Posts tagged ‘Statutory Gift Rider’

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


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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