discrepancies between the exact language of NY law and the POA your front line staff is reviewing no longer provides a basis for refusing to honor the POA. 

Furthermore, there are now financial consequences if your credit union refuses to honor a valid POA. Under existing law, all an attorney can do is commence a summary proceeding to order your credit union to honor the POA. When this new law kicks in, if a judge finds that your credit union refused to honor a valid POA, it could be on the hook for damages and attorney costs.

There are also important changes made to the actual form.  Most importantly, Statutory Gift Riders are no longer required and instead certain powers must be noted in a modification section on the POA itself.

Here’s where it gets a little complicated.  For POAs drafted before June 13th to be valid they still must comply with the exact wording standard as well as the existing Gift Rider requirements. But, starting June 13th, you can still face litigation for refusing to honor valid POAs drafted before June 13th.

The bottom line is that your credit union should be updating its procedures to make sure that frontline staff is aware of these new changes and has clear guidance, such as a checklist, detailing the circumstances under which it will and will not accept a POA.

May 28, 2021 at 10:04 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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