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Temporary
Investments Community Bank Deposit Program
Privacy/Identity Theft
The Honorable Richard Platkin Counsel to the Governor Executive Chamber State Capitol Albany, NY 12224
Re: Approval of S. 26-B (Maziarz)/A. 3678-B (DiNapoli) AN ACT to amend the general municipal law and the state finance law, in relation to temporary investments
Dear Mr. Platkin:
The New York Bankers Association supports this legislation that would authorize the State and City of New York to invest up to $250 million each in highly rated money market mutual funds whose portfolios are limited to fully guaranteed U.S. government and agency obligations. The bill also authorizes local governments to accept pledges of a pro rata share of a pool of collateral to secure their deposits, rather than the current system that requires collateral pledged individually to back each government’s deposits. The legislation would increase the efficiency of bank collateralization operations without diminishing the security of local government deposits. We urge that the legislation be approved. Our Association is comprised of the community, regional and money center banks doing business in New York State, whose aggregate assets exceed $3 trillion and which have more than 320,000 New York employees.
Beginning as a bill that we opposed since it would have authorized unlimited investments in no-load money market mutual funds by the State and any local government of a municipality of greater than 300,000 population, the bill has been gradually amended, in response to our Association’s concerns, to restrict it to the State and City and to $250 million each. In addition, the bill was amended further to authorize banks to pool the collateral backing all of their local government deposits in the aggregate. This collateral pooling should represent a marked improvement in the efficiency of bank collateralization programs for municipal deposits.
In 1992, section 10 of the General Municipal Law was amended by Chapter Law 708 to authorize banks to hold a greatly expanded list of collateral to back their municipal deposits. Even though the collateral list was greatly expanded, however, the collateral must be segregated on the books of the bank or trust company, and either be registered in the name of the municipality, delivered in a form suitable for transfer or with an assignment in blank to the local government, or maintained on the books of a third-party custodian. Maintaining and managing segregated collateral for each municipal depositor consumes considerable time and effort both by municipal officials and by the bank or trust company holding the deposit.
As more and more competitors have entered the municipal deposit-taking business, the costs to banks and trust companies of maintaining collateral has become a serious competitive issue. One hundred percent collateralization of municipal deposits is not the issue, since the current system of full collateralization has served New York very well, assuring that no municipality has ever suffered a loss of deposits as a result of a bank failure.
Many states have authorized banks to engage in pooling of collateral backing municipal deposits. Such pooling arrangements offer much greater efficiencies in managing collateral without, in any way, threatening the safety of municipal deposits, which continue to be 100% collateralized. In fact, in several respects, municipal deposits backed by a pool of collateral are safer than mutual funds: they are not subject to interest rate market fluctuation; in addition to the promise to pay of the primary obligor (either the bank or the mutual fund, as the case may be), the depositor has an enforceable, secured interest (rather than merely a contractual interest, as with a mutual fund) in the collateral; and the pool of collateral is required by law to be maintained, in the aggregate, at a market value equal to the value of all New York State municipal deposits in the bank or trust company. Our Association opposed the original version of this legislation, but, with the significant amendments adopted during the legislative process, we support the current version of the bill and urge that it be approved.
Sincerely,
Michael P. Smith
President, New York Bankers
Association
The Honorable Richard Platkin Counsel to the Governor Executive Chamber State Capitol Albany, NY 12224
Re: Disapproval of S. 5736 (Saland)/A. 8919 (Rules, Request of Pheffer) AN ACT to amend the general business law, in relation to fees charged in connection with billing practices of creditors
Dear Mr. Platkin:
The New York Bankers Association opposes this legislation that would prohibit creditors from charging differential rates or fees to debtors because of the debtors’ choice of the method of transmitting payment. This legislation discriminates against New York State-chartered creditors, and could impede creditors from adopting newer, more efficient technology. Our Association is comprised of the community, regional and money center banks doing business in New York State, with aggregate assets in excess of $3 trillion and more than 320,000 New York employees.
This legislation would prohibit creditors from charging consumers an additional rate or fee or a differential rate or fee when the method of transmitting payment chosen by the consumer involves the use of mail, paper billing or an electronic transaction involving the Internet or telephone. It states that it is explicitly subject to federal law and regulation and provides consumers with a private right of action to enforce the provision.
In recent years, creditors have experimented with many alternative means of permitting consumers to transmit payments. Many of these means, such as use of the Internet, involve significant cost savings to both the consumer and the creditor. In order to encourage consumers to use the most cost-effective option, some creditors provide a discount for the use of the Internet or other low-cost payment means for transmitting payment. Others have chosen to charge an extra fee to reflect the costs of continuing to accept payments through higher cost methods of payment transmission.
The restrictions in this legislation would likely not apply to nationally chartered creditors, whose choice of billing practices are governed by federal law. In addition, the practices of many lenders from outside New York State would be governed by the law of the state in which they are located. We therefore believe this legislation would impose an unfair competitive burden on New York State-chartered creditors.
Moreover, the Electronic Signatures in Global and National Commerce Act, P. L. 106-229, (the Act) preempts much state legislation that would restrict many aspects of electronic commerce. Section 101 (c)(1)(B) of the Act requires that consumers be provided a notice at the beginning of a transaction of any right that the consumer has to receive any record in paper or other non-electronic form and of the consequences of withdrawal of permission to receive documents electronically. The Act makes clear that a business may charge customers who refuse to receive documents electronically a fee for that refusal or may even terminate the business relationship. As this Act by its terms is intended to preempt relevant state law, it would appear that many of the provisions of this bill would be preempted.
For these reasons, the New York Bankers Association opposes this legislation and urges that it be disapproved.
Sincerely,
Michael P. Smith President, New York Bankers Association
The Honorable Richard Platkin Counsel to the Governor Executive Chamber State Capitol Albany, NY 12224
Re: Disapproval of S. 5618 (Farley)/A. 8830 (Rules, Request of Nolan) AN ACT to amend the tax law, in relation to providing exemptions for certain credit unions from sales and compensating use taxes imposed by and pursuant to the authority of articles 28 and 29 of such law
Dear Mr. Platkin:
The New York Bankers Association opposes this legislation that would exempt State-chartered credit unions from sales and compensating use taxes. This legislation would further increase the competitive advantage already enjoyed by credit unions and send a contradictory signal to the State’s taxpayers. Our Association is comprised of the community, regional and money center banks doing business in New York State, with aggregate assets in excess of $3 trillion and more than 320,000 New York employees.
Credit unions currently enjoy a complete exemption from Federal, State and local income taxes, an exemption that has provided them with a dramatic competitive advantage over tax-paying commercial and savings banks. Banks and thrifts pay the State of New York more than $600 million per year in State income taxes alone. In addition, the Cities of New York and Yonkers receive hundreds of millions more in income tax revenue from banks and thrifts. Similarly, the Metropolitan Transportation Authority receives over $100 million more a year in income tax payments from banks and thrifts. These payments of course do not include the Federal income taxes paid by New York banks and thrifts, which totaled more than $40 billion in the five-year period from 1999 to 2003. Banks and thrifts as a result are faced with a financial burden not shared by their credit union counterparts.
This legislation would exempt existing State-chartered credit unions from State sales and compensating use taxes beginning March 1, 2008. Any federally chartered credit union that converts to a State charter after January 1, 2006 would be entitled to this exemption beginning March 1, 2006. Federal credit unions are currently exempt from sales and use taxes. While the amount of sales and use taxes paid by State-chartered credit unions is relatively small, the exemption would simply add to the already formidable competitive disadvantage faced by the State’s tax-paying commercial banking industry in competing with credit unions. In many areas of the State, the local commercial bank may be smaller than the credit union with which it competes, but pays taxes far in excess of any paid by the credit union. In the Rochester area, for example, no locally based commercial bank or thrift is nearly as large as the ESL Federal Credit Union, the largest in New York. The State should not enact competitive advantages for only one type of financial institution.
For these reasons, the New York Bankers Association opposes this legislation and urges that it be disapproved.
Sincerely,
Michael P. Smith President, New York Bankers Association
The Honorable Richard Platkin Counsel to the Governor Executive Chamber State Capitol Albany, NY 12224
Re: Disapproval of S. 5081 (Farley)/A. 8227 (Nolan) AN ACT to amend the banking law, in relation to the state charter deposit program and to repeal certain provisions of the state finance law relating to the community bank deposit program
Dear Mr. Platkin:
The New York Bankers Association opposes this legislation that would create a new State Charter Deposit Program and repeal the existing but never implemented Community Bank Deposit Program. Among other troublesome provisions, this legislation would discriminate against federally chartered depository institutions. Our Association is comprised of the community, regional and money center banks doing business in New York State, with aggregate assets in excess of $3 trillion and more than 320,000 New York employees.
This legislation would create a new State Charter Deposit Program, authorizing and encouraging the State Comptroller and the Commissioner of Taxation and Finance to deposit up to $100 million each in State-chartered banks, trust companies and thrift institutions. Eligibility for the program would be limited to State-chartered banks and thrifts that have a CRA rating of satisfactory or better. The legislation would also repeal the Community Bank Deposit Program, enacted in 2001, but never implemented.
This legislation is intended to help redress the balance of competition between State and federally chartered entities - a laudable goal, and one shared by our Association. We are working with the Banking Department and with the bill’s sponsors on other pieces of legislation and regulation that would materially enhance the State charter, providing additional competitive balance for New York banks and thrifts, but without discrimination to the national charter. Federally chartered institutions pay substantial taxes to the State of New York and make significant contributions to the State economy. They provide loans for the expansion of small businesses and for consumer transactions, as well as employing hundreds of thousands of New Yorkers themselves. While the amount of funding in the bill is relatively insignificant as a percent of total New York deposits, the principle the bill would establish is very troubling as a public policy matter.
The bill also uses CRA ratings as a qualification for participation. Our Association supports the Community Reinvestment Act and believes that it has made a major contribution to the ability of banks to serve the credit needs of their local communities. However, linking CRA ratings to State deposits denigrates from the goals of CRA because it fails to take into account the linkage of these credit services to deposits.
Drafting of this legislation was also flawed because it undermines the system established in New York for safeguarding State deposits. Every other program established by New York State that involves deposits by the State in depository institutions requires that all deposits in excess of the deposit insurance limit be fully collateralized by readily marketable securities. This legislation, by contrast, provides that State deposits could be made into institutions that have no authority to collateralize the deposits and, because of language stating that the deposit authority is “notwithstanding any provisions of law to the contrary,” would override the current requirement that the State Comptroller and Commissioner of Taxation and Finance ensure that all deposits are fully protected against loss.
For these reasons, the New York Bankers Association opposes this legislation and urges that it be disapproved.
Sincerely,
Michael P. Smith President, New York Bankers Association
The Honorable Richard Platkin Counsel to the Governor Executive Chamber State Capitol Albany, NY 12224
Re: Approval of S. 4847-A (DeFrancisco)/A. 7345-A (Weinstein) AN ACT to amend chapter 231 of the laws of 1998 amending the real property actions and proceedings law relating to mortgage foreclosure, in relation to extending the expiration of the provisions thereof; and to amend the real property actions and proceedings law, in relation to mortgage foreclosure
Dear Mr. Platkin:
The New York Bankers Association supports this legislation that would extend the effective date of Article 14 of the Real Property Actions and Proceedings Law, relating to uncontested, non-judicial commercial mortgage foreclosure, and urges that it be approved. This legislation will continue to enhance the ability of commercial lenders to extend mortgage credit in New York and facilitate the resolution of disputes over defaulted commercial mortgage loans. Our Association is comprised of the community, regional and money center banks doing business in New York State, whose aggregate assets exceed $3 trillion and which have more than 320,000 New York employees.
This legislation would extend for four years, until July 1, 2009, the provisions of Chapter 231 of the Laws of 1998, which established effective non-judicial provisions to govern uncontested commercial mortgage foreclosures. In addition, the bill clarifies a provision of that statute that provides mortgagors with notice of the intent to foreclose, making clear that the notice must be served at least ten days prior to the first service of the notice of sale.
The passage of Chapter 231 in 1998 provided, for the first time, an opportunity for lenders and borrowers to negotiate a non-judicial resolution to default on commercial mortgages in New York State. The availability of a remedy to commercial mortgage default short of judicial foreclosure has been critical in expanding the availability of mortgage credit in New York, as lenders have come to understand that they can exercise on their security through a far less time-consuming and costly procedure than judicial foreclosure. In addition, borrowers have been given additional leverage through the statute since lenders are willing to grant significant concessions to gain the certainty of remedy available through non-judicial foreclosure. A survey conducted by the Association indicates that, during the eight years that Chapter 231 has been in existence, New York State has witnessed probably the lowest incidence of commercial foreclosure than during any comparable period. Although economic conditions are clearly the principal reason for the low incidence of foreclosure, many bankers believe that the mere availability of a non-judicial foreclosure remedy has encouraged negotiations among lenders and borrowers to resolve credit problems before foreclosure. In the past, when the only remedy was judicial foreclosure, the time consumed in that process required lenders to file for foreclosure so soon after default that the opportunity for negotiation was more limited than is available under Article 14.
This legislation also clarifies a provision in Article 14 with regard to notice of intent to foreclose. Currently, the somewhat ambiguous language in Article 14 appears to state that a notice of pendency can be served on day one, the notice of intention to foreclose can be served on day one, the notice of sale can be served on day one, and the sale can be held on day thirty-one.
However, Section 1421 of the Law states that the mortgagor has forty days after receipt of the notice of intention to foreclose to seek judicial intervention. Thus, the statute should provide that the notice of intention to foreclose must be served at least ten days prior to the first service of the notice of sale. In this way, the mortgagor will be assured of the entire forty-day period within which to seek to stop the sale. This useful clarification will reduce opportunities for misunderstanding and possible litigation.
For these reasons, the New York Bankers Association supports this legislation and urges that it be approved.
Sincerely,
Michael P. Smith President, New York Bankers Association
June 28, 2005
Re: Disapproval of A. 75-A (Pheffer)/S. 4225-A (Saland) AN ACT to amend the general business law, in relation to written solicitations
Dear Mr. Platkin: The New York Bankers Association opposes this legislation that would impose several new procedural requirements for solicitations for credit protection services designed to protect credit card customers from the effects of identity theft. The bill is inconsistent with federal disclosure requirements and would be preempted for non-New York State chartered-issuers. Our Association is comprised of the community, regional and money center banks doing business in New York State, whose aggregate assets exceed $3 trillion and which have more than 320,000 New York employees. This legislation would require credit card issuers that sell credit protection services to their customers to provide a notice that the customer is not required to accept or renew the credit protection service in order to get the card and a concise statement of the customer’s rights that exist free of charge under the federal Fair Credit Billing Act. In addition, if the contract for the service is automatically renewable, the soliciting party must notify the customer at least 15 and not more than 60 days prior to the expiration of the existing contract that the contract will be renewed and the card charged. Enforcement is committed to the Attorney General’s Office. Part 425 of Title 16 of the Code of Federal Regulations contains the Federal Trade Commission’s regulations on the use of prenotification negative option plans. Section 425.1 provides, in relevant part, that it is an unfair or deceptive act or practice for a seller to offer any negative option plan that fails to comply with the provisions of the section. “Negative option plans” are defined as programs under which the seller periodically provides subscribers an announcement that they will receive certain merchandise or services unless they instruct the seller, by a date certain, not to provide the identified merchandise. This regulation governs all negative option plans such as the credit protection services described in this legislation. However, whereas this legislation would require that the notice be provided the consumer during a window extending from 60 to 15 days prior to the expiration of the existing contract, the FTC’s regulation provides that the notice must be mailed at least 20 days prior to the return date and must provide the subscriber at least 10 days in which to mail a response form. Our Association does not object to the notice provisions in this legislation in themselves, but strongly believes that they should be made consistent with federal law. In addition, we believe that they would not apply to non-New York issuers or to federally chartered entities. This competitive imbalance is unfair to New York State-chartered issuers. For these reasons, the New York Bankers Association opposes this legislation and urges that it be disapproved.
Sincerely,
Michael P. Smith President, New York Bankers Association
Federal Home Loan Bank Letters of Credit
June 28, 2005
The Honorable Richard Platkin Counsel to the Governor Executive Chamber State Capitol Albany, NY 12224
Re: Approval of A. 8064 (Nolan)/S. 4755 (Farley) AN ACT to amend the banking law and the state finance law, in relation to letters of credit from federal home loan bank
Dear Mr. Platkin: The New York Bankers Association supports this legislation that would authorize the State of New York to accept irrevocable letters of credit issued by Federal Home Loan Banks as collateral for public deposits. Municipalities within the State have been authorized to accept such letters of credit since 1992 and they have proven a safe and cost-effective alternative to some other forms of collateral. Our Association is comprised of the community, regional and money center banks doing business in New York State, whose aggregate assets exceed $3 trillion and which have more than 320,000 New York employees. This legislation would specifically authorize the Comptroller of the State of New York and the Commissioner of Taxation and Finance to accept irrevocable letters of credit issued by a Federal Home Loan Bank as collateral for the protection of the State’s public deposits. Local governments throughout the State were first authorized to accept these letters of credit in 1992, but at a steep discount to face value. In 2002, recognizing the security offered by such instruments, the State authorized Home Loan Bank-issued letters of credit to be accepted at par by the State’s municipalities. Such letters have proven safe and cost-effective alternatives to certain other types of collateral, and are becoming more widely used in the State’s depositories. For these reasons, the New York Bankers Association supports this legislation and urges that it be approved. Sincerely,
Michael P. Smith President, New York Bankers Association
Transfer-on-death security registration
June 28, 2005
The Honorable Richard Platkin Counsel to the Governor Executive Chamber State Capitol Albany, NY 12224
Re: Approval of A. 5770 (Weinstein)/S. 1396 (DeFrancisco) AN ACT to amend the estates, powers and trusts law, in relation to enacting the transfer-on-death security registration act
Dear Mr. Platkin:
The New York Bankers Association supports this legislation, that would authorize owners of investment securities to register the securities in transfer-on-death form, allowing them to identify beneficiaries to whom the securities would transfer on the death of the owner. The legislation will provide a more attractive alternative than joint tenancy for securities holders to facilitate securities transfers on death and allow New York to be competitive with other states that provide this option. Our Association is comprised of the community, regional and money center banks which do business in New York State and which have, in the aggregate, more than 320,000 New York employees and assets in excess of $3 trillion.
This legislation would establish a procedure by which the owners of investment securities could register them in transfer-on-death form. The procedure would be available for securities held in both sole ownership form as well as joint tenancy. Currently, the most commonly used option for New Yorkers who wish to pass title to securities outside of probate is to register the securities jointly with the intended beneficiary. However, joint registration can seriously complicate the ability to buy and sell securities, and passes all existing ownership rights to a joint tenant, irrespective of whether the owner intended such rights to vest prior to the owner’s death. Joint tenancy may also create significant problems in the event of the incapacity or bankruptcy of one of the tenants and, when the tenants are not married, may impose significant income or transfer tax costs.
This legislation is based on the Uniform Transfer-on-Death Security Registration Act promulgated by the National Conference of Commissioners on Uniform State Laws and already adopted in 47 states. It builds on existing law authorizing the transfer of other types of financial assets on death. In 1998, New York adopted a statutory “Totten Trust” account bill (Chapter 518 of the Laws of 1998), clarifying the rights of bank depositors to register bank accounts in transfer-on-death form. Transfer-on-death registration of U.S. Savings Bonds has been available for more than 50 years and life insurance proceeds, retirement benefits and certain mutual funds have traditionally passed by this method. Our Association has consistently supported these efforts to provide additional customer convenience. This legislation would allow securities owners to avoid some of the problems of joint tenancy registration of securities while retaining flexibility in designating beneficiaries. Control of the investment securities registered in transfer-on-death form would clearly remain with the original owner or owners and the owner could, at any time up to death, change the beneficiary or cancel the transfer-on-death designation. For these reasons, the New York Bankers Association supports this legislation and urges that it be approved.
Sincerely,
Michael P. Smith President, New York Bankers Association
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