Posts tagged ‘power of attorney’

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

New York Makes Big Changes to Power of Attorney Law

Governor Cuomo signed a bill yesterday that makes major changes to New York’s Power of Attorney laws. The changes will have a direct impact on whether or not your credit union decides to honor a power of attorney (POA). A.5630-A/S.3923-A was a product of the frustration of lawyers with New York’s POA laws. Specifically, they complained that third parties were too hesitant to accept POAs which didn’t include the exact language contained in New York law.

I know from my compliance days that credit unions are asked on a daily basis to take actions based on POAs. Under existing New York law (General Obligations Law 5-1501), a power of attorney must contain the “exact wording” of New York’s POA law in order to be valid. In addition, there is no penalty that can be imposed against third parties that refuse to accept POAs. Under this new law, a POA will be valid so long as it “substantially conforms” to the relevant statutory language. When a financial institution refuses to accept a POA in the future, they can be brought to court and be made to cover damages for their “unreasonable” rejection of a valid POA. Additionally, your credit union will now have 10 days to accept a POA or explain in writing its reasons for not doing so. The good news is that the new law also stipulates that a person who is asked to accept an acknowledged POA may request “and rely upon without further investigation” an agent’s certification that a POA is valid. There are also several substantive changes to the POA forms. With regard to statutory gift riders, the new law will “expand an agent’s power to make gifts in the aggregate in a calendar year from the current $500 limit to $5,000 without requiring a modification to the form.”

The law takes effect in early June of 2021, and POAs valid before that date will remain effective. If I helped run your credit union’s compliance department, I wouldn’t let too much time pass before looking at this bill and updating your policies and procedures, and making sure the relevant staff knows of these changes. 

On that note, enjoy your day. I didn’t get to address the two other major headlines – that the Northeast gets big snowstorms in December, and that the Electoral College reflects the will of the voters – what a concept. 

December 16, 2020 at 9:54 am 2 comments

Legislature Considers Major Changes To POA Requirements

I remember from my days helping out with the Association’s Compliance hot-line that one of the most common questions from credit union folks is whether or not they should accept a Power Of Attorney (POA).  The issue became trickier in 2010 when New York State passed legislation severely limiting an agent’s ability to conduct account transactions unless the POA documentation was accompanied by a Statutory Gift Rider.

So as the legislature moves to end its session this week, one of the pieces of legislation that the Association is keeping a close eye on this week involves proposed amendments to POA requirements.  If the legislation is passed and signed into law by the Governor, it would force your credit union to reassess the standards it uses when deciding whether or not to accept a POA.

Most importantly, A05630A Weinstein/S03923 Hoylman would replace the current requirement that a document purporting to be a POA contain the “exact language” mandated by New York Law.  This requirement would be replaced by making POAs valid so long as the language “substantially conforms” to wording requirements.  The bill also raises the threshold for the amount of money which an agent can gift without a Statutory Gift Rider from $500 to $5,000 annually.

The process for accepting or rejecting the validity of short form POAs would be formalized.  Your credit union would have ten days to either honor the short form POA; reject the statutory short form POA or request that the agent present an affidavit stating that the POA is in full force and effect.  If you choose window #2 and reject the statutory short form, you must provide a written explanation to the agent who would have the option of responding in writing to these concerns.

Here’s the catch: Whereas under existing law, a judge can simply order a third party to accept a POA; under this proposal, an unreasonable refusal to accept a POA can be accompanied by damages.

In short, on the one hand, the bill provides straight forward mechanisms for third parties to have documented assurances that they are not responsible for an agent’s actions pursuant to a POA.  On the other hand with the potential threat of damages and greater flexibility to draw up POAs, critics could argue that the bill could result in more financial abuse, particularly of the elderly.

The bill still has to be acted on by both the Senate and the Assembly and approved by the Governor.  We will keep you posted as to its progress.


July 21, 2020 at 9:55 am Leave a comment

Lawyers: New York’s Power-of-Attorney laws Are Too Confusing

If you find New York’s Power of Attorney laws confusing-and judging by the number of questions  our erstwhile compliance department gets on the issue many of you do-you are not alone. Apparently so do many attorneys.  The good news is that the influential NYC Bar Association is proposing changes to simplify the POA process.  The bad news is that one of their solutions is to authorize the imposition of fines on financial institutions that refuse to accept POA’s.

Responding to high-profile examples of elder abuse, since 2008 the legislature has  made  several changes intended to make sure that an  agent is authorized to gift   money on behalf of a principal. Most importantly,  principals  must now  sign both a   power-of-attorney and  a separate  statutory gift rider in order  for agents  to be empowered to  gift  $500 or more on their behalf  (5-1514 General Obligations Law).   The Bar Association wants to reintroduce the use of a single form.   It also wants to make POA’s valid so long as the language used to create them “substantially conforms” to NY Law.

According to legal practitioners these forms have become traps for all but the most experienced attorneys: “Unless you practice in this area on a regular basis, you can’t get it right,” David Goldfarb, an attorney who helped come up with the proposed changes is quoted as saying in today’s NY Law Journal “Seventy-five to 80 percent of the powers of attorney done by lawyers who don’t specialize in this area, I’d say, have something in there that would cause it to be a problem.” (

Unfortunately, its most important proposal would authorize the imposition of fines on financial institutions that “unreasonably refuse to accept a properly executed Statutory Short Form Power of Attorney.” The Bar complains that it is all too common for financial institutions to refuse to accept valid POAs and that there is  a lack of uniformity among financial  institutions.

Remember it’s Already illegal to refuse to honor , without reasonable cause, a properly executed statutory short form power of attorney which is supplemented by a statutory gifts rider (N.Y. Gen. Oblig. Law § 5-1504 (McKinney).  In addition, while no sanctions can be imposed , NY has an expedited process that agents and financial institutions can use to resolve disputes about a form’s validity.

Recognizing that sanctions are a no-go for the financial services industry the Bar  is open to coupling sanctions authorization  with provisions holding a financial institution “ harmless if it, in good faith, accepts an acknowledged power-of-attorney without actual knowledge that the signature is not genuine.” They  would also be empowered to  “ ask the agent for his or her certification of any factual matter concerning the principal, agent, or power-of- attorney and an opinion of counsel as to any matter of law concerning the power-of- attorney.”

These changes should be seriously considered but without sanctions. Many credit unions already require POA’s to include a “hold harmless” provision before they accept them and I would suggest that credit unions are already within their rights to confirm that a person is legally acting as an agent before accepting a POA but codifying these standards is a good idea. But it makes little sense to acknowledge, as the Bar does,   that POA’s are liability traps for all but the most experienced attorneys  and then propose pressuring financial institutions into making quick decisions on the acceptance of documents where the wrong decision could literally wipeout a member’s savings. Here is a link to the proposal.



February 18, 2016 at 10:00 am Leave a comment

What We Can Do To Prevent Elder Abuse

I recently wrote a blog expressing concerns about proposals placing an affirmative obligation on the part of credit unions to report suspected elder abuse.  As pernicious as this problem is, the best way to attack it is to ensure that the law provides adequate protection for those who suspect foul play as opposed to putting more pressure on our front line staff to recognize and act on evidence of suspected abuse. 

One solution, as highlighted in a recent discussion at the Association’s Legal and Compliance Conference, is to file a SAR.  Judging by the statistics, this is becoming an increasingly common practice and provides maximum protection to the credit union reporting the suspected abuse.  The problem is that an awful lot of damage can be done between the time a SAR is filed and if and when it is acted on.  Fortunately, existing law provides another narrow, but important protection, at least in New York State. 

Merrill Lynch Pierce Fenner & Smith, Inc. suspected that one of its account holders suffered from dementia.  It even had a letter from her doctor stating that within a month of granting the power of attorney, she lacked the legal capacity to understand what she was doing when she created the document to help manage her affairs.  Merrill Lynch refused to honor the delegation of agency power which was granted to an agent in December of 2010 and instead a proceeding was commenced under New York’s General Obligation Law under Section 5-1504(2) and 5-1510(2)(i) to compel acceptance.  The use of the law in this situation puts the onus on a court to ultimately decide if the power of attorney should be recognized. 

As a result, a credit union with doubts as to whether or not a power of attorney should be honored has the authority to commence a special proceeding.  This isn’t as complicated as it sounds.  Special proceedings are more analogous to arbitrations than they are a trial.  The resolution of the Merrill Lynch case shows how difficult some of these decisions can be.  The judge ruled that the account holder had the capacity to enter into the power of attorney.  He noted that even when a member has dementia, depending on how advanced the condition is, a person may still have capacity to make binding power of attorney decisions. 

Ultimately, these are difficult, fact sensitive decisions.  Expanded use of quick legal proceedings, a willingness to file SARs when appropriate, and, as I argued previously, statutory language that maximizes protection for institutions that report suspected abuse provide a framework for clamping down on elder abuse.

Lottery Bill Sent To Governor

Legislation to permit credit unions to offer lottery savings accounts (S.5145/A.7341) has been sent to the Governor.  The legislation, for which the Association advocated, will allow credit unions in New York to follow the lead of those in other states to encourage savings by tying raffle prizes to the opening of savings accounts.  The Governor has ten days to act on the bill. 

September 18, 2013 at 8:06 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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