The Point: April 5, 2013

Alloya and CenCorp to merge April 30

Yesterday, the members of Central Corporate CU (CenCorp) voted overwhelmingly in favor of a proposed merger with Alloya Corporate FCU. The merger was approved by NCUA last month and will be effective April 30.

"We are excited about the synergies that the merger brings," stated William A. Walby, the current CEO of CenCorp who is slated to lead Alloya Corporate FCU after the merger. "Members saw additional value in combining two strong credit union-owned organizations to deliver their financial and correspondent service needs into the future."

Alloya Corporate FCU's current CEO, Charles Furbee, will remain at the corporate for a brief period to assist in the transition.

As the synergies are realized, the annual expenses of the combined corporate are expected to fall by several million dollars, and products and features will be added. The combined corporate will conduct business in 10 core states, providing investment, financial, lending and correspondent services to more than 1,400 member-owner credit unions. Headquartered in Warrenville, Ill., Alloya Corporate FCU will also conduct major operations from offices in Albany and Southfield, Mich.

NCUF accepting 2014 Wegner Award nominations

Credit unionists are encouraged to nominate individuals and organizations for the Herb Wegner Memorial Awards to be presented by the National Credit Union Foundation (NCUF). Winners will be honored at NCUF's annual awards dinner on Feb. 24, 2014, in conjunction with the 2014 CUNA Governmental Affairs Conference (GAC) in Washington, D.C.

Nominations should be submitted by Friday, June 28, for the following awards:

  • The Individual Achievement Award honors an individual for his/her innovative concepts, contributions and/or accomplishments to the credit union community within the past three to five years. Accomplishments must have had a significant impact or a potential impact on the local and/or national and/or international credit union movement with measured results. Nominations must cite a specific area of achievement, such as financial literacy, service to the underserved, alternatives to predatory lending and/or new products.
  • The Outstanding Organization/Program Award honors an organization, program or business for its innovative concepts and/or product/services that have had a significant impact on the local and/or national and/or international credit union movement with measured results.
  • The Lifetime Achievement Award honors an individual who has: dedicated his/her life to promoting the credit union philosophy; created innovative concepts; and provided leadership that has had a significant and lasting impact on the local and/or national and/or international credit union movement.

Notably, award criteria have been modified to recognize the local impact of nominees.

For details and nomination instructions, visit the NCUF website.

Upcoming webinar: Adapting Products and Services to Immigrant Markets

Credit unionists can learn how to reach immigrant markets with innovative services and products during a free upcoming webinar. The webinar will be held April 16 at 2 p.m. and is being hosted by CUNA, the National Federation of Community Development Credit Unions and Coopera as part of the continuing Community Development Finance Series.

Participants will explore:

  • the current immigrant market and its unique, changing needs;
  • opportunities to serve this rapidly growing demographic;
  • how cultural differences affect credit union outreach and interaction with members and potential members; and
  • strategies and innovative programs, products and services for serving the immigrant market.

To learn more or register, visit CUNA's website.

Legal Spotlight: New York's highest court to weigh in on restraining notice law

By Associate General Counsel Henry Meier

Suppose a credit union receives a restraining order against a member's account. The creditor is a private party who successfully obtained a judgment against the member, who refuses to pay an outstanding debt. Even though the restraining notice isn't accompanied by an exemption claims form, the credit union sends notice of the restraint to the member and freezes the account. The credit union has clearly violated New York's levy and restraint law, which requires that members be sent an exemption notice, but can the member sue the credit union because of the mistake?

That's the question New York's Court of Appeals (the state's highest court) was asked to answer last week in the case of Cruz v. TD Bank, N.A., Martinez v. Capital One Bank, N.A., and its conclusions will be important to note.

Case history: Last year, the U.S. Court of Appeals for the Second Circuit (the federal court that has jurisdiction over New York) heard an appeal from two individuals (Cruz and Martinez) who wanted to sue TD Bank and Capital One for restraining their bank accounts. The banks not only restrained the funds, but also charged fees for checks that bounced as a result of honoring the restraints. Although the banks informed both individuals that their accounts were being restrained, the accountholders contended that they were never given a copy of the exemption claim forms. One of the accountholders, for example, was instead given a single-page notice of restraint.

The banks successfully moved to have the cases dismissed before trial. They argued that the Eligible Income Protection Act (EIPA) passed in 2009 stipulates that the inadvertent failure by a depository institution to provide the exemption claim forms and other required notices does not result in liability against the depository institution. The EIPA categorically exempts a minimum amount of money in an account from levy and restraints imposed by private third parties. It also requires a judgment creditor to provide the debtor's financial institution with two copies of the restraining notice, an exemption notice and two exemption claim forms, which the credit union must then send to the member. If a creditor doesn't provide this documentation, the levy or restraint is invalid and should be ignored.

The banks further argued that, even if they made mistakes in complying with the statute, the only way to challenge the legality of the restraint was a "special proceeding," which is similar to a hearing.

The accountholders were seeking to start a class action lawsuit. They argued that the statute does not shield institutions that violate the law from being liable for damages resulting from their failure to follow the procedures outlined in the law.

Last week, the U.S. Court of Appeals for the Second Circuit decided that New York courts had not addressed the issue and, as a result, asked New York's Court of Appeals to make a legal ruling.

"Whether judgment debtors may sue their banks for violating EIPA's procedural requirements will significantly affect the force of that legal procedure," the Second Circuit Court concluded in sending the case to the state. "In addition, where, as here, the plaintiffs represent putative classes, the outcome of these cases can have broad and lasting consequences."

For more legal and regulatory analysis by Associate General Counsel Henry Meier, visit the New York's State of Mind blog.

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