Two Things to Put on Your To-Do List

Last week highlighted two issues, one for your HR person and the other for your erstwhile vice president of compliance, that your credit union should look into sooner rather than later.

I have a theory that so many people like shows like “Dr. Phil” so much because they can take comfort in the knowledge that their family isn’t as messed up as they think it is. My concern is that the same approach is taken by credit unions when it comes to news of the latest compliance crackdown.

So last week, when you heard the CFPB and the OCC fined Bank of America a quarter of a billion dollars, you can be forgiven for quietly taking pleasure in knowing your credit union has never been slammed quite so badly.

But you should also take the time to read the consent order and learn from Bank of America’s “mistake.” Incidentally, I am putting “mistake” in quotes because I don’t think Bank of America was guilty of bad compliance with regard to its non-sufficient funds (NSF) policy, but of being in the wrong place at the wrong time, overseen by a bureau that has the authority to declare otherwise perfectly legal practices unfair and deceptive. But alas, I digress.

Here are the key takeaways, many of which reinforce previous guidance or enforcement actions the bureau took.

First, no matter how well you craft your disclosures, the days of authorized-positive/settle-negative procedures for one-time debit card and point-of-sale transactions are over. The CFPB has concluded that the American consumer is just not capable of understanding when charges will be imposed using this procedure. The fact that a mere 20 years ago, every adult with a banking account was responsible for balancing their own checkbook or suffering the consequences is now irrelevant. Sarcasm aside, if you continue to engage in these practices, it is only a matter of time before you get sued.

Secondly, we should all know by now that charging more than one NSF fee for an ACH transaction will get you in trouble. However, you may not realize yet that this prohibition against NSF fees applies not only to ACH transactions but to multiple check presentments. For instance, Bank of America was fined because it “assessed consumers $35 NSF Fees each time the Respondent returned as unpaid a re-presented Automated Clearing House (ACH) transaction or check, despite already having charged consumers an NSF Fee on the initial returned transaction.”

Now for your HR professional’s assignment: Unless you have been vacationing on a remote island, you know that the Supreme Court severely restricted the consideration of race when admitting students to elite colleges and universities. Despite the fact that the decision just came out a little more than two weeks ago, we are already seeing arguments as to whether or not this ruling invalidates private sector diversity, equity and inclusion initiatives. This past week, 13 of the nation’s aspiring governors, I mean Attorneys General, penned a letter to the CEOs of Fortune 100 companies putting them on notice that “race-based employment and contracting violates both state and federal law, and as the chief law enforcement officers of our respective states we intend to enforce the law vigorously.”

To be abundantly clear, this letter has absolutely no legal effect. There are clear and obvious differences between the college admission process and private-sector hiring. Furthermore, even as he severely restricted the use of race in admitting students, Judge Roberts also wrote, “Nothing in this opinion should be construed as prohibiting universities from considering an applicant’s discussion of how race affected his or her life, be it through discrimination, inspiration, or otherwise … [however] universities may not simply establish through application essays or other means the regime we hold unlawful today.”

In other words, no one knows precisely how, or even if, the Court’s framework can translate into the employment arena.

Unfortunately, given the speed with which the opinion has become a political lightning rod, it is not too early for your credit union to consider what steps, if any, it may have to take depending on how the decision is ultimately interpreted. In addition, unless and until the Supreme Court takes employment cases, the legal lens through which the decision is judged will vary widely depending on which state or states you are operating in.

For example, the letter’s criticism of preferential contracting clearly signals that this will be one of the first areas scrutinized by local law enforcement. Conversely, in states like New York, you will see attempts to minimize the ruling’s impact. For example, a bill passed late in the session would require businesses required to submit EEO-1 forms to the US Department of Labor to also provide this information to the state.

All this means that we are in for a chaotic period of fast-paced confusion that will only be resolved with additional clarification by the Supreme Court. The bottom line is, keep your attorney on speed dial and your HR director happy. We are all in for a bumpy and most likely very unpleasant ride.

Henry Meier is the former General Counsel of the New York Credit Union Association, where he authored the popular New York State of Mind blog. He now provides legal advice to credit unions on a broad range of legal, regulatory and legislative issues. He can be reached at (518) 223-5126 or via email at henrymeieresq@outlook.com.