Posts tagged ‘stimulus checks’

Albany Moves On CU Priorities

Yesterday saw some important movement on legislation impacting credit unions.

First, legislation that would permit municipalities to deposit money in credit unions has been placed on the Senate Banking agenda which meets this Tuesday, May 18th. S670 sponsored by Banking Committee Chairman Sanders is of course a key priority for the industry.

Currently, municipalities, including school districts and local towns throughout the state, are prohibited from placing their money in credit unions even when it could help New York’s taxpayers by generating more interest on public funds and providing much needed competition in an area where banks currently hold a monopoly. We will be coming out with a Call To Action later today.

Secondly, yesterday the Governor signed legislation to exempt from levy and restraint COVID-19 stimulus payments. More specifically, the bill exempts from collection any payment to individuals under the Federal Family First Coronavirus Response Act exemption for emergency relief funds. Any payments to individuals, including tax refunds, recovery rebates, refundable tax credits, and any advances of any tax credits, under the Federal Families First Coronavirus Response Act (FFCRA), Coronavirus Aid, Relief, and Economic Security Act of 2020  (CARES Act), Consolidated Appropriations Act of 2021, and the American Rescue Plan Act Of 2021 (ARPA). The exemption does not apply to child and family support payments. In addition, the bill prohibits financial institutions from exercising a right-of-set-off on these funds. 

The Association joined with CUNA in advocating for stimulus payments to be exempt from levy and restraint.  Congress did not exempt the latest round of stimulus payments from levy and restraint apparently because doing so would have violated budget reconciliation rules which allowed the measure to be passed in the Senate by a simple majority.

May 14, 2021 at 9:22 am Leave a comment

Governor Extends Executive Order; IRS Issues Guidance on Checks To Deceased Persons

Yesterday evening the Governor extended all of his Executive Orders through at least June 6, 2020.  He also further extended the moratorium on foreclosures.

Last evening’s orders specify that there shall be no foreclosure of residential or commercial property

“…for nonpayment of such mortgage, owned or rented by someone that is eligible for unemployment insurance or benefits under state or federal law or otherwise facing financial hardship due to the COVID-19 pandemic…”

Remember that even without this order, the New York courts are not processing foreclosure cases at this time.  The moratorium will remain in effect at least through August 19, 2020.

On another note, you know these are strange times when guidance from the IRS makes national news, but sure enough I was planning on telling you about how the IRS has issued guidance informing members how to return stimulus money to which they are not entitled when NPR broadcast the report about this very subject.

The Association’s Compliance Department will be providing you an excellent analysis of the issue in its weekly newsletter.  Yours truly will just emphasize that the IRS guidance imposes no additional requirements on financial institutions.

That being said, in a non-ACH transaction, when you have advance notice that a stimulus check is made out to a deceased individual, such as a joint check with one of the recipients having recently passed away, I would not negotiate that check.

Now it’s time for me to get ready for my South Korean Fantasy Baseball League Draft.  Play Ball!… and with Sunday being Mother’s Day, it’s time for my favorite quote from former baseball great and Mets announcer Ralph Kiner: “Happy Mother’s Day to all you Father’s out there”.

May 8, 2020 at 8:34 am Leave a comment

Why Credit Unions Should Follow The Attorney General’s Guidance

By warning credit unions and banks that, in her opinion, they would be violating New York Law by honoring levy and restraints, or setting off funds to pay for delinquent loans, New York’s Attorney General has put everyone on notice that she has a good faith basis for taking legal action against any institution which decides to take some or all of these steps. Nevertheless, judging by the number of emails and phone calls I received on this topic yesterday, at least some credit unions are considering going ahead and either setting off funds or capitalizing negative balance accounts.

Time to take a deep breath people. Is the amount of money you are seeking to collect worth the risk of being scrutinized by the Attorney General, not to mention the reputational harm to your credit union?

Here’s the problem: given the unique times in which we live, virtually every action you take involves an unsettled area of law. For example, Federal Credit Unions have a statutory right of setoff and there is both case law and regulatory interpretation making it clear that to the extent that state law prevents a credit union from exercising this right, the state law is preempted. Conversely, the Attorney General can argue that New York’s Exempt Income Protection Act, does not prevent financial institutions from setting off funds, but simply ensures that members have adequate resources to live on before they do so.

Another action credit unions are considering taking involves using some of the stimulus check money to address negative account balances. But how long has that account been negative? Is it possible that the member does not even know that the account is still open? Worse yet, is it possible the account is closed to the member but “open” for collection purposes? Could any of these scenarios provide a good faith basis for alleging that your credit union is engaging in an unfair and deceptive practice? Do you really want to find out the answer?

For those of you who insist on forging ahead and fund negative account balances, it’s important to keep in mind the constraints your overdraft program operates.  For one thing your overdrafts should be charged off no later than forty-five (45) days after the overdrafts are cleared.  In addition, as you can see from this opinion letter, a credit union using funds to pay off an overdraft is paying off a loan and setting off funds in order to do it.  The AG has taken the position that setoffs are illegal.

This is not the time for aggressive legal interpretation. There are no great principals at stake here. Don’t put yourself in a situation where, in a best case scenario, your credit union secures the right to government stimulus checks which cover a fraction of the legal costs it will have to pay to lawyers.

April 21, 2020 at 9:59 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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