Posts tagged ‘Uber’

Five Things You Need To Know On Tuesday Morning

Here is a roundup of some of the other news that happened over the last week when I wasn’t doing the blog and the CFPB had only one Director:

Uber Data Breach

Most importantly, ride sharing app Uber disclosed, all be it belatedly, that it had been victimized by a data breach about a year ago. The breach affected at least 57 million accounts and compromised the phone numbers and emails of 600,000 US driver licenses. It ended up paying more than $100,000 in ransom money to hackers. Uber’s announcement, conveniently made as people prepared for the Thanksgiving holiday, is the latest and most blatant example of companies failing to give adequate notice of data breaches in a timely fashion. This is why it is also the latest example of why we need national data breach standards.

High Noon For Tax Reform

The push for the Republican Tax Cut Proposal is nearing another critical stage with the Senate talking about voting on the bill by the end of the week. Today the Senate Budget Committee meets to consider the bill. What’s so interesting about that is that one of the Republicans most outwardly skeptical about the plan, Senator Corker of Tennessee sits on that committee. He has indicated the he plans to vote against the bill unless changes are made. If Republicans hope to pass a tax bill without Democrat support, they can only afford two Republican no votes. Remember, that even if the legislation gets through the Senate, then the House and the Senate will have to agree to and pass a single bill.

CUNA and NAFCU Recognize Mulvaney As CFPB Director

All of this would be comical if it didn’t have real world consequences and involve adults.

CUNA and NAFCU sent letters to Mick Mulvaney congratulating him on being named the interim head of the CFPB. Meanwhile, the Justice Department was granted an extension to prepare a response to Leandra English’s lawsuit claiming that she is the rightful heir to the CFPB throne. Mulvaney also announced a freeze on CFPB rulemaking. Also yesterday, several high-profile Democratic Senators including New York Senator and majority leader Chuck Schumer and Massachusetts Senator Elizabeth Warren indicated that they would be submitting amicus briefs in support of English. All this took place as Mulvaney was passing out donuts to his new employees and English was emailing CFPB employees in between making visits to key Democrats on Capital Hill. And you thought your office was dysfunctional?

Powell To Testify At Confirmation Hearing

Gerome Powell will be testifying today before the Senate Banking Committee as he seeks to be confirmed as the next head of the Federal Reserve Board. Barring any unforeseen developments, he is expected to easily win Senate approval and take over the job when Janet Yellen’s term ends in February. Here is a link to his prepared testimony.

Is Inflation MIA?

When he takes the helm, one of the riddles he will continue to have to deal with is inflation and the lack thereof. As I’ve noted in previous blogs, there is an important debate going on among economists; in one camp are those who argue that inflation is just around the corner and that the Fed has to aggressively act now or it will act too late to control the inevitable spike; the other camp argues that the economy is changing and that the persistence of low inflation may be a permanent fixture of this new world. One of the most interesting articles I’ve read in recent weeks was this one from the WSJ in which Chairman Yellen said that the continued persistence of low inflation surprised her and that policy makers may have to consider that “there is something more endemic or long-lasting that we need to pay attention to.” Expect the Fed to raise rates again in December. But if inflation continues to be sluggish, more and more central bankers will question whether raising interest rates makes sense.

November 28, 2017 at 9:09 am Leave a comment

I’ve had an affair!…with Uber

This morning I’m telling the world I’ve cheated and I may do it again.

I have just taken my first Uber ride to work. I honestly felt like I was cheating on all of you medallion holders out there but the temptation of quick, simple and courteous service was too tempting.  If my experience is any indication you better make sure your loan loss reserves are in good shape.

Don’t get me wrong. This is not some starry-eyed infatuation. I know, for example, that as innovative as the Transportation network model is, credit union compliance people continue to be mindful of some of the unique issues raised by the service.  Just yesterday, our compliance Department fielded an interesting question: If insurance companies aren’t obligated to provide additional insurance for members who join Uber or Lyft how can a credit union protect its car loan collateral?

Here are some key points to keep in mind. The law authorizing TNC networks makes Crystal clear that insurance companies don’t have to provide insurance for persons acting as TNC drivers (N.Y. Veh. & Traf. Law § 1695 (McKinney).Does this mean that your collateral is at risk? No. The Association successfully argued that lenders need protection. Remember, car loans are getting to be longer and longer.

The law authorized insurers to offer additional coverage and allowed TNCs to have group plans. The insurance is available. Both the TNC’s and the drivers must ensure that it  is in place before logging onto the App. The driver I talked to this morning said that he was covered under a plan provided by the company. As an added protection TNCs are obligated to put potential drivers on notice that they need additional insurance (N.Y. Veh. & Traf. Law § 1694 (McKinney).

Keeping in mind that this blog is not a substitute for consulting with your legal counsel or your insurance provider, even with the legal protections NY has put in place I have suggested that you should put additional language into your car loan agreements stipulating that providing TNC services without adequate insurance constitutes a loan default.

If the system works as intended this language won’t be necessary but there are always glitches. At the very least it will put your member on notice that they can’t buy a car today and start offering rides tomorrow.

On that note enjoy your weekend. And remember, if you enjoy yourself a bit too much a ride home is just a couple of taps away.

 

July 14, 2017 at 9:49 am Leave a comment

Household Debt Hits New Record

Far be it from me to tell anyone how to do their job, but if I was involved in lending for a living I would certainly take a close look at the New York Fed’s quarterly snapshot of household debt released yesterday. Its either (a) an infliction point signaling that sustained higher growth has taken hold; (b) a high point which masks some disturbing trends; or (c) something in-between.

First, the “good” news. The American consumer is back baby! The New York Fed tells us that household debt achieved a new peak in the first quarter of 2017, rising by $149 billion to $12.73 trillion—$50 billion above the previous peak reached in the third quarter of 2008. Balances climbed in several areas: mortgages (1.7 percent); auto loans (0.9 percent); and student loans (2.6 percent). Considering that consumer spending accounts for at least 70% of the nation’s economic growth all this spending is good news. Despite the growth, credit card balances fell 1.9 percent this quarter.

Secondly, there is evidence that we have learned our lesson According to this accompanying research the country still has less mortgage debt than it did a decade ago and lenders have actually followed the credit union lead in lending to more credit worthy borrowers.

So why am I a little skeptical? It doesn’t feel like it but by historical standards we are at the back end of the growth cycle. As none other than Ben Bernanke pointed out in a speech yesterday that from a historical standpoint a recession is due in the next two to four years.   In addition much of the current economic hype is predicated on a “Trump bump” but don’t expect major Reg Relief let alone tax reform until Robert Mueller completes his Russia investigation.

Supreme Court Makes Important Bankruptcy Rule

One of the CFPB’s real pet peeves has to do with debt collectors who continue to seek repayment of debts even after the statute of limitation for their collection has expired. In addition, inquiring minds want to know if it is legal for debt collectors to submit proofs of claim in Chapter 13 bankruptcy proceedings for the repayment of such debts. Earlier this week the Supreme Court provided guidance on this issue. It ruled that debt collectors do not engage in an unfair and deceptive practice, under the Fair Debt Collections Practices Act, by submitting claims for stale debts.

MIDLAND FUNDING, LLC v. JOHNSON dealt with a creditor who submitted a proof of claim for repayment of a 10 year old credit card debt. The debtor argued that this was an unfair and deceptive practice since the debt was not collectible. Alabama has a six year statute of limitations. The Court explained that the parties to a Chapter 13 bankruptcy are sophisticated. Most importantly the bankruptcy is responsible for reviewing the validity of all claims. The court effectively held that, while a trustee has every right to reject a stale loan there is nothing to keep the debt collector from seeing if he can slip one by the goalie.

Baseball Hot Dogs, Apple Pie and Uber

Nothing says summer like hailing a ride from Uber or Lyft, or at least that is what some New York lawmakers think. They recently proposed legislation to push up the effective date of New York’s law authorizing ride hailing services from July 9th to July 3rd, just in time to get a cheap ride home from the beer infused family Fourth of July party.

May 18, 2017 at 9:18 am Leave a comment

How to maximize your TNC protection

As readers of this blog know, the Legislature authorized Transportation Network Companies such as Uber and Lyft to start operating in New York State locales beyond NYC as part of the recently approved budget. Thanks in no small part to the efforts of the Association, the legislation includes some important protections for credit unions. However, there are still additional steps that I would take to maximize your credit union’s collateral protection, particularly as ridesharing is taking hold at the same time that the 72 month car loan has become common place.  Remember this is just one person’s advice and not a substitute for running this by your own counsel.

Ever since plans were laid for TNC networks to come to New York, insurance has always been a big issue. Remember that your typical car insurance policy contains a livery exception, meaning that a driver isn’t insured for accidents that happen while logged into the network to pick up passengers. The legislation addresses this issue by mandating that TNC drivers applying to join a network be informed of the need for additional insurance and mandating that the TNC’s make sure that these drivers are, in fact, properly insured.

While these are important protections, in talking to credit unions I am suggesting that there are still additional steps they should consider taking. Most importantly, I would amend your car loan language with a provision informing the borrower that the use of a vehicle being financed in a TNC without the insurance mandated under NYS Law shall constitute a breach of the lending agreement and may result in the entire amount of the loan being due immediately.

What does this accomplish that New York State’s Law cannot? For one thing it is more expansive than the protections afforded by the law since its prohibitions would apply even to members who are not currently logged in to a TNC Network but who are TNC drivers.This is important because if you have reason to believe that a member is operating as a TNC driver you can call the loan without waiting for an accident. It also provides an additional notice to your members that special TNC insurance is required. Finally, it provides you some level of protection in the event that your member somehow gets to join a network without getting adequate insurance. But under this later scenario I would consider going after the TNC Company for your losses. New York’s TNC legislation takes effect in approximately three months.

By the way, since we are on the subject of TNC’s, I had the pleasure of dropping off my two daughters at Kennedy Airport Monday morning for a flight down to North Carolina. For those of you, who haven’t had the “pleasure” of going to Kennedy, think of those chaotic scenes in third world capitals where a mass of humanity ignores all laws. The one thing noticeably absent from this scene was anything more than a handful of traditional yellow cabs. If I had taken this trip just 5 years ago they would have been everywhere. With the caveat that I have always been accused of being a skeptic when it comes to the future of the medallion industry, all you have to do is go to NYC to realize that the medallion industry as we know it is destined to become an exhibit in the Smithsonian. I am also happy to report that my two kids didn’t witness paying passengers being dragged off the plane and assaulted.

On that upbeat note enjoy your day!

 

 

April 20, 2017 at 9:21 am 1 comment

Uber Model Alive and Well after Settlement

Late last week, Uber announced it had settled two class action lawsuits brought by drivers claiming, among other things, that the ride sharing service was violating the labor law by classifying drivers as independent contractors.  For those of you with either a direct or indirect stake in the taxi industry through the financing of medallions, the settlement of these lawsuits is another blow.  Here’s why.

The Uber model is based fundamentally on the assumption that the company is nothing more or less than the provider of an App that enables individuals in need of a ride with those willing to provide one.  In Uber’s view of the world, ride sharing allows the mom on the way to the store to make a few extra dollars by taking Sally down the street along for the ride.  Under this best case scenario, our mom is an independent contractor picking and choosing what rides to take as she makes her way through her busy day.

To critics of Uber and other ride sharing services, the mom is not so much an independent contractor as a poorly paid employee.  For instance, under Uber’s model drivers who consistently turn down rides can be dropped from the service and each ride comes with a suggested price and gratuity. 

If the critics are correct, the Uber model is illegal and the traditional taxi medallion model is alive and well.  This is why the settlement is such a big deal.  Uber agreed to pay drivers up to $100 million and end its practice of automatically removing drivers who refuse too many rides.  At the same time, the drivers will continue to be classified as independent contractors in Massachusetts and California. 

Uber is by no means out of the woods.  Similar lawsuits are still pending.  And just last week California’s Commissioner of Labor ruled that an Uber driver was an employee rather than an independent contractor.  But this ruling is being appeal and is not binding on anyone beyond the employee involved. 

While the settlement of the Massachusetts and California cases leaves the independent contractor issue undecided, in my ever so humble opinion, anyone looking for the courts to provide a silver bullet, at least in the near future, when it comes to regulation of ride sharing businesses is likely to be disappointed.  For those of you who feel that the system should be better regulated in order to put medallion taxi and ridesharing service on an equal footing, the places to look for relief are State legislatures.

April 25, 2016 at 8:29 am 2 comments

What Donald Rumsfeld Can Teach Us About Medallion Loans

In the immortal words of Donald Rumsfeld, “[t]here are things we know that we know. There are known unknowns. That is to say there are things that we now know we don’t know. But there are also unknown unknowns. There are things we do not know we don’t know.” With an estimated 122 credit unions holding taxi medallion participations and one taxi credit union in conservatorship, it’s clear that the condition of the medallion industry has emerged as one of the key issues facing the credit union industry. The problem is that there are many known unknowns.

For example, what we know for sure is that the App-based model of public transportation poses a fundamental challenge to the way taxi service has been provided in New York and other cities for more than 70 years. What we don’t know is precisely what services App-based services can legally provide. Most importantly, whereas yellow cabs still have the exclusive right to pick up street hails in the busiest     part of the City, the City’s Taxi and Limousine Commission has authorized the use of “electronic hails” which are basically rides arranged using an App-based network such as Uber. Obviously, the more electronic hails are authorized the less valuable medallions become.

Last month, a NY state supreme court judge rejected arguments that the Taxi and Limousine Commission acted illegally by permitting Uber and similar Transportation Network companies to pick up “street hails.” (Glyca Trans. v. NYC). This was a big blow to the industry, but the case took an intriguing twist last week. Crain’s is reporting that the judge has decided to reconsider his decision in light of a recent federal court ruling.

The decision causing the judge to reopen arguments is Illinois Transp. Trade Ass’n v. City of Chicago, No. 14 CV 827, 2015 WL 5610880, Sept. 22, 2015). The case is similar to New York’s, in that the judge rejected claims that Uber and its ilk violated state law. However, the judge went on to rule that the Equal Protection rights of medallion taxis under the U.S. Constitution were being violated.

As a very general rule, laws have to be rationally related to the goal they are trying to achieve and in this case the court ruled that this very low threshold wasn’t satisfied.

Here is the key provision:

“The City argues that TNPs are not similarly situated to taxis because they cannot be hailed on the street, rides are prearranged, there is a pre-existing contractual relationship between the TNP and the consumer, the driver is not unknown to the consumer, and fares are not set by the City. Even a cursory examination of these purported differences demonstrates that these are not material differences justifying disparate treatment of taxis and TNPs. First, with respect to the manner of obtaining a ride, this Court sees no material difference between raising your arm to hail a cab on a street corner and putting your location in an app with a request for immediate transport. Similarly, rides can be prearranged in taxis as well as TNPs. The pre-existing contractual relationship is also an illusory difference since the taxi passenger is immediately bound by a contract of adhesion upon entering the taxi.”

While the decision of an Illinois Federal District Court is not directly binding on a New York State judge, the New York decision was based primarily on an analysis of the administrative authority of the City’s Taxi and Limousine Commission as opposed to a consideration of the Equal Protection Clause.

The ultimate question for credit unions, of course, is what impact a decision in the industry’s favor will have on the value of medallions? That is another question we might not know the answer to for several months.

FBI Urges Caution on EMV Use

The shift of liability from card issuers with EMV technology to store merchants that can’t process in-store EMV transactions is r being greeted with slightly more enthusiasm than Volkswagen sponsoring a clean air rally.

On October 9, the FBI’s San Diego Division issued a press release stating, in part, “While EMV cards offer enhanced security, the FBI is warning law enforcement, merchants, and the general public that no one technology eliminates fraud and cyber-criminals will continue to look for opportunities to steal payment information.”  In addition, merchants, who had years to shift to EMV technology, are making a virtue of the fact that they have been so unwilling to adopt EMV technology. In addition, since the release stresses the importance of PIN-based technology, it can easily be interpreted as supporting a central contention of merchants that EMV should have been coupled with mandatory PIN-based transactions. Once again, merchants are winning the PR battle.

Here is the FBI press release:

https://www.fbi.gov/sandiego/press-releases/2015/fbi-warns-that-new-credit-cards-may-be-vulnerable-to-exploitation-by-fraudsters

October 13, 2015 at 10:42 am Leave a comment

CUS Placed In Conservatorship

Friday was a sad day for New York credit unions. In case you didn’t hear the news, two iconic credit unions, Montauk Credit Union and Bethex Federal credit union were placed in conservatorship and taken over by regulators.

Montauk was chartered in 1922. It has $178.5 million in assets. It specializes in making loans to finance the purchase of taxi medallions in New York and other cities. Since the late 1930’s, when New York City first began regulating taxis, the Medallion industry, distinguished by its yellow cabs and exclusive right to pick up street hails, had been among the most stable sources of credit union loan growth. In addition, the value of medallions spiked over the last decade reflecting increased tourism in the City and a search for higher yields. In 2013 they sold for as much as $1.3 million. But the emergence of Uber, which provides drivers with a low-cost means of entry into the taxi industry, has sent the prices of medallions tumbling. A recent decision upholding the right of Uber and other such services to pick up street hails so long as an App is used further hurts the industry.

On Friday I was talking to a credit union CEO who has participation interests in NYC taxi medallion loans. He has given these loans increased scrutiny in recent months and adjusted his ALLL to account for potential loses.

Bethex Federal Credit Union in the Bronx, N.Y has $12.9 million in assets was started in 1970. Its CEO, Joy Cousminer, is a leading advocate for small credit unions who has been honored by the NYS Senate for her work in the Bronx Community.

In June Bethex was one of the credit unions highlighted in a WSJ article reporting that 50 credit unions were identified in a confidential report from FINCEN for their increased vulnerability to potential money laundering. Here is some additional information.

http://www.ncua.gov/News/Pages/NW20150918Montauk.aspx

http://www.ncua.gov/News/Pages/NW20150918Bethex-Federal-Credit-Union.aspx

 

Pressure To Settle MBS Lawsuits

Just how much money credit unions will get to offset their special assessments for losses stemming from the purchase of Mortgage Backed Securities (MBS) by the corporates may become clearer in the coming weeks. The Law360 blog is reporting that   “ A New York federal judge on Friday gave Morgan Stanley & Co. Inc., Goldman Sachs & Co. and other big banks six weeks to meet face to face with the National Credit Union Administration and try to broker resolutions to lawsuits that claim the banks’ toxic mortgage-backed securities helped ruin multiple credit unions.”   Stay tuned.

 

 

 

September 21, 2015 at 9:17 am Leave a comment

When It Comes to Car-Sharing If You Can’t Beat ‘Em Join ‘Em

Conventional wisdom tells us that if the motto of previous generations was that “good fences make good neighbors” the motto for the millennial generation is “share and share alike.”

Look around you and everything from bedrooms to clothes to cars is being made available by your neighbor for rent. Personally, it gives me the creeps, but my car is rarely neat enough to let anyone but my closest friends and family ride in it.

Will this trend impact lenders? I have written posts about how ride-sharing services like Uber pose risks for credit unions because, as the law currently stands, a car being used as a taxi isn’t insured in the event of an accident. Good luck getting that car loan paid back.

But there might be a way to not only guard against the sharing trend, but profit from it. Car-sharing poses insurance risks similar to ride sharing. An App is used to connect people willing to loan their car to people who need a quick rental. It’s taking off in cities — where it’s not uncommon to find residents who don’t own a car but who may need one in a pinch. Ford has started a pilot program with which it will offer a ride sharing App to people who need to rent a car for as little as an hour. It is available in Portland, D.C., San Francisco and Chicago. It’s targeting car buyers who obtained Ford Financing.

(http://www.americanbanker.com/news/consumer-finance/fords-car-sharing-experiment-and-the-future-of-auto-finance-1075238-1.html)

Here is the part that I find so clever. According to the American Banker, the project will enable Ford to examine the costs and benefits of car sharing and “augurs a future-not too far off-in which auto lenders take into account the revenue a vehicle’s car owner can generate by renting a vehicle.” In other words, my concern is that your collateral is being put at risk; but lending models are already being developed that may enable your credit union to make more loans to more members precisely because they participate in the sharing economy.

For the record, I am not convinced that the sharing economy reflects a fundamental shift in consumer habits. For my money, it simply reflects how desperate people are to squeeze every dollar they can out of this economy. I don’t care if you are 25 or 50, once you have a secure, well-paying job renting out your car to a total stranger looses its appeal. But, for now the sharing economy is alive and well and there are ways to capitalize on this trend.

Has a deal Really Been Reached With Greece?

If you have turned on the news this morning or read a paper you have heard that Europe had reached a deal to keep Greece in the group of countries that use the Euro. These headlines are entirely premature. By Wednesday, the Greek parliament must agree to a long list of austerity measures that sound just as severe as those rejected by the Greek voters a little more than a week ago. Maybe there is more in this for the Greeks than is being reported but, if not, we may very well be seeing the last act before Greece drops the Euro and jilts the world economy.

July 13, 2015 at 10:11 am 1 comment

Why Ride-Sharing Impacts Your Credit Union

Ride sharing is about to have a bigger impact on your credit union than you may have thought possible.

Yesterday, the Attorney General and the Department of Financial Services reached an agreement with the Lyft Ridesharing Service that will allow it to start plying its trade in Buffalo and Rochester. Since July 2014, the AG and the DFS blocked the company from operating in Buffalo contending that it was violating the Insurance Law by not requiring people who signed up as drivers on the service to comply with basic insurance requirements. The agreement announced yesterday addresses some of the insurance concerns but could still leave credit unions holding the bag in the event one of your members gets into an accident while providing a Lyft ride.

Lyft is a ride sharing service that competes against Uber. The service matches people who need a ride with willing drivers using an App. The two parties negotiate the fare. Here’s where it gets interesting. Your typical car insurance has a livery exception, meaning that if one of your members gets into an accident providing ride-sharing services they won’t get coverage. Needless to say, this makes your collateral worthless.

The agreement reached yesterday specifies coverage for three distinct periods: the time during which the Lyft driver is waiting for pick-up requests; the period between when a driver has accepted a request and the driver is going to pick up the passenger; and the period running from when the driver begins transporting the passenger to when he drops them off. While this is a step in the right direction, drivers are still not required to obtain comprehensive collision insurance that would protect the vehicle against property damage. In other words, the agreement doesn’t go far enough to protect lenders.

The Legislature had been considering passing legislation to address the issue, but with time running out on an already past deadline Legislative session, movement in this area is unlikely. The agreement raises several questions for credit unions to consider. Most importantly, while the agreement just applies to Buffalo, it may provide a template for ride sharing services to start operating in other parts of the state. Uber is already in operation in New York City under an agreement with that city’s Taxi and Limousine Commission.

Is there a way for credit unions to protect themselves? You may be able to mandate that members get special comprehensive collision insurance if they decide to become a ride sharing driver. The problem is, that you won’t know if they have honored this requirement until they get into an accident.

June 19, 2015 at 8:49 am 1 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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