SUMMARY Of IBANYS Government Relations Call Of January 30, 2017

January 30, 2017

IBANYS' Government Relations Committee met by conference call this morning  to review and discuss Governor's proposed 2017-18 budget legislation as it could impact New York community banks.

IBANYS Legislative Counsel Bill Crowell prepared the following summary for discussion. 

TED Article VII
Part Y
The DFS Superintendent is empowered to:
a) Bring an action against an unlicensed entity or individual as if the entity or individual were licensed and as such subject to the same penalties; and
b) Retain control over initiation and prosecution of civil actions against a regulated entity rather than the Attorney General.

Part Z
This bill provides DFS with the authority to license and regulate the student loan industry.  Banks are exempted from the licensing requirements for student loan servicers provided that the Superintendent is notified by the bank that it is acting as a loan servicer and complies with provisions relating to prohibited practices and responsibilities and any regulations promulgated by the Superintendent.

Part AA
This bill is directed at protecting vulnerable adults from financial exploitation.  A vulnerable adult is defined as an individual who because of physical or mental impairment is unable to manage their own resources or protect themselves from financial exploitation.  A banking institution is authorized to place a transaction hold on the account of a vulnerable adult under circumstances where there is a reasonable basis to suspect financial exploitation.  The bank must notify adult protective services and law enforcement of the transaction hold and inform them of the basis for such action.  Provision is made for an account holder to have access to funds for ongoing housing, living and emergency expenses during the transaction hold.  The bank and its employees are provided immunity from criminal, civil and administrative sanctions for good faith actions.

Part BB
The Superintendent of DFS based on a disqualifying event may serve charges against a person operating under a DFS license or serving as an employee, owner, director, trustee, officer, member or partner of a DFS licensee based upon a disqualifying event.  A disqualifying event is defined and includes certain criminal acts, engaging in any unsafe or unsound practice and other such acts are delineated.  The disqualification may be for a lifetime or a shorter period as determined by the Superintendent.

Part CC
This bill would create an exemption under the Banking Law for an entity to engage in limited lending activities without being subject to licensing requirements.  Such entities can only engage in making zero-interest loans and must be exempt from federal income taxes as 501c(3).  An application to operate as an exempt entity must be filed with the Superintendent. Such registration may be suspended or revoked by the Superintendent.

Part EE
This bill expands the prohibition of doing the business of making loans without a license to on-line lenders who either make loans or otherwise arrange or facilitate the funding of loans.  This applies to non-business loans of less than $25,000 and business loans of less than $50,000.

Part FF
This bill makes reverse mortgages subject to prior notice requirements and settlement conferences which are currently applicable to other mortgage products subject to the mortgage foreclosure process.

Part GG
This bill would allow the expenses of every examination of the affairs of a regulated entity by DFS to be paid for by such entity so examined.  It also provides that regulated entities would be assessed for operating expenses solely attributable to the regulated entity in proportions determined by the Superintendent to be just and reasonable.

Revenue Article VII
Part U
This bill provides that the financial institution data match system would be available when past due for liabilities become fixed and final.  It currently requires a docketed judgment with a tax warrant filed with the county clerk.  It also permits the disclosure of debt and debtor information to the financial institutions and the third party operator of the data match system.

PPGG Article VII
Part C
This bill would amend the Penal Law to provide increased penalty level based on the amount of aggregate financial damage done by computer tampering.  It also provides increased penalties for mass identity theft.

The discussion of the proposals essentially arrived at the position that of these proiposals, those that drew the most bad actor" provision (Part BB), based on addressing "Wells Fargo type" behavior. The language is very broad, and there is a likelihood that a number of segments in the financial services industry will be looking closely at this to perhaps oppose on that basis. Also, Part GG could result in higher assessments charged to examined institutions by DFS. There was some opinion that this could impact decision-making of current state-chartered institutions which may be considering switching to a federal charter. The other areas that could spark heightened interest involve Part U (data match), and banks were encouraged to review their situations in this area, and Part Y, which empowers the DFS Superintendent in legal actions vis-a-vis the State Attorney general. 

On other matters not related to the budget, there was a discussion of the ongoing issue involving attorneys sending solicitation letters related tio ADA website compliance. The possibility of looking into responding by initiating UDAP claims against the solicitating attorneys, and/or declaratory actions, was discussed and will be further discussed.

There was also a discussion of the DFS form to file for an exemption for community banks from the abansoned or vacant ("zombie") property regulation. While the original legislative intend was to compare "apples to apples" -- i.e., mortgages originated in New York State -- in the formula to determine eligibility, the form to seek the exemption under the DFS implementing regulation  appears to comnpare "apples to oranges" by also including mortgages services. The result is that very few banks would appear to qualify, as opposed to a large number of communitt banks that would under the original formula. IBANYS is looking into this and there may be a need to seek legislative remedy.

There was also discussion of the length of the foreclosure process in New York State, and its impact on banks. With the process often taking up to two-to-three years to complete, banks find that the equity in the properties is severely diminished and the result could eventually be to curtail lending, particularly on junior liens. While most community banks have very few propwrties in foreclosure, the issue remains a concern, with issues such as bankruptcy, judicial foreclosure and heavy case loads of judges contributing to the concerns.

Lastly, IBANYS has meetings scheduled with the two new legislative Banks Committee Chairs, Sen. Jesse Hamilton (D-Brooklyn) and Assemblyman Ken Zebrowski (D-Rockland County). The objective is to provide information on community banks and our importance to the local and state economies, as well as to consumers, small businesses and local communities.

IBANYS will be holding future G.R. Committee meetings as the congressional and legislative sessions unfold. All meetings will be held Friday mornings at 9:00 a.m. unless otherwise noted. We will send out notices of when meetings will be held as situations dictate. Thanks to all for their participation and support.

Stephen W. Rice
Director of Government Relations & Communications
Independent Bankers Association of New York State