In an April 16 letter to Senators Sherrod Brown (D-OH) and Elizabeth Warren (D-MA), four financial trade groups emphasized that the industry’s “highest priority is to ensure that economic impact payments (EIPs) reach Americans’ wallets quickly.”
In response to concerns lawmakers raised about the garnishment of these payments, the groups noted that more clarity is needed to ensure that EIPs are considered as benefits subject to the federal exemption from garnishment. Without this legal clarity, “depository institutions have no discretion and are obligated to comply with applicable state laws and court-ordered garnishments,” the groups noted.
The groups underscored the importance of maximizing electronic payments. This will enhance the ability of banks and credit unions to identify and protect these payments.
The letter was signed by American Bankers Association, Bank Policy Institute, Consumer Bankers Association, and Credit Union National Association.
Read the letter.
Showing posts with label Legal. Show all posts
Showing posts with label Legal. Show all posts
Monday, April 20, 2020
Tuesday, March 17, 2020
ABA Appeals Credit Union Field of Membership Case to Supreme Court
The American Bankers Association (ABA) last week petitioned the U.S. Supreme Court to review a lower court ruling in the association’s challenge of the National Credit Union Administration’s 2016 field of membership rule.
In August, a three-judge panel of the D.C. Circuit Court of Appeals upheld much of rule while remanding a portion related to redlining concerns. The court will grant the petition only if four of the nine justices vote to accept the case.
ABA argued that the three-judge panel’s decision “stretches Chevron deference past the breaking point” in ruling that NCUA could define a “local community” as a combined statistical area inhabited by up to 2.5 million people or define an entire state as a “rural district.” Under the Supreme Court’s Chevron doctrine, courts defer to administrative agencies’ interpretation of statutes they administer where Congress has not specifically addressed the question at issue.
Chevron cannot be applied to the statute granting NCUA authority to define terms like “local community” and “rural district” in its regulations in such a way that neglects the “reasonableness” test of the agency interpretation, ABA argued, calling for the Supreme Court to hear the case and “make clear that an express delegation of definitional authority does not authorize an agency to interpret a term in ways that exceed its ordinary range of permissible meanings.”
Read the petition.
In August, a three-judge panel of the D.C. Circuit Court of Appeals upheld much of rule while remanding a portion related to redlining concerns. The court will grant the petition only if four of the nine justices vote to accept the case.
ABA argued that the three-judge panel’s decision “stretches Chevron deference past the breaking point” in ruling that NCUA could define a “local community” as a combined statistical area inhabited by up to 2.5 million people or define an entire state as a “rural district.” Under the Supreme Court’s Chevron doctrine, courts defer to administrative agencies’ interpretation of statutes they administer where Congress has not specifically addressed the question at issue.
Chevron cannot be applied to the statute granting NCUA authority to define terms like “local community” and “rural district” in its regulations in such a way that neglects the “reasonableness” test of the agency interpretation, ABA argued, calling for the Supreme Court to hear the case and “make clear that an express delegation of definitional authority does not authorize an agency to interpret a term in ways that exceed its ordinary range of permissible meanings.”
Read the petition.
Tuesday, March 10, 2020
Joint Trades Letter Urges FCC Action to Prevent Erroneously Blocked Calls
A broad coalition of trade associations, including bank and credit union trade groups, wrote the Federal Communications Commission (FCC) on March 4 asking the FCC to protect outbound calls placed by legitimate businesses from telephone companies’ call-blocking programs.
To ensure legitimate calls are not blocked, the FCC should require telephone companies to provide notification of mislabeling and blocking and to provide a robust challenge mechanism that permits a legitimate business whose calls are being blocked to have the block removed promptly, the groups said. They also recommended that telephone companies be required to share information with each other on phone numbers that have been mislabeled or mistakenly blocked and also report that information to the FCC.
The trade groups were American Association of Healthcare Administrative Management, American Bankers Association, American Financial Services Association, ACA International, Consumer Bankers Association, Credit Union National Association, Edison Electric Institute, Mortgage Bankers Association, National Association of Federally Insured Credit Unions, and National Council of Higher Education Resources.
Read the letter.
To ensure legitimate calls are not blocked, the FCC should require telephone companies to provide notification of mislabeling and blocking and to provide a robust challenge mechanism that permits a legitimate business whose calls are being blocked to have the block removed promptly, the groups said. They also recommended that telephone companies be required to share information with each other on phone numbers that have been mislabeled or mistakenly blocked and also report that information to the FCC.
The trade groups were American Association of Healthcare Administrative Management, American Bankers Association, American Financial Services Association, ACA International, Consumer Bankers Association, Credit Union National Association, Edison Electric Institute, Mortgage Bankers Association, National Association of Federally Insured Credit Unions, and National Council of Higher Education Resources.
Read the letter.
Sunday, March 8, 2020
Settlement Agreement Ends Dispute on Bank Selling to CU
On March 6, First American Bank and the Iowa Division of Banking entered into a settlement agreement allowing the bank to sell its Iowa assets and branches to a credit union.
Both parties decided it was in the best interest of all, especially First American Bank's customers, to settle this dispute. Both parties recognized that litigation could take months, if not years, to resolve the issue to the detriment of First American Bank's customers.
As background, GreenState Credit Union (North Liberty, IA) completed its acquisition of First American Bank (Fort Dodge, IA) on February 28.
However, the Iowa Division of Banking on March 2 blocked the sale of First American Bank’s remaining Iowa-based assets and branches to GreenState Credit Union. The banking regulator also directed the bank and the credit union to maintain separate records until the matter is resolved.
But First American Bank asserted that it did not need the prior approval of the Superintendent before the transaction closed and disputed the Superintendent's decision to deny the bank's application and effectively block the sale.
As part of the settlement, a state chartered bank must obtain the approval of the Superintendent before voluntarily ceasing the business of banking.
The superintendent understands that First American Bank was confused about whether it needed the approval of the Superintendent before closing the deal with GreenState CU. Part of the confusion arose from First American Bank in 2019 selling its Florida branches and assets to MID-FLORIDA Credit Union without the prior approval of the Iowa Division of Banking. But the Division of Banking did not object to the sale, because the bank still had significant assets and deposits and was still actively engaged in the business of banking.
Due to the unique circumstances of this transaction, the Superintendent agreed to approve First American Bank's application. But the approval of this application should not be construed as setting precedent where an Iowa state-chartered bank can sell substantially all its assets and liabilities to a credit union.
First American Bank agreed to pay $110,700 to cover cost incurred by the Division of Banking associated with the application.
First American Bank does not necessarily agree with the Superintendent's position on the legal issues addressed in the settlement agreement. The settlement agreement should not be interpreted as an admission of wrongdoing by the bank. Both parties have agreed to disagree regarding their respective positions.
Both parties decided it was in the best interest of all, especially First American Bank's customers, to settle this dispute. Both parties recognized that litigation could take months, if not years, to resolve the issue to the detriment of First American Bank's customers.
As background, GreenState Credit Union (North Liberty, IA) completed its acquisition of First American Bank (Fort Dodge, IA) on February 28.
However, the Iowa Division of Banking on March 2 blocked the sale of First American Bank’s remaining Iowa-based assets and branches to GreenState Credit Union. The banking regulator also directed the bank and the credit union to maintain separate records until the matter is resolved.
But First American Bank asserted that it did not need the prior approval of the Superintendent before the transaction closed and disputed the Superintendent's decision to deny the bank's application and effectively block the sale.
As part of the settlement, a state chartered bank must obtain the approval of the Superintendent before voluntarily ceasing the business of banking.
The superintendent understands that First American Bank was confused about whether it needed the approval of the Superintendent before closing the deal with GreenState CU. Part of the confusion arose from First American Bank in 2019 selling its Florida branches and assets to MID-FLORIDA Credit Union without the prior approval of the Iowa Division of Banking. But the Division of Banking did not object to the sale, because the bank still had significant assets and deposits and was still actively engaged in the business of banking.
Due to the unique circumstances of this transaction, the Superintendent agreed to approve First American Bank's application. But the approval of this application should not be construed as setting precedent where an Iowa state-chartered bank can sell substantially all its assets and liabilities to a credit union.
First American Bank agreed to pay $110,700 to cover cost incurred by the Division of Banking associated with the application.
First American Bank does not necessarily agree with the Superintendent's position on the legal issues addressed in the settlement agreement. The settlement agreement should not be interpreted as an admission of wrongdoing by the bank. Both parties have agreed to disagree regarding their respective positions.
Thursday, February 13, 2020
Labor Union Files Complaint Against Municipal Credit Union
A labor union has filed a complaint against Municipal Credit Union (New York, NY) with the National Labor Relations Board on January 16, 2020.
The Office & Professional Employees International Union, Local 153 alleged that Municipal Credit Union unilaterally repudiated or modified contracts of union members.
The labor union also accused the credit union of refusing to bargain or bargaining in bad faith.
The labor union represents 375 employees at Municipal Credit Union.
Municipal Credit Union was placed into conservatorship with the National Credit Union Administration on May 17, 2019.
Read more.
The Office & Professional Employees International Union, Local 153 alleged that Municipal Credit Union unilaterally repudiated or modified contracts of union members.
The labor union also accused the credit union of refusing to bargain or bargaining in bad faith.
The labor union represents 375 employees at Municipal Credit Union.
Municipal Credit Union was placed into conservatorship with the National Credit Union Administration on May 17, 2019.
Read more.
Wednesday, February 12, 2020
Trade Groups Urge Swift Action by FCC to Reform TCPA
The U.S. Chamber of Commerce and other industry trade groups, including bank and credit union trade groups, in a February 5 letter urged the Federal Communications Commission (FCC) to issue without delay a re-interpretation of a key term in the Telephone Consumer Protection Act (TCPA): the definition of an “automatic telephone dialing system (ATDS),” commonly known as an “autodialer.”
The FCC is considering issuing new TCPA rules in light of a federal appellate court’s decision in 2018 to strike down the FCC’s expansive definition of that statutory term.
The groups asserted that “consumers are harmed when they do not receive time-critical, non-telemarketing communications” from banks and other companies “because the business is discouraged from placing the call due to litigation risk.”
The groups also claim that ongoing uncertainty surrounding the definition of ATDS continues to fan the flames of abusive TCPA litigation.
Read the letter.
The FCC is considering issuing new TCPA rules in light of a federal appellate court’s decision in 2018 to strike down the FCC’s expansive definition of that statutory term.
The groups asserted that “consumers are harmed when they do not receive time-critical, non-telemarketing communications” from banks and other companies “because the business is discouraged from placing the call due to litigation risk.”
The groups also claim that ongoing uncertainty surrounding the definition of ATDS continues to fan the flames of abusive TCPA litigation.
Read the letter.
Sunday, January 19, 2020
Maloney Calls for NCUA To Immediately Stop Taxi Medallion Loan Foreclosures and Sales
Congresswoman Carolyn B. Maloney, Chairwoman of the Oversight and Reform Committee, on January 17 called on the National Credit Union Association (NCUA) to place an immediate moratorium on both taxi medallion loan foreclosures and sales of taxi medallion loans currently owned by the NCUA.
Earlier this month, it was reported that NCUA was seeking to sell approximately 3,500 taxi medallions loans from failed credit unions in its possession by the end of January.
The letter comes in light of a New York City Medallion Task Force proposal to provide as much as $500 million in debt relief to borrowers.
Representative Maloney wrote that any foreclosure or sales of taxi medallion loans would be both premature and harmful to the many borrowers who were innocent victims of fraudulent lending practices.
Maloney argued that if NCUA sells its portfolio of taxi medallion loans before the Medallion Task Force recommendations can be implemented, then much of this relief will never reach the borrowers.
Read more.
Earlier this month, it was reported that NCUA was seeking to sell approximately 3,500 taxi medallions loans from failed credit unions in its possession by the end of January.
The letter comes in light of a New York City Medallion Task Force proposal to provide as much as $500 million in debt relief to borrowers.
Representative Maloney wrote that any foreclosure or sales of taxi medallion loans would be both premature and harmful to the many borrowers who were innocent victims of fraudulent lending practices.
Maloney argued that if NCUA sells its portfolio of taxi medallion loans before the Medallion Task Force recommendations can be implemented, then much of this relief will never reach the borrowers.
Read more.
Friday, January 17, 2020
Colorado State Regulator Blocks the Sale of Bank to CU
The Colorado State Banking Board on January 16 denied the sale of a Colorado community bank to one of the state’s largest credit unions. The board found that the deal—in which Boulder, Colorado-based Elevations Credit Union would purchase the assets of Cache Bank and Trust, headquartered in Greeley—did not meet the requirements of state law.
According to the American Banker, only one of the seven board members voted in favor of the acquisition.
In a letter to the state regulator earlier this week, the Colorado Bankers Association cited a state statute regarding the sale of assets between state-chartered banks, which essentially establishes “that a bank may only sell the bulk of its assets to another bank.”
Read the American Banker story (subscription required).
According to the American Banker, only one of the seven board members voted in favor of the acquisition.
In a letter to the state regulator earlier this week, the Colorado Bankers Association cited a state statute regarding the sale of assets between state-chartered banks, which essentially establishes “that a bank may only sell the bulk of its assets to another bank.”
Read the American Banker story (subscription required).
Wednesday, January 15, 2020
Colorado Bankers Association Objects to CU Acquisition of Bank
The Colorado Bankers Association (CBA) on January 13 wrote State Bank Commissioner Ken Boldt objecting to Elevations Credit Union (Boulder, CO) proposed acquisition of Cache Bank & Trust (Greeley, CO).
This is the first announced acquisition of a bank by a credit union in Colorado.
The CBA cited existing statutes, which prohibit the acquisition as state laws hold that banks can only sell a substantial portion of their assets to other banks, with a similar prohibition in place for credit unions.
The CBA contended that the state banking board may be using the state's wildcard statute to authorize this transaction, which states that the banking board may allow a state chartered bank to conduct any banking activity a national bank is permitted to, so long as that activity is not legally prohibited.
However, the CBA wrote that the wildcard statute is not permissible, because liquidation is not a banking activity and the bank won't be engaging in it.
CBA stated that the proper forum for this change in policy is the Legislature, not by regulatory interpretation.
A hearing regarding this transaction is scheduled for January 16.
Read the letter.
This is the first announced acquisition of a bank by a credit union in Colorado.
The CBA cited existing statutes, which prohibit the acquisition as state laws hold that banks can only sell a substantial portion of their assets to other banks, with a similar prohibition in place for credit unions.
The CBA contended that the state banking board may be using the state's wildcard statute to authorize this transaction, which states that the banking board may allow a state chartered bank to conduct any banking activity a national bank is permitted to, so long as that activity is not legally prohibited.
However, the CBA wrote that the wildcard statute is not permissible, because liquidation is not a banking activity and the bank won't be engaging in it.
CBA stated that the proper forum for this change in policy is the Legislature, not by regulatory interpretation.
A hearing regarding this transaction is scheduled for January 16.
Read the letter.
Tuesday, December 3, 2019
Ent CU Settles Overdraft Fee Class Action Lawsuit
Ent Credit Union (Colorado Springs, CO) has settled an overdraft fee class action lawsuit, according to The Colorado Springs Business Journal.
The terms of the agreement remain confidential; however, the credit union stated that all impacted members will receive refunds on all identifiable overdraft fees and insufficient funds fees (NSF fees) raised in the lawsuit.
The credit union stated that the excess overdraft fees and NSF fees were primarily caused by software issues that were unknown to the credit union until the lawsuit was filed.
Read more.
The terms of the agreement remain confidential; however, the credit union stated that all impacted members will receive refunds on all identifiable overdraft fees and insufficient funds fees (NSF fees) raised in the lawsuit.
The credit union stated that the excess overdraft fees and NSF fees were primarily caused by software issues that were unknown to the credit union until the lawsuit was filed.
Read more.
Friday, October 25, 2019
NCUA Board Finalized Nonmember Shares Rule, Proposes FOM Rule Implementing Court Decision
The National Credit Union Administration Board finalized its rule expanding credit unions access to nonmember and public unit shares (deposits).
According to the final rule, a federal credit union may accept public unit and nonmember shares in an amount up to 50 percent of the credit union’s net amount of paid-in and unimpaired capital and surplus, less any public unit or nonmember shares, or $3 million, whichever is greater.
The original proposal had eliminated the current alternative limit of $3 million. The Board, however, thought the elimination of the current alternative limit of $3 million would adversely impact some small credit unions.
In addition, the Board is proposing changes to its community charter regulations to align it with the August 2019 opinion issued by the District of Columbia Circuit Court of Appeals.
A federal credit union would be allowed to designate a combined statistical area or an individual contiguous portion of such an area, as a well-defined local community, provided the chosen area has a population of 2.5 million or less.
The Board added a provision to address concerns raised by the Appeals Court about potential discrimination in the field-of-membership selection process in combined statistical areas and core-based statistical areas.
Read the press release.
According to the final rule, a federal credit union may accept public unit and nonmember shares in an amount up to 50 percent of the credit union’s net amount of paid-in and unimpaired capital and surplus, less any public unit or nonmember shares, or $3 million, whichever is greater.
The original proposal had eliminated the current alternative limit of $3 million. The Board, however, thought the elimination of the current alternative limit of $3 million would adversely impact some small credit unions.
In addition, the Board is proposing changes to its community charter regulations to align it with the August 2019 opinion issued by the District of Columbia Circuit Court of Appeals.
A federal credit union would be allowed to designate a combined statistical area or an individual contiguous portion of such an area, as a well-defined local community, provided the chosen area has a population of 2.5 million or less.
The Board added a provision to address concerns raised by the Appeals Court about potential discrimination in the field-of-membership selection process in combined statistical areas and core-based statistical areas.
Read the press release.
Tuesday, October 15, 2019
Unsealed Complaint: CU Board Members Incurred Significant Expenses
An unsealed complaint states that multiple Board members at Municipal Credit Union (New York, NY), including Sylvia Ash, regularly incurred significant expenses each year paid by the credit union.
These expenses included conferences at foreign destinations, food and drink, and donations to charitable organizations of their choice.
The complaint states that Ash between 2012 and 2016 received annually tens of thousands of dollars in reimbursements and other benefits from the credit union.
Ash, who is charged with obstructing a Federal probe of Kam Wong the former CEO of Municipal CU, served on Municipal CU's Board from 2008 until she resigned on about August 15, 2016. From about May 2015 until her resignation, Ash was the Chair of the credit union's Board.
Kam Wong on December 2, 2018 pled guilty to embezzlement and impeding a criminal investigation into the embezzlement.
Pages 7 and 8 of the complaint outlined the benefits and gifts received by Ash.
For example, in 2015 Municipal Credit Union spent approximately $63,408 for the benefit of or at the direction of Ash. These expenses included airfare and hotels at multiple conferences for her and a guest in Cancun, Greek Isles, and San Juan. The credit union also paid for tickets to sporting events for Ash. in addition, Municipal Credit Union paid her phone and cable bills.
Even after she left the credit union Board, Ash continued to have her expenses paid by the credit union.
In October 2016, she attended a credit union conference in Las Vegas. The credit union paid her and a guest's expenses including 3 tickets to a Brittany Spear's concert.
In June 2017, Ash was a guest of another credit union Board member for a conference in Cuba of the Caribbean Confederation of Credit Unions. Her expenses were picked up by the credit union.
While Ash and her fellow board members were not paid, they were handsomely rewarded with significant in-kind benefits.
This is probably not an isolated instance. Credit union regulators need to examine the corporate governance practices of credit unions to ensure that credit union officials are not incurring excessive expenses.
Read the complaint.
These expenses included conferences at foreign destinations, food and drink, and donations to charitable organizations of their choice.
The complaint states that Ash between 2012 and 2016 received annually tens of thousands of dollars in reimbursements and other benefits from the credit union.
Ash, who is charged with obstructing a Federal probe of Kam Wong the former CEO of Municipal CU, served on Municipal CU's Board from 2008 until she resigned on about August 15, 2016. From about May 2015 until her resignation, Ash was the Chair of the credit union's Board.
Kam Wong on December 2, 2018 pled guilty to embezzlement and impeding a criminal investigation into the embezzlement.
Pages 7 and 8 of the complaint outlined the benefits and gifts received by Ash.
For example, in 2015 Municipal Credit Union spent approximately $63,408 for the benefit of or at the direction of Ash. These expenses included airfare and hotels at multiple conferences for her and a guest in Cancun, Greek Isles, and San Juan. The credit union also paid for tickets to sporting events for Ash. in addition, Municipal Credit Union paid her phone and cable bills.
Even after she left the credit union Board, Ash continued to have her expenses paid by the credit union.
In October 2016, she attended a credit union conference in Las Vegas. The credit union paid her and a guest's expenses including 3 tickets to a Brittany Spear's concert.
In June 2017, Ash was a guest of another credit union Board member for a conference in Cuba of the Caribbean Confederation of Credit Unions. Her expenses were picked up by the credit union.
While Ash and her fellow board members were not paid, they were handsomely rewarded with significant in-kind benefits.
This is probably not an isolated instance. Credit union regulators need to examine the corporate governance practices of credit unions to ensure that credit union officials are not incurring excessive expenses.
Read the complaint.
Saturday, October 12, 2019
Former Officials at Municipal CU Charged by Federal Law Enforcement
Two former officials at Municipal Credit Union (New York, NY) were charged by Federal authorities for obstruction of justice and financial fraud.
Sylvia Ash, presiding judge of the Kings County Supreme Court, Commercial Division, and former chair of the board of directors of Municipal Credit Union (MCU), was charged in Manhattan federal court with conspiracy to obstruct justice and obstruction of justice, arising from a scheme to seek to influence and impede an ongoing federal investigation into fraud and corruption at MCU associated with former CEO Kam Wong. Ash made false and misleading statements, as well as she deleted and concealed relevant text messages.
Joseph Guagliardo, a/k/a “Joseph Gagliardo,” a former New York City Police Department Officer and former member of MCU’s supervisory committee, was charged separately with embezzlement, fraud, and controlled substance offenses arising from abuse of his position as a member of the supervisory committee.
Municipal Credit Union is currently under conservatorship with the National Credit Union Administration.
The defendants are presumed innocent unless and until proven guilty.
Read the press release.
Sylvia Ash, presiding judge of the Kings County Supreme Court, Commercial Division, and former chair of the board of directors of Municipal Credit Union (MCU), was charged in Manhattan federal court with conspiracy to obstruct justice and obstruction of justice, arising from a scheme to seek to influence and impede an ongoing federal investigation into fraud and corruption at MCU associated with former CEO Kam Wong. Ash made false and misleading statements, as well as she deleted and concealed relevant text messages.
Joseph Guagliardo, a/k/a “Joseph Gagliardo,” a former New York City Police Department Officer and former member of MCU’s supervisory committee, was charged separately with embezzlement, fraud, and controlled substance offenses arising from abuse of his position as a member of the supervisory committee.
Municipal Credit Union is currently under conservatorship with the National Credit Union Administration.
The defendants are presumed innocent unless and until proven guilty.
Read the press release.
Monday, October 7, 2019
ABA Challenges Appellate Court Decision in FOM Case
The American Bankers Association (ABA) on October 4 filed a petition for the full D.C. Circuit Court of Appeals to review its decision in the association’s challenge the National Credit Union Administration’s 2016 field of membership (FOM) rule. In August, a three-judge panel of the court upheld much of rule while remanding a portion related to redlining concerns. The request for a rehearing by the full “en banc” panel of judges is the next step in the legal process
ABA argued that the three-judge panel’s decision “stretches Chevron deference beyond its limits” in ruling that NCUA could define a “local community” as a combined statistical area inhabited by up to 2.5 million people or define an entire state as a “rural district.” The panel concluded that when a statute directs an agency to define a term through regulation, this act suggests that Congress did not intend the terms to be applied according to their plain meaning, whereas Supreme Court precedent holds that an agency’s authority “go[es] no further than the ambiguity will fairly allow.”
“Rehearing en banc is warranted to realign this Court’s Chevron jurisprudence with that of the Supreme Court,” ABA explained. Under the Supreme Court’s Chevron doctrine, courts defer to administrative agencies’ interpretation of statutes they administer where Congress has not specifically addressed the question at issue. ABA also said the decision was incompatible with judicial review under the Administrative Procedure Act and thus warranted review.
ABA argued that the three-judge panel’s decision “stretches Chevron deference beyond its limits” in ruling that NCUA could define a “local community” as a combined statistical area inhabited by up to 2.5 million people or define an entire state as a “rural district.” The panel concluded that when a statute directs an agency to define a term through regulation, this act suggests that Congress did not intend the terms to be applied according to their plain meaning, whereas Supreme Court precedent holds that an agency’s authority “go[es] no further than the ambiguity will fairly allow.”
“Rehearing en banc is warranted to realign this Court’s Chevron jurisprudence with that of the Supreme Court,” ABA explained. Under the Supreme Court’s Chevron doctrine, courts defer to administrative agencies’ interpretation of statutes they administer where Congress has not specifically addressed the question at issue. ABA also said the decision was incompatible with judicial review under the Administrative Procedure Act and thus warranted review.
Tuesday, September 10, 2019
Federal Prosecutors Open Probe into New York City Taxi Medallion Lending
The New York Times is reporting that the United States Attorney’s Office for the Southern District of New York has opened an investigation into possible lending fraud in the New York City taxi industry.
Federal agents have started to interview cabdrivers, who took on massive amounts of debt to purchase taxi medallions and were not fluent in English.
The investigation appears to be focused on possible crimes including bank, wire or mail fraud.
Read the story.
Federal agents have started to interview cabdrivers, who took on massive amounts of debt to purchase taxi medallions and were not fluent in English.
The investigation appears to be focused on possible crimes including bank, wire or mail fraud.
Read the story.
Friday, August 30, 2019
New Haven County CU Enters into Consent Order, Former CEO Pleads Guilty to Bank Fraud
New Haven County Credit Union (North Haven, CT) has entered into a consent order on August 5, 2019 with the Connecticut Department of Banking regarding unsafe and unsound banking practices.
The consent order addressed numerous deficiencies at the $20 million credit union that need to be addressed.
The consent order paints a picture of weak board oversight of the credit union. The consent order mandated the active participation of the credit union board of directors in credit union affairs. This included at least a monthly meeting of the board and a minimum attendance requirement for board members of at least 75 percent of the meetings.
In addition, the consent order required that the credit union will retain qualified board members, as well as management and staff.
The credit union is required to put into place internal controls and ensure financial records are complete and accurate.
The credit union is expected to file timely and accurate Call Reports, including ensuring that delinquent loans are properly reported and Allowance for Loan and Lease Losses are adequately funded.
The consent order requires the credit union to develop a strategic plan covering at lease three years. The credit union board is also expected to develop written budget consistent with safe and sound banking practices.
The credit union will ensure that employees and Board members are provided with Bank Secrecy Act training and that there is a comprehensive review of the credit union's BSA program.
The consent order requires the credit union to establish a comprehensive Information Security Program.
In a related story, the former credit union Chief Executive Officer (CEO), James Farrell, pleaded guilty to bank fraud. Farrell was the CEO of the New Haven County Credit Union from approximately 1992 to June 2015 and was then retained by the credit union's board of directors to provide assistance to the new CEO until March 2016.
Between July 2011 and March 2016, Farrell defrauded the credit union by transferring funds from NHCCU’s general ledger account to the account held by The Rib House, a restaurant located in East Haven, Connecticut. Farrell provided financial and bookkeeping services to The Rib House from 2010 to 2016.
Read the order.
Read the Justice Department press release.
The consent order addressed numerous deficiencies at the $20 million credit union that need to be addressed.
The consent order paints a picture of weak board oversight of the credit union. The consent order mandated the active participation of the credit union board of directors in credit union affairs. This included at least a monthly meeting of the board and a minimum attendance requirement for board members of at least 75 percent of the meetings.
In addition, the consent order required that the credit union will retain qualified board members, as well as management and staff.
The credit union is required to put into place internal controls and ensure financial records are complete and accurate.
The credit union is expected to file timely and accurate Call Reports, including ensuring that delinquent loans are properly reported and Allowance for Loan and Lease Losses are adequately funded.
The consent order requires the credit union to develop a strategic plan covering at lease three years. The credit union board is also expected to develop written budget consistent with safe and sound banking practices.
The credit union will ensure that employees and Board members are provided with Bank Secrecy Act training and that there is a comprehensive review of the credit union's BSA program.
The consent order requires the credit union to establish a comprehensive Information Security Program.
In a related story, the former credit union Chief Executive Officer (CEO), James Farrell, pleaded guilty to bank fraud. Farrell was the CEO of the New Haven County Credit Union from approximately 1992 to June 2015 and was then retained by the credit union's board of directors to provide assistance to the new CEO until March 2016.
Between July 2011 and March 2016, Farrell defrauded the credit union by transferring funds from NHCCU’s general ledger account to the account held by The Rib House, a restaurant located in East Haven, Connecticut. Farrell provided financial and bookkeeping services to The Rib House from 2010 to 2016.
Read the order.
Read the Justice Department press release.
Tuesday, August 27, 2019
NCUA Board Dismisses Secondary Capital Plan Appeal by LICU
The National Credit Union Administration (NCUA) Board dismissed an appeal of a low-income state chartered credit union's secondary capital plan on procedural grounds.
The unnamed low-income credit union on January 11, 2019 applied to a unspecified NCUA Region for the authority to accept secondary capital. This unnamed credit union may be Freedom Northwest Credit Union (Kamiah, ID), which had its secondary capital plan denied earlier this year.
The NCUA Region on February 25 denied the credit union'e request. On March 18, 2019, the low-income credit union made a written request for reconsideration. Upon reconsideration, the Region upheld its initial decision and denied the credit union's request to accept secondary capital in a letter dated April 24, 2019.
The credit union on May 17, 2019 appealed the decision to NCUA's Supervisory Review Committee. The credit union stated that the approval or disapproval of a secondary capital plan resided with the state regulator and only required the concurrence of NCUA.
On June 4, 2019, the Region issued a letter to the credit union stating that it had erred in its determination of the credit union's secondary capital plan without a prior approval or disapproval of the state regulator and rescinded its findings.
Because the Region had rescinded its determination, the Supervisory Review Committee on June 5, 2019 concluded it did not have jurisdiction to review the matter.
On July 1, 2019, the credit union appealed to the NCUA Board the decision by the Supervisory Review Committee stating that its findings were inconsistent with applicable law and should be reversed. The credit union also requested an oral hearing.
The NCUA Board on July 18, 2019 denied the request for an oral hearing and affirmed the decision of the Supervisory Review Committee.
Read more.
The unnamed low-income credit union on January 11, 2019 applied to a unspecified NCUA Region for the authority to accept secondary capital. This unnamed credit union may be Freedom Northwest Credit Union (Kamiah, ID), which had its secondary capital plan denied earlier this year.
The NCUA Region on February 25 denied the credit union'e request. On March 18, 2019, the low-income credit union made a written request for reconsideration. Upon reconsideration, the Region upheld its initial decision and denied the credit union's request to accept secondary capital in a letter dated April 24, 2019.
The credit union on May 17, 2019 appealed the decision to NCUA's Supervisory Review Committee. The credit union stated that the approval or disapproval of a secondary capital plan resided with the state regulator and only required the concurrence of NCUA.
On June 4, 2019, the Region issued a letter to the credit union stating that it had erred in its determination of the credit union's secondary capital plan without a prior approval or disapproval of the state regulator and rescinded its findings.
Because the Region had rescinded its determination, the Supervisory Review Committee on June 5, 2019 concluded it did not have jurisdiction to review the matter.
On July 1, 2019, the credit union appealed to the NCUA Board the decision by the Supervisory Review Committee stating that its findings were inconsistent with applicable law and should be reversed. The credit union also requested an oral hearing.
The NCUA Board on July 18, 2019 denied the request for an oral hearing and affirmed the decision of the Supervisory Review Committee.
Read more.
Wednesday, August 21, 2019
Court of Appeals Rules on FOM Rule
A federal appeals court on August 20 dismissed most of the American Bankers Association’s challenge to the Field of Membership (FOM) updates by National Credit Union Administration (NCUA).
The U.S. Appeals Court for the District of Columbia reversed District Judge Dabney Friedrich’s ruling overturning the provisions of the agency’s rule related to combined statistical areas and the increase in the population size of rural districts.
However, with the regard to the elimination of the urban-core requirement for local communities based upon a Core-Based Statistical Areas, the court recognized the potential of gerrymandered redlining. The court ordered the District Court to issue a summery judgement in favor of the American Bankers Association, but stated that the agency may be able to offer a satisfactory reason on remand.
In its decision, the court noted that Congress gave the agency wide discretion to make these policy decisions, but its authority is not limitless.
The court also stated that the plaintiff can bring an applied challenge to local communities that exceed NCUA's authority.
NCUA stated that it is reviewing the Court's decision and will provide guidance to affected credit unions in the near future.
Read the decision.
The U.S. Appeals Court for the District of Columbia reversed District Judge Dabney Friedrich’s ruling overturning the provisions of the agency’s rule related to combined statistical areas and the increase in the population size of rural districts.
However, with the regard to the elimination of the urban-core requirement for local communities based upon a Core-Based Statistical Areas, the court recognized the potential of gerrymandered redlining. The court ordered the District Court to issue a summery judgement in favor of the American Bankers Association, but stated that the agency may be able to offer a satisfactory reason on remand.
In its decision, the court noted that Congress gave the agency wide discretion to make these policy decisions, but its authority is not limitless.
The court also stated that the plaintiff can bring an applied challenge to local communities that exceed NCUA's authority.
NCUA stated that it is reviewing the Court's decision and will provide guidance to affected credit unions in the near future.
Read the decision.
Tuesday, August 20, 2019
N.H. Supreme Court Dismisses Defamation Lawsuit Brought by Patent Troll
In a unanimous decision, the New Hampshire Supreme Court on August 16 upheld a lower court ruling that dismissed defamation claims brought by a patent assertion entity against the American Bankers Association (ABA), the Credit Union National Association (CUNA) and other defendants who labeled the company and its operator a “patent troll.”
The suit was brought by David Barcelou and a company he controlled. Barcelou held a commercially unsuccessful patent for cash-dispensing-related technology, and between 2011 and 2012 he generated $3 million in licensing fees from demand letters to banks and credit unions.
Patent trolls work by acquiring patents to common processes and technological elements—such as scan-to-email functionality on a copier or an ATM’s ability to connect to the Internet—then demanding “licensing fees” and threatening litigation. The cost of litigation is intended to pressure businesses to pay the fee, regardless of the patent’s validity.
The court found that the term “patent troll” is a non-actionable expression of opinion.
Read the opinion.
The suit was brought by David Barcelou and a company he controlled. Barcelou held a commercially unsuccessful patent for cash-dispensing-related technology, and between 2011 and 2012 he generated $3 million in licensing fees from demand letters to banks and credit unions.
Patent trolls work by acquiring patents to common processes and technological elements—such as scan-to-email functionality on a copier or an ATM’s ability to connect to the Internet—then demanding “licensing fees” and threatening litigation. The cost of litigation is intended to pressure businesses to pay the fee, regardless of the patent’s validity.
The court found that the term “patent troll” is a non-actionable expression of opinion.
Read the opinion.
Thursday, August 15, 2019
Whistleblower Lawsuit Alleges Retaliation by SEFCU
A lawsuit alleges that State Employees Federal Credit Union (SEFCU), headquartered in Albany, New York, retaliated against an employee for filing a whitleblower complaint.
The plaintiff, David Gosstola, was fired in May 2019 as the Chief Financial Officer (CFO) after filing a whistleblower complaint. The plaintiff was employed as the CFO at SEFCU, since 2008.
The complaint alleges that Michael J. Castellana, President and Chief Executive Office of SEFCU, "had business and personal relationships that created real or potential conflicts of interest" and entered into transactions with such parties that did not adequately protect SEFCU's interest.
For example, the CFO alleges that Castellana had communicated confidential information regarding commercial loans to third parties with whom Castellana had a personal and/or business relationship.
The lawsuit claims that the board of directors relied on information submitted by Castellana and his personal adviser in determining his compensation.
Moreover, Castellana approved projects without competitive bids.
In January 2018, the plaintiff filed a Whistleblower complaint regarding concerns about the governance and direction of SEFCU under Castellana's leadership.
The complaint claims that SEFCU violated its Whistleblower Policy after it retaliated against him.
The plaintiff alleges breach of contract, wrongful termination, and fraud.
The plaintiff claims the firing harmed his professional reputation and inflicted economic loss and emotional pain.
The lawsuit seeks compensatory, punitive damages and attorneys' fees in the amount to be proven at trial.
Read the complaint.
The plaintiff, David Gosstola, was fired in May 2019 as the Chief Financial Officer (CFO) after filing a whistleblower complaint. The plaintiff was employed as the CFO at SEFCU, since 2008.
The complaint alleges that Michael J. Castellana, President and Chief Executive Office of SEFCU, "had business and personal relationships that created real or potential conflicts of interest" and entered into transactions with such parties that did not adequately protect SEFCU's interest.
For example, the CFO alleges that Castellana had communicated confidential information regarding commercial loans to third parties with whom Castellana had a personal and/or business relationship.
The lawsuit claims that the board of directors relied on information submitted by Castellana and his personal adviser in determining his compensation.
Moreover, Castellana approved projects without competitive bids.
In January 2018, the plaintiff filed a Whistleblower complaint regarding concerns about the governance and direction of SEFCU under Castellana's leadership.
The complaint claims that SEFCU violated its Whistleblower Policy after it retaliated against him.
The plaintiff alleges breach of contract, wrongful termination, and fraud.
The plaintiff claims the firing harmed his professional reputation and inflicted economic loss and emotional pain.
The lawsuit seeks compensatory, punitive damages and attorneys' fees in the amount to be proven at trial.
Read the complaint.
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