Filed under: Current Issues in Credit Unions | Tags: compliance, contract negotiation, HR, payday lending
This month Charlie Williams from Blaylack and Williams is our guest. Faith is off this month but Hal, Katherine and Rob mind the store. Our Behind the Scenes video is in its second month and is now new and improved!
Here are the topics:
–Developing a Code of Ethics for a Board of Directors.
–Running a remote capture program at your credit union.
–Using flagging software across your share draft portfolio.
–Implementing a 10 hour 4 day workweek at your credit union.
–Post Merger net worth under Prompt Corrective Action.
–Criticism of CU Payday Lending Programs?
The CIiCU hosts are:
Farleigh Wada Witt,
Attorneys at Law
121 SW Morrison Street, Suite 600
Portland, Oregon 97204
Messick & Weber P.C.
The Madison Building, 108 Chesley Drive
Media, Pennsylvania 19063-1712
American Airlines Credit Union
P.O. Box 619001
DFW Airport, TX
Weltman, Weinberg & Reis Co., L.P.A.
323 W. Lakeside Avenue, Suite 200
Cleveland, Ohio 44113
Subcribe to the show via iTunes Music Store: http://phobos.apple.com/WebObjects/MZStore.woa/wa/viewPodcast?id=151785964&s=143441
Direct download: CIiCU_29_final.mp3
The following is a client advisory that was sent out today to WWR’s clients:
An Analysis of Ohio’s New Foreclosure Laws
By: Larry R. Rothenberg, Esq.
Ohio’s Substitute House Bill 138, which revises many of the procedures in foreclosure actions, becomes effective on September 11, 2008. The bill originated in response to complaints by cities, that purchasers of properties at foreclosure sales were delaying the recording of the sheriff’s deed, making it difficult for the cities to determine on whom notices should be served with regard to building code violations. Hence, the original primary purpose of the bill was to authorize and require the sheriffs personally to submit the deeds for recording promptly after the bidder pays the balance due.
Various groups involved in the foreclosure process lobbied for a number of amendments, resulting in a 30-page bill by the time it was passed. This author met with the chief sponsor of the bill and testified at the Ohio Senate’s Civil Justice Committee hearing, in order to propound some new ideas to change Ohio’s laws regarding, among other things, lis pendens and publication requirements, which will shorten the timeline and reduce the costs for foreclosures. The bill as passed includes significant improvements from the lenders’ standpoint, but also presents a couple of potential headaches.
The following is a summary of the new provisions:
Under the prior law, lis pendens did not take effect until service of the summons was complete. Frequently, new liens were filed after a foreclosure commenced but before service was complete, requiring that the complaint be amended to add new lienholders as parties to the case. This caused the case to be delayed until service was completed on the new lienholders and their answer periods expired.
Under the new law, lis pendens will take effect as of the date the complaint is filed. This change in the law will bring about a significant reduction in the timeline, as amended complaints will be necessary much less frequently.
Title Evidence For Foreclosures
Under the prior law, each county decided for itself whether to require evidence of title to be filed in the case, and what form of title evidence would be required. The new law imposes a standardized requirement that a “preliminary judicial report”, which is a guarantee of title issued by a licensed title insurance agent, must be filed within 14 days after the complaint is filed, and must have an effective date not more than 30 days prior to the complaint. The only exception relates to commercial property foreclosures, in which either a preliminary judicial report or a title commitment can be filed.
Service of Summons by Publication
Service of summons by publication has always been authorized for defendants whose whereabouts are unknown. Publication was to be made once a week for six weeks. The new law reduces this requirement for foreclosures to once a week for three weeks. In addition, if the property has a street address and a permanent parcel number, it will no longer be necessary to include the complete legal description in the publication. By reducing both the number and size of the publications, the timeline in cases where service of the summons is perfected by publication will be reduced by three weeks and hundreds of dollars in publication costs should be saved.
The Sheriff is now authorized to conduct open houses to show vacant properties prior to the Sheriff’s Sale. This idea was conceived by one of the state senators, as a device to attract additional bidders to the sheriff’s sale. However, because almost all sheriffs departments are overworked and understaffed, it is unlikely that many sheriffs will actually conduct any open houses.
Advertisement of Sale
The sheriff’s advertisement of the sale is to be published for at least three weeks prior to the sale, rather than beginning thirty days prior to the sale under the prior law. This will reduce the time frame by nine days in many cases.
The successful bidder, including lienholders, must provide the sheriff with information regarding the purchaser, including the name, address and phone number of a contact person. Presumably, this information can be used by the city in order to discuss or serve notices of building code violations.
Payment of Deposit at Sale
Purchasers are generally required to pay a deposit at the time of the sale. Previously, first lienholders could obtain a waiver and were not required to make any payment at the time of the sale. However, the new law appears to require the sheriff to collect at the time of the sale, the amount of the recording and conveyance fees, and associated costs to cover the recording of the deed. Therefore, unless the sheriffs interpret the law differently, first lienholders must become accustomed to providing the required funds to their attorneys when required for the sale. An amendment has already been suggested in order to alleviate this requirement for lienholders.
Confirmation of Sale
The new law requires the court to enter the order confirming the sale within thirty days after the sale. The law does not state, and therefore it remains to be determined, what the consequence will be if the court fails to enter the order confirming the sale within that time frame.
Payment of Balance to Complete the Sale
The balance due on the purchase price must be paid within 30 days after confirmation of the sale, or the purchaser will be found in contempt of court. There is no exception for purchasers who are lienholders. Therefore, lienholders who purchase property at a sheriff’s sale must take this requirement seriously, and deliver to their attorney the balance due to complete the sale, so that the attorney can deliver it to the sheriff prior to the 30-day deadline.
Under the prior law, in most counties, the sheriff’s departments prepared the sheriff’s deed and issued it to the purchaser. Under the new law, the foreclosure attorney is to prepare the sheriff’s deed and deliver it to the sheriff for execution not later than 7 days after the court enters the order confirming the sale. Eliminating the duty to prepare the deed from the sheriff will eliminate many delays due to overworked sheriff’s departments, and will eliminate frequent errors on the deeds that are prepared. The sheriff is to record the deed within 14 days after payment of the balance due to complete the sale.
Impact on Conveyances to HUD
Previously, Ohio was a “one deed” state for conveyances to HUD. The bid could be assigned from the investor to HUD and therefore, the sheriff’s deed could convey title directly to HUD. The foreclosure attorney would hold the unrecorded sheriff’s deed until the servicer provided instructions to record the conveyance, and would then submit the sheriff’s deed for recording.
Under the new law, Ohio becomes a “two deed” state. Because the law requires the sheriff to submit the sheriff’s deed for recording, it will no longer be possible for the foreclosure attorney to hold the unrecorded sheriff’s deed until the property is in a conveyable condition to HUD. Therefore, the bid will be in the name of the investor and not assigned to HUD. The sheriff will promptly record the deed to the investor, and it will be necessary for a second deed, from the investor to HUD, to be executed on behalf of the investor and recorded after the property is in a conveyable condition.
Deeds to HUD are exempt from the conveyance fee (transfer tax) to the county at the time of the recording of the deed. The sheriff’s deed to the investor will not be exempt from the conveyance fee, although the deed from the investor to HUD will be. The conveyance fee, which must be paid upon recording the sheriff’s deed to the investor, varies from county to county, between .1% and .4% of the purchase price.
Payment of Taxes
Taxes are to be paid from the proceeds of the sheriff’s sale for any unpaid prior year’s taxes including penalties and interest, and taxes for the current year, which accrued prior to confirmation of the sale even if not yet assessed. The treasurer is to provide an estimated amount for this purpose, and the sheriff is to refund any excess after the actual amount is determined.
If you have any questions on this information, please contact Mr. Larry R. Rothenberg, Esq. Larry Rothenberg is the partner-in-charge of the Cleveland real estate and foreclosure department of Weltman, Weinberg & Reis Co., L.P.A. He is the author of the Ohio Jurisdictional Section contained within the treatise, “Dunaway, The Law of Distressed Real Estate”. The firm handles foreclosures and related litigation throughout Ohio, Kentucky, Indiana, Illinois, Pennsylvania and Michigan. Larry can be reached at (216) 685-1135 or via e-mail at firstname.lastname@example.org.
Client Advisory is published by Weltman, Weinberg & Reis Co., L.P.A., an organization providing comprehensive creditor representation. The information contained in this advisory is a summary of legal information and is not intended to constitute legal advice on specific matters or create an attorney-client relationship. Contact any of our offices or visit our website at realestatedefaultgroup.com for more real estate related information, company facts and attorney profiles. ©2008
The following is an article reprinted with permission from the upcoming Summer 2008 edition of The WWR Letter:
Dormant Accounts and Escheatment
By: Matthew Burg, Esquire
“A penny saved is a penny earned”…well, unless the account becomes dormant. This old adage obviously did not contemplate dormant accounts and the state’s power of escheatment.
Credit unions, like banks, must deal with dormant customer accounts – accounts that sit unused usually due to its owner’s death, inadvertence or forgetfulness. Once an account becomes dormant, the funds escheat, or revert, to the state. Astonishingly, the State of Ohio’s Unclaimed Funds Division maintains more than 3.2 million accounts, some generated from money left in dormant accounts, worth over one billion dollars.
For purposes of Ohio’s escheatment laws, checking and savings accounts are deemed dormant after five years of inactivity on the account between the owner, i.e., the person or legal representative having an interest in the account, and the holder, i.e., the credit union or bank who has possession of the money in the account. Any activity on the account, however, such as an owner’s increase or decrease of the funds, correspondence with the holder concerning the funds, or some acknowledgement by the owner of an interest or knowledge of the funds, will protect the account from being dormant.
If an account becomes dormant, the holder is required to report the unused, abandoned or unclaimed funds to the state. A credit union’s failure to accurately and timely report dormant accounts may result in penalties. Aside from the penalties associated with failing to report unclaimed funds contained in dormant accounts, the costs associated with maintaining a dormant account are generally unrecoverable once the funds escheat to the state.
Some tips and traps to keep in mind when dealing with dormant accounts:
• Dormancy Periods: Know your state’s dormancy periods for each type of account. Each state has its own time periods, which differ amongst the states. States also apply different dormancy periods to different types of accounts. For example, a bank account becomes dormant after five years in Ohio, but an IRA becomes dormant after only three years.
• Reporting: Know your state’s reporting deadlines. In Ohio, the reporting deadline for accounts dormant as of June 30 is November 1 of the same year. Even if no unclaimed funds are held, a “negative” report must still be filed.
• Preemption: Federal law preempts state law whenever a conflict exists. Thus, even if your state law does not allow state credit unions to retain a portion of the dormant funds before they escheat to the state, the same is not true for federal credit unions governed under federal law. Generally, federal credit unions may recover fees or costs generated in maintaining an account before the unclaimed funds escheat to the state.
• Multiple customer accounts: When customers have multiple accounts with a credit union, link the accounts together. If one account becomes dormant, a customer’s activity with the other accounts may insulate the dormant account from reverting to the state.
• Penalties: Knowing the reporting requirement and providing accurate reports are crucial because of the potential penalties for non-compliance. In Ohio, a failure to report unclaimed funds or under-reporting unclaimed funds may result in civil penalties of $200.00 per day or criminal penalties as high as $500.00 a day, plus interest.
Overall, maintaining both a dependable computer system and accounting/operating procedures are critical to a credit union’s success in monitoring accounts, promoting activity and complying with state reporting requirements. And for those customer accounts that do remain active, a penny saved will be a penny earned.
Matthew G. Burg is an Associate in the Litigation & Defense department of the Cleveland office. He can be reached at (216) 685-1111 or email@example.com.
Resources utilized in preparing this article:
Ohio Department of Commerce at http://www.com.ohio.gov/unfd/
Ohio Revised Code Ch.169
Current Issues in Credit Unions podcast, March 22, 2008, http://www.ciicu.libsyn.com/ (featuring WWR Partner, Robert W. Rutkowski)
McMahan, Emmet. Guide to Unclaimed Property in Ohio.
The following is an article reprinted with permission from the upcoming Summer 2008 edition of The WWR Letter:
Using Employee Pictures and Related Items Without Consent
By: A.J. Ober, Esquire
The rapid development and use of the Internet and high-speed communication devices such as BlackBerrys and camera phones over the past decade has given renewed rise to concerns regarding privacy rights. In an instant, a picture can be broadcasted around the globe, virtually unstoppable, and without consent from the pictured party. Due to the ever-increasing number of ways personal information can now be appropriated, individuals have grown more protective of personal attributes such as their name, picture or likeness.
How many times have you seen the candid pictures of a wise senior executive or a fresh-faced junior associate used in a company’s advertising campaigns? The people featured in those ads may be employees of the company and often are, since use of their pictures typically comes at little or no cost to the company. While this appears harmless enough, using these pictures may result in an actionable claim against the employer for a violation of privacy rights.
For instance, New York’s Civil Rights Law § 51 gives a plaintiff a right of action if his/her name, portrait, picture or voice is used for advertising or trade purposes without written consent. Virginia and Utah have also enacted laws, modeled after New York, which statutorily protect a person’s right to privacy. New York’s highest state court awarded damages for invasion of privacy when Defendant Chemical Bank photographed its employees and used the photos for advertising purposes. The Court cited § 51 and held that absent written consent from the employees, use of the photos was an invasion of privacy. See Caeser, et al. v. Chemical Bank, 66 N.Y. 2d 698 (1985).
A majority of states including Ohio, Pennsylvania, Michigan, Illinois and New Jersey have judicially recognized the right to privacy in case law. However, most states have not codified this right. Nevertheless, state court rulings across the country have been consistent with Restatement (2ND) of Torts § 652C, which provides “One who appropriates to his own use or benefit the name or likeness of another is subject to liability to the other for invasion of privacy.”
In one case, a New Jersey Plaintiff employed by Kodak gave Kodak permission to use his family photo in a publication on how to print pictures. Condecor, another company in the photo industry, copied the picture from Kodak’s publication and used it in picture frames and pricing catalogs. Condecor did not seek consent from the Plaintiff or Kodak and alleged that the use of the picture was incidental, and thus not an invasion of privacy. The Superior Court of New Jersey enforced the Plaintiff’s privacy right against Condecor and reasoned that the photo was used for trade purposes, as the photo was used inside frames that were offered for sale. The Court also noted that the Plaintiff’s consent to Kodak would not extend to Condecor since the Plaintiff did not contemplate Condecor’s use at the time consent was given to Kodak. See Faber v. Condecor, Inc., 477 A.2d 1289 (1984).
In another case, a Georgia man’s insurance company used his picture in a newspaper advertisement for life-insurance, without consent. Georgia’s Supreme Court held that publication of one’s picture without consent, in an advertisement, for the mere purpose of increasing the profits and gains of the advertiser is an invasion of privacy. See Pavesich v. New England Life Ins. Co., et al., 122 Ga. 190 (1905).
The Missouri Court of Appeals similarly protected one’s right to his/her picture. The picture of a five-year old boy was used by a jeweler to advertise his store and sell merchandise. The Court declared that one’s own picture is a property right of material profit and use without consent deprives one of their rights to property and privacy. See Munden v. P.S. Harris, et al., 153 Mo. App. 652 (1911).
Without question, courts have actively and unequivocally protected privacy rights when names, pictures, likenesses, etc. are used without consent. It should be noted that a Plaintiff is not required to allege nor prove actual damages to be awarded injunctive relief. If damages are proven, however, the majority of jurisdictions will also award both actual and punitive damages. Some courts have even gone so far as to order a public apology and/or retraction, which may prove costly to an employer.
In sum, an employer is best served by always obtaining written consent from an employee when using the employee’s name, picture, voice and/or likeness for marketing or advertising purposes. Lastly, the employer should be conscientious to obtain consent each time a picture or similar item is reused for a new or different purpose.
A.J. Ober is an Associate in the Legal Action Recovery department of the Philadelphia office. He can be reached at (215) 599-1500 or firstname.lastname@example.org.
The following is an article reprinted with permission from the upcoming Summer 2008 edition of The WWR Letter:
Vendor Credentials- High or Low Risk?
By: Sara Donnersbach, Esquire
Verifying a vendor’s credentials, as well as those of its principals, is essential before providing an outsider access to business assets, facilities and workforce. In today’s business environment, failing to screen and monitor a vendor can result in huge consequences. When choosing a vendor, look for the vendor that can not only solve today’s problem, but one that won’t increase or create problems by being a high risk vendor. Choose a vendor that will still be around next year.
Before hiring a company to provide goods and services, verify the prospective vendor’s performance, criminal record and financial standing. Failing to do so, and failing to monitor these things at future intervals, can result in fraud, unsatisfactory work and lost time and money.
When considering long-term needs, look at the stability of the vendor. For example, if the vendor company is a one-man-shop, there is essentially no stability. When considering team-based vendors, be mindful of their financial stability. Many service companies have cash-flow issues that can impact their customers. Ask prospective vendors for proof of their financial stability.
Another aspect of stability is turnover rate. On any given project, the vendor team members should rarely change. Re-teaming or starting with a new resource costs time and money, so turnover is extremely important. When reviewing prospective vendors and monitoring present vendors, ask for updated references and ask questions about turnover.
A final aspect of long-term stability is abandoned projects. Ask the prospective vendor about any projects that have ended badly or that were abandoned. Some will be forthcoming with information; however if told it has not happened, do some research when calling references.
Key things to check for, from business vendors and their principals:
• Businesses: corporate status, financial and credit information, bankruptcy history and judgment record, insurance certificates, W9 tax documentation, licensing, government watch lists and conflicts of interest.
• Principals: Social Security number and identification verification, background check, credit history, professional licensing, government watch lists and conflicts of interest.
There are specific, measurable benefits to screening a prospective vendor and monitoring present vendors. Doing so provides more control and accountability. Vendors are encouraged to abide by set work and ethical standards. The review process provides the truth about a vendor’s and potential business partner’s capabilities, financial health and reputation. While there is an administrative cost, this process, too, can be outsourced.
Sara M. Donnersbach is a Partner in the Specialty Collections department of the Cleveland office. She oversees the Governmental Collections Practice Group, the Healthcare Practice Group and the Utility Service and Damage Claims Practice Group. She can be reached at (216) 685-1039 or email@example.com.
New Developments in Identity Theft
By: David Wolfe, Esquire
Identity theft is the fastest-growing crime in the United States and topped the list of consumer fraud complaints filed with the Federal Trade Commission (“FTC”) for seven years in a row through 2007. In an FTC report issued in February 2008, credit card fraud was the most common form of reported identity theft at 23%, with utilities fraud at 18%, followed by bank fraud at 14%. To combat this growing trend, federal agencies enacted the Fair and Accurate Credit Transactions Act (“FACTA”) Red Flag guidelines requiring financial institutions and creditors to develop and implement a preventative program to mitigate the risk of identity theft for both new and existing accounts.
FACTA imposes serious responsibilities on these businesses to develop and adopt a written Identity Theft Prevention Program (“Program”) to detect, prevent and mitigate identity theft with the opening or existence of a covered account. A covered account is defined as an account used primarily for personal, family or household purposes; or any other account for which there is a reasonably foreseeable risk to the customer or the safety and soundness of the financial institution from identity theft. The Program must address four basic elements:
• Identify relevant patterns, practices and specific forms of activity that are “red flags” signaling possible identity theft and incorporate those red flags into the plan;
• Detect those red flags that have been incorporated into the plan;
• Respond appropriately to any red flags that are detected to prevent and mitigate identity theft; and
• Ensure the plan is updated periodically to reflect changes in risks from identity theft.
This Program must include reasonable policies and procedures to identify certain signals of actual or attempted identity theft. Supplement A to the guidelines contains a list of 26 “red flags” that financial institutions and creditors may consider incorporating into their Program, including:
• Alerts, notifications, or other warnings received from consumer reporting agencies or service providers;
• Unusual patterns in the consumer’s use of credit, such as a recent increase in inquiries or new credit accounts, changes in the use of credit, or accounts closed;
• Suspicious documents that appear to be forged or reassembled, or those documents that contain information that is inconsistent with the person applying for credit;
FACTA includes additional special rules for debit and credit card issuers to develop policies and procedures to assess the validity of a request for a change of address that is followed closely by a request for an additional or replacement card. The rules prohibit the issuance of the additional or replacement card until the change of address is verified with the cardholder.
The regulation and guidelines were effective on January 1, 2008 and FACTA’s mandatory compliance date of November 1, 2008 is fast approaching. This new rule/guideline requires significant continued administration and oversight of the Program and requires each financial institution or creditor to:
• Obtain approval of its written Program from either its Board of Directors or an appropriate committee of the Board of Directors;
• Involve the Board of Directors or the appropriate committee, or a designated senior-management-level employee in the oversight, development, implementation and administration of the Program; and
• Train staff to effectively implement the Program.
With roughly four months before the deadline, many financial institutions and creditors may already have compliant policies and procedures in place as many are spending more on fraud prevention, and for most it will be a matter of training staff on how to spot and respond to a red flag.
David A. Wolfe is an Associate in the Bankruptcy and Legal Action Recovery departments of the Detroit office. He can be reached at (248) 362-6142 or firstname.lastname@example.org.
Will Web Video Kill the Conference Star?
By: Rob Rutkowski, Esquire
This morning, I watched a seminar given over the Web. Normally, when you attend a webinar, you get telephone audio feed and a PowerPoint that is it best unreliable. This was different. NAFCU sponsored the event, and the webinar began with video camera panning back off their logo and then focusing on the two speakers. A small video ran on the left of my screen while the PowerPoint was displayed on the right. This seminar went flawlessly. I didn’t even see it live, I saw part of a recording of it. Nonetheless, it was very impressive.
If a webinar can be given reliably via streaming video and the audience can see the speaker and the PowerPoint simultaneously, why would anyone ever go to a live seminar again? Webinars are cheaper than in-person seminars. There are no travel costs or food expenses and the time the employee spends away from the credit union is significantly less. Moreover, you can have as many people watching it on the computer as you have space in your conference room. You could even port it to an HDTV. For a credit union trying to cut costs, a good webinar is far superior to sending employees away for educational training. At its most basic level, the purpose of a seminar is for the dissemination of information to the attendees. If it can be done more cheaply, then it should be done more cheaply.
Webinars are still not perfect. Workshops suffer. It is hard to play learning games, get answers to hypotheticals and break people into groups via a webinar. Also, I mentioned this webinar opportunity to some other credit union folks and some were concerned that webinars don’t allow for networking. I have to agree with that. There is, by definition, no in-person contact beyond that of your co-workers. However, while networking might be rewarding to individuals, what is the return to the credit union?
I would submit to you that webinars will indeed greatly reduce the number of conferences for credit union employees and volunteers over time. The ones that survive will be more social events for educational sessions. People will want to attend these not for the educational sessions, but for the networking and camaraderie. This is not necessarily a bad thing. As webinar technology improves, the corresponding efficiency will be a benefit to everyone. You might think that I have a vested interest in the convention circuit as I give upwards of 40 presentations a year. Honestly, I would rather do them all as webinars.
Robert Rutkowski is the Managing Partner of the Firm’s Credit Union department. Based in the Brooklyn Heights operations center, he can be reached at (216) 739-5004 or email@example.com.