Credit Union Legal Update – Spring 2010

    By Credit Union

    Warnings Regarding Third-Party Vendor Relationships

    Due diligence of third-party vendors continues to be a hot NCUA examination issue. NCUA stressed that their role is not to impede third-party vendor relationships, but instead to help ensure credit unions understand the risks that are properly presented and carefully evaluated. Third-party vendor relationships, according to NCUA, provide critical access to products and services by expanding delivery channels, offering cost-effective products and services, and managing programs that require external expertise. However, all federally-insured credit unions will be held accountable or responsible for conducting a thorough risk assessment, due diligence and monitoring of third-party vendor relationships.

    Supervisory Letter 07-01 provided detailed guidance. The letter encouraged credit unions to address at least the following: risk assessment and planning; due diligence; risk measurement, monitoring and control. The evaluation of new and current vendors includes different components. At a minimum, a due diligence review should take into account the critical nature of the service, the level of expertise exhibited by the vendor, staffing changes, economic and regulatory changes, and risk mitigation and strategies associated with a vendor oversight. Legal review and/or a legal opinion is strongly encouraged. It is clear that upcoming examinations will focus on third-party vendor relationships and adherence to the NCUA guidelines. The detailed 9-page Supervisory Letter is accompanied by 2 appendices. Rarely does a week pass without this author being asked to review a legal contract on behalf of a credit union.

    This brief article provides only an executive summary of the due diligence required for contract issues and legal review.

    Typically, at a minimum, third-party vendor contracts should address at least the following:

    • Scope of arrangement, services offered, and activities authorized;
    • Responsibilities of all parties (including subcontractor oversight);
    • Service level agreements addressing performance standards and measures;
    • Performance reports and frequency of reporting;
    • Penalties for lack of performance;
    • Ownership, control, maintenance and access to financial and operating records;
    • Ownership of servicing rights;
    • Audit rights and requirements (including responsibility for payment);
    • Data security and member confidentiality (including testing and audit);
    • Business resumption or contingency planning;
    • Insurance;
    • Member complaints and member service;
    • Compliance with regulatory requirements;
    • Dispute resolution; and
    • Default, termination, and escape clauses.

    NCUA reminded federally-insured credit unions that, in many cases, early termination, escape clauses and default terms are negotiable, notwithstanding the objections of a third-party vendor. NCUA also noted that, in addition to a legal review of contracts and written agreements, it may be prudent for credit unions to obtain a legal opinion about any services provided by a third party vendor.

    A copy of this supervisory letter can be downloaded in PDF format by clicking here.

    Virginia Uniform Power of Attorney Act

    A Virginia version of the Uniform Power of Attorney Act will become effective in July 2010. It includes a number of important changes and, it is not too early to start becoming familiar with it. Like most uniform acts, the new law creates only default rules; therefore, it is possible to draft around almost all of the provisions of the Act. Under the Act, a new Power of Attorney must specifically revoke a former Power of Attorney; otherwise the former Power of Attorney and the new Power of Attorney are both effective. This could result multiple agents at one time, and possibly even multiple agents taking inconsistent actions. If a principal names multiple agents in his Power of Attorney, the agents may act independently of one another unless the Power of Attorney specifically provides that the agents must act jointly. The new Act includes a provision that the agent has the duty to attempt to preserve the principals estate and estate plan. The Act includes a laundry list of grants of specific authority that can be incorporated in a Power of Attorney by reference to the Code section listing the powers. However, other powers of the agent must be added to the Power of Attorney by specific mention in the document, including gifting, revising inter vivos trusts, changing beneficiary designations, delegating authority and transferring property into the name of the agent. The new Act also will permit a statutory short-form Power of Attorney, such as that currently used in New York.

    Many credit unions accept Powers of Attorney. If a Power of Attorney applies to a resident of Virginia, a credit unions legal counsel should be consulted to confirm the enforceability of the Power of Attorney.


    On an annual basis, it is advisable for a Credit Union Board of Directors to review its code of conduct or code of ethics. It is also very important for the Board to review the Credit Unions insurance ‘package of protection.’ As you may recall, several years ago, NCUA required such an insurance review to be part of an annual checkup. They have deregulated that requirement, but it is one that makes a lot of sense. Please review your coverage. Insurance is becoming increasingly costly, and some credit unions have found that increasing their deductible results in a significant cost savings, or perhaps you need additional coverage. Over the past several years, there has been an increase in litigation brought against credit unions, their directors, volunteers and employees. As reported in the press, CUNA Mutual has sued their insured.

    Board members may ask about indemnification. As you know, credit union standard bylaws provide for an indemnification provision. The NCUA Rules and Regulations also address indemnification rights for federal credit unions. Language pertaining to indemnification in the Regulations points in the direction of state law or the Model Business Corporation Act.

    The indemnification question also causes Boards to ask about the deductible and how, in the event that they get sued, the deductible would be addressed. The directors, volunteers and employees policy includes a deductible. The amount of loss and defense costs that is part of the deductible is usually the personal responsibility of the individual Board member, unless and except there is an indemnity agreement between the Credit Union and the director, volunteer or employee. Such an agreement could be changed by any future Board, but it is advisable to at least include in the minutes the goal and intention of the Board of Directors to pay the deductible on behalf of any individual that is subject to litigation. This goal could be part of your annual checkup, and the policy and direction of the Board could be reaffirmed on an annual basis.

    Check the Credit Unions package of protection and address the findings with your Board, as well as the recommendations. Seek reaffirmation from them that it is the decision of the Board of Directors of the Credit Union that there will be full indemnification offered to all directors, volunteers and employees. Although it is the personal responsibility of an individual to pay deductibles regarding covered insurance claims, it should be the policy of the Credit Union that the deductibles shall be paid by the Credit Union and not by any named individual.

    Most certainly, if you have any questions about any of these items, please contact your credit union attorney.

    Loan Modifications That Require Adverse Action Notices Under Regulation B

    The Federal Reserve Board (FRB) is increasingly concerned about consumer compliance regarding adverse action notices under Regulation B (Equal Credit Opportunity) and recently issued an Alert. The Alert provided guidance as to when an adverse action notice might be required for loan modification denials, including those made under the U.S. Department of Treasurys program, Making Home Affordable. Regulation B generally requires an adverse action notice when a creditor declines an application for an extension of credit from a borrower that is not currently delinquent or in default on that loan.

    The FRB provided a detailed analysis of whether or not an action constitutes an ‘extension of credit.’ Under Regulation B, ‘credit’ includes ‘the right granted by a creditor to an applicant to defer payment.’ An ‘extension of credit’ is defined as ‘the granting of credit in any form, including but not limited to the refinancing or renewal of credit or the continuance of existing credit without any special effort to collect at or after maturity.’ Under the Making Home Affordable modification program, often there is the request to defer payment of a debt or reduce the interest rate or extend the term. The FRB concluded that such actions would constitute an ‘extension of credit’ and, therefore, be subject to Regulation B.

    Another question considered by the FRB was one of whether or not there is an ‘application.’ If there is or may have been an extension of credit (as noted above), the next step is to determine whether there is an application. Whether a borrowers request for a mortgage loan modification is an ‘application’ for extension of credit depends on the creditors application process. If a borrower submits sufficient information for the mortgage loan to be evaluated and a loan modification considered, then the borrower has submitted an ‘application’ for an extension of credit.

    The FRBs analysis was one, then, of whether or not there is an ‘adverse action’ on the application. Clearly, Regulation B provides that an ‘adverse action’ includes ‘a refusal to grant credit in substantially the amount or on substantially the terms requested in an application.’ If the request for loan modification is considered and then denied by the credit union, the denial constitutes an adverse action on an application. Compliance is mandated with Regulation Bs adverse action notice requirements.

    Now what about the situation where the borrower is currently delinquent or in default on the loan and requests a modification? This is another issue that was considered by the FRB. Under Regulation B, a creditor is not required to provide an adverse action notice to a borrower whose account is currently delinquent or in default.

    A copy of the notice from the FRB can be downloaded in PDF format by clicking here.

    NCUA on Residential Real Estate Mortgage Loan Modification Programs

    In response to unprecedented levels of mortgage loan defaults and foreclosures, NCUA continues to offer considerable advice, guidance and direction to credit unions. Previously in our Credit Union Legal Update we addressed loan modifications. In an NCUA letter (09-CU-19) to all federally-insured credit unions, NCUA encouraged all to be proactive and identify ‘at risk’ loans. They mentioned that NCUA examiners were provided guidance in evaluating the safety and soundness of residential loan modification programs. NCUA provided a copy of their supervisory letter that had been provided to all examiners. In fact, NCUA informed the examiners in their supervisory letter that loan modification options may include (but are not limited to) any one, or a combination, of the following:

    • Reduction in the interest rate;
    • Extension of the maturity date;
    • Principal forbearance or forgiveness;
    • Conversion of the interest rate from adjustable to fixed;
    • Allowing interest-only payments for a period of time;
    • Balloon options;
    • Waiver of late fees; and
    • Reduction or capitalization of past due amounts, accrued interest, taxes, insurance or fees.

    NCUA examiners were reminded that some loan modifications could allow the credit union to share in any future appreciation of the collateral property in exchange for a reduction in principal. Credit unions have now been officially provided with so much flexibility that they can do anything to avoid ‘taking the keys to the house.’

    A copy of NCUA Letter 09-CU-19 can be downloaded in PDF format by clicking here.

    Making Home Affordable Programs

    In addition to the other articles in this Credit Union Legal Update pertaining to loan delinquencies and loan modifications, we bring to your attention a change in the procedures of the Department of Treasury. Some credit unions are participating in the Department of Treasurys program commonly known as Making Home Affordable. The program has proceeded with some difficulty. Some borrowers have complained that banks often lost paperwork. Banks have complained that borrowers have failed to submit their documentation on time or it has been incomplete.

    Beginning June 1, 2010, the Department of Treasury has mandated certain documentation requirements. Borrowers must prove up front that they qualify for mortgage help. Borrowers must provide at least two current paystubs and other paperwork before any payments can be lowered. Those credit unions that are not participating in the Making Home Affordable program may consider requiring at least two paystubs from their members before pursuing loan modification discussions.

    The initial package that borrowers will be required to provide under the program includes:

    • a request for modification and affidavit that gives financial information including the cause of the borrowers hardship;
    • a signed IRS Form 4506T or 4506T-EZ (Request for Transcript of Tax Return); and
    • income verification documentation that is no more than 90 days old.

    Servicers must acknowledge receipt of the package of documents within 10 days. Within 30 days they must review the package for completeness and either send the borrower a trial period notice, a rejection, or a notice that the package is incomplete. If the package is incomplete, the borrower must be given two opportunities to supply the missing documents.

    Income verification can consist of: two recent pay stubs; unaudited profit-and-loss statements from self-employed individuals; evidence of other income such as commissions or tips; evidence of government benefits; tax forms, leases or other documents showing rental income; and divorce documents showing alimony or child support (if the borrower chooses to rely on such income).

    Servicers will be required to obtain:

    • a credit report;
    • verification of occupancy; and
    • documentation of the property value.

    Residential Mortgage Processing and Servicing: Credit Union or CUSO?

    There is a long history and tradition of credit unions sharing and cooperating amongst themselves. Some maintain that this spirit of cooperation has passed. Perhaps not. NCUA was recently asked about an approach by a federal credit union to provide residential mortgage loan processing and servicing to smaller credit unions on a correspondent basis. It was argued that this would be covered under the incidental powers rule where the credit union receiving the service would fund the loan and the loan would close in the funding credit unions name. NCUA concluded that this would be a permissible activity and a credit union could adopt correspondent mortgage processing and servicing under the incidental powers clause. However, all applicable NCUA regulations, policies and legal opinions, as well as state and federal law, must also be followed.

    Under the facts stated in the letter, a large federal credit union sought to enter into agreements with smaller state- and federal-chartered credit unions to process and underwrite residential loans to members of those smaller credit unions. The loans would be in compliance with Freddie Mac and all applicable mortgage insurer guidelines. The smaller credit unions would fund the loans for their members. The loans would close in the name of the smaller credit unions. The agreement by and between the credit unions would also provide that, upon a loan closing, the larger federal credit union would purchase the loan from the smaller credit union and sell it to Freddie Mac, with the larger federal credit union retaining the servicing rights. Previously, NCUA had found that correspondent services are those services that a federal credit union is authorized to perform for its members or as a part of its operation and that a federal credit union may provide that service to other credit unions. In 1995, NCUA concluded and issued a legal opinion that the correspondent service agreements to facilitate a federal credit union providing mortgage processing services to aid small credit unions was permissible. This finding was reaffirmed and a letter issued by NCUA on December 9, 2009.

    The key to the NCUA decision was the fact that, while the larger federal credit union would provide processing and servicing, the smaller credit unions would fund the loans and the loans would close in their names.

    NCUA did not address, however, the longstanding credit union policy to use CUSOs to underwrite, process and service the mortgage loans. CUSOs have the policies and procedures in place and their operations are very sophisticated. Credit Union Mortgage Association ( is a widely respected CUSO and is a stellar example of an alternative to that procedure which NCUA considered. For further information, please contact Scott Toler at

    A copy of this NCUA letter can be downloaded in PDF format by clicking here.

    County Ownership of a Federal Credit Union

    In these troubled economic times, many are concerned about expenses. County governments are certainly no exception. Apparently, Miami-Dade County in Florida is troubled by increasing fees and commissions charged against their interest income on funds deposited at federal financial institutions. The County recently wrote NCUA and sought guidance regarding the legality of a County forming its own federal credit union by using public funds to form and otherwise create, own and operate the credit union. NCUA Deputy General Counsel, Michael McKenna, must have smiled as he responded to the inquiry and issued an opinion of the Office of General Counsel for the NCUA. He reminded all that a federal credit union is a non-profit, cooperative financial institution owned by its members. Accordingly, the NCUA held that a County government cannot ‘own’ a federal credit union. A County government, however, depending on the federal credit unions field of membership, could join a federal credit union, be a sponsor and assist in the credit unions organization and operation. As to the funding sources of credit union sponsors, NCUA did not take a position.

    This NCUA letter provides an outstanding foundation from an educational standpoint on the overall policies and procedures that need to be addressed in the formation of a credit union. However, there may also be some lessons learned for credit unions. If Miami-Dade County is concerned about the fees and commissions charged against its interest income on funds deposited at financial institutions, the assumption is that the deposits have been made at banks. Perhaps credit unions should consider reminding County governments that, in many cases, a credit union can be a depository financial institution for a County government and that often credit union fees are lower than banks and dividends paid are higher than banks.

    A copy of this letter can be downloaded in PDF format by clicking here.

    Reverse Mortgage Products Face New Regulations

    The Federal Financial Institutions Examination Council (FFIEC) posted a notice in late 2009 that has received little attention. They announced the possibility of additional consumer regulations. The FFIEC requested comments on proposed guidance for managing the compliance and the reputation risks regarding reverse mortgage products. Reverse mortgages are loans that convert home equity into payments from a lender. Generally speaking, these are loans that are available to homeowners that are 62 or older. Typically, reverse mortgages do not require any payments from borrowers as long as they continue to live in the homes. Many credit unions are currently either offering reverse mortgages or considering offering reverse mortgage loans.

    According to the FFIEC, reverse mortgages present safety and soundness challenges because they rely primarily on the sale of the collateral property for repayment. However, with the concern by FFIEC that seniors may be vulnerable to misleading marketing techniques, the FFIEC sought comment on the following compliance and reputational risks:

    • Consumers may enter into reverse mortgage loans without understanding the costs, terms, risks and other consequences of these products or may be misled by marketing and advertisements promoting reverse mortgage products;
    • Counseling may not be provided to borrowers or may not be adequate to remedy misunderstandings;
    • Appropriate steps may not be taken to ensure that consumers will be able to pay required taxes and insurance; and
    • Potential conflicts of interest and abuse of practices may arise in connection with reverse mortgage transactions, including the use of loan proceeds in the sale of other investment and insurance products.

    The opportunity to comment to the FFIEC ended on February 16, 2010. In 2010 credit unions will probably encounter yet another regulatory change that could be costly, time consuming and perhaps burdensome. Stay tuned.

    Feasibility Study New Branch

    There are at least two types of analysis that credit unions should undertake when considering a branch market expansion. A branch or main office feasibility study is used to determine the best location for either a new branch, a main office, or a relocation of a credit unions existing branch or main office. Generally such a study will focus on a specific geographic area and has a short term goal of less than 3 years as its target for implementation.

    If the credit union desires to take a longer term, more strategic look at its market for expansion opportunities, using the same basics as the feasibility study but drawing a broader set of conclusions including timing of expansion over the desired planning horizon, a Strategic Retail Delivery Plan should be considered. This takes a look at your overall strategic plan for 10+ years and develops a road map for your expansion strategy.

    A Strategic Retail Delivery Plan begins with a discussion with a credit unions management team to insure that the analysis and conclusions dovetail with the institutions strategic direction. When this has been established, a thorough objective analysis of the market is undertaken including such items as: data and maps of member households, loans, and deposits; demographics number of households, growth, median household income, lifestyles, and usage of financial products and services; and the competitive market deposits and trends and market leaders.

    Having established a set of potential locations, a credit union can more easily understand the market and gain a first hand understanding of the critical subjective factors that will play a role in the success of the potential office. Included in the analysis are such factors as drive times, accessibility and visibility of the various hubs/locations, physical conditions of the locations, potential for changes in the street/highway paths and configurations, and overall traffic patterns and bottlenecks and available real estate opportunities.

    Whether expanding your retail delivery channels by one or more branches or relocating existing facilities; understanding the market environment is critical to ensure the success of your investment. In these times of economic challenges and change, the market is very different than it was, even two to three years ago. For more information on developing your market expansion strategy, you can contact Joe DiAntonio with KDA Holdings, Inc. or other equally qualified design-build companies.

    More on the Telephone Consumer Protection Act

    The Telephone Consumer Protection Act (TCPA) provides that it is unlawful to use any fax machine, computer or other device to send an unsolicited advertisement to another fax machine. An ‘unsolicited advertisement’ is defined as ‘any material advertising the commercial availability or quality of any property, goods, or services which is transmitted to any person without that persons prior express invitation or permission, in writing or otherwise.’ A fax that contains only information, such as industry news, articles, legislative updates or employee benefit information, is not prohibited by the TCPA.

    Some recent litigation was reported over the issue of unsolicited faxes. In this case, the faxes were sent by a chiropractic firm to personal injury attorneys. The Court held that these unsolicited faxes were not ‘advertisements.’ Some of the key considerations for the Court were the fact that the faxes contained medical information of interest to personal injury lawyers, the firm issued its faxes on a regular schedule, the text of the faxes changed from issue to issue, and the faxes were directed to specific regular recipients.

    The TCPA is often a difficult law to interpret. For those credit unions that are advertising by fax, computer or other device to a receiving fax machine, legal counsel should be consulted so as to avoid or at least minimize the possibility of litigation.

    Regulatory Compliance Services by a CUSO

    It is a well-known fact that a federal credit union may only invest in, lend to or contract with a CUSO that is primarily serving credit unions and engaged in activities and services related to the routine daily operations of credit unions. Section 712.5 of the NCUA Rules and Regulations provides a list of preapproved categories of permissible Credit Union Service Organization (‘CUSO’) activities. Regulatory compliance services are not specifically identified within any preapproved activity. Recently, NCUA was asked if a CUSO can provide regulatory compliance services for credit unions. NCUA responded in the affirmative.

    The foundation to the request to NCUA was that a group of credit unions was considering forming a CUSO to provide regulatory compliance services for credit unions. The CUSO would assist credit unions, primarily smaller credit unions, in complying with consumer protection and other applicable regulations. The CUSO would review credit union documents and procedures and provide guidance on meeting compliance obligations.

    Although regulatory compliance services is not in the NCUA list of preapproved categories, NCUA concluded that the list was basically illustrative and not exhaustive. Clerical, professional and management services, along with internal audit for credit unions or research services, were already preapproved CUSO activities. To the extent that compliance audits of credit unions and research apply, NCUA concluded that regulatory compliance services must also fall within a preapproved category.

    Some may view this as a reach for NCUA, but others will maintain that the regulatory compliance burden has become so great that smaller credit unions truly need assistance.

    The challenge for the various trade associations and leagues is that they are prohibited from providing advice. NCUA similarly cautioned that the CUSO, if formed, must be careful that they are not providing legal advice that would require an attorneys license under state law. In this case, the CUSO was prepared to hire or keep an attorney on retainer as necessary under applicable law to ensure that the CUSOs non-lawyer compliance staff is not engaging in the unauthorized practice of law. However, this might be a challenge, since many state laws are impacted and the CUSO might need a review of local state law by an applicable licensed lawyer, rather than just a lawyer well-versed in regulatory compliance.

    A copy of this NCUA letter can be downloaded in PDF format by clicking here.


    During these troubled economic times, credit unions have seen an increase in garnishment summonses or subpoenas. A recent case litigated by Kaufman & Canoles is of significant interest and will benefit many financial institutions. An employee of our client, BB&T, was served with a garnishment summons. At the time when the employee of the Bank received the summons or subpoena, there were sufficient funds in the customers account to pay off the judgment. The garnishment summons was not answered by the return date and the creditor faxed a copy of a garnishment summons to the ‘Deposit and Compliance Department’ of BB&T. The Bank then promptly sent a check for a minimal existing balance. A subpoena duces tecum for all of the Banks records was then served on the Bank. The question of service of process was litigated, and it is an issue where many financial institutions can learn and benefit. The Code of Virginia provides that the service of a garnishment summons must be served on an officera designated employee or a managing employee. Banks, as well as credit unions, have many employees, and serving a summons according to the Court must be directed to a certain or specified employee, not just any employee. The Court held that the Bank should not be punished for failing to comply with an improperly-served summons. The judge ruled that the consequences of not strictly complying with the garnishment statutes ought to be on the creditor and not the Bank. Credit unions should consider establishing a policy as to how summonses or subpoenas should be handled, and the policy should be widely distributed throughout the credit union.

    Code of Ethics? Conflict of Interest? Disqualification?

    Often, Boards of Directors are confronted with ethical issues and considerations. As one of the primary fiduciary duties of a Board, they need to be conscious of any and all potential conflict of interest situations. Recently, NCUA was contacted by the Polish & Slavic Federal Credit Union regarding conflict of interest matters, as well as other significant issues for that credit union. The Office of General Counsel for the National Credit Union Administration issued a thorough and comprehensive opinion letter which should be able to provide further guidance for all credit unions.

    The NCUA stated that a federal credit union must determine whether a matter before the Board will affect the organizations pecuniary interests. If so, the Board then must determine whether the decision would affect the Directors interests in the organization.

    The standard NCUA Federal Credit Union Bylaws prohibit a Director, Committee member, officer, agent or credit union employee from participating, directly or indirectly, in matters affecting his or her pecuniary interests or personal interests.

    Whether a conflict of interest exists, requiring a director to be disqualified depends on the particular facts and circumstances involved. Sometimes the determination is obvious; for example, a Director should not vote on whether a credit union should enter into a contract with a company where the Director is a sole or majority owner. Other situations are not so clear and conspicuous and need thorough and careful analysis by the Director, as well as the Board. Most certainly full and proper disclosure is required. As NCUA notes, ‘the conflict of interest provision in the bylaws requires a real or actual effect, not a hypothetical or speculative effect’ on the individual or the organizations interests in order for a conflict to exist.

    NCUA concluded that directors may make decisions for a credit union that may affect their interests, and even the pecuniary interests of an organization in which they have interest. For example, the directors most certainly may establish dividend rates and, as members, they will benefit. Such a decision, however, is affecting all members, not the particular or direct interests of the director.

    It is for the reason of potential conflicts of interest, as well as disqualification, that many Boards review, at least on an annual basis, their code of ethics. It is often suggested that the Board of Directors, on an annual basis, sign a statement reaffirming that they have read the credit unions Code of Conduct. They should reaffirm their commitment to avoid any conflict of interest or the appearance of a conflict of interest and, again, a personal affirmation of this policy.

    A copy of this opinion of the Office of General Counsel of NCUA can be downloaded in PDF format by clicking here.

    Internet Social Networking and Blogging Policies

    Have you tried LinkedIn? Have you tried Twitter? How about Facebook or MySpace? Does your credit union have a policy on internet social networking and blogging? How does your credit union view social networking sites? Can the employees access these sites during work? How are the sites policed or monitored?

    The casual and informal nature of many social media communications could cause an author to forget that a business correspondence is taking place and ‘regulations’ or policies might apply to the ‘message.’

    Some credit unions view social networking sites, personal websites and blogs very positively. They respect the right of employees to use such sites on their personal time as a medium of self-expression. However, it may be a concern if an employee chooses to identify himself or herself as an employee of a particular credit union on such internet venues. Some readers may view the employee as a spokesperson or representative of the credit union. Several credit unions have adopted guidelines for employees to observe when referring to the credit union, or credit union products, services, programs or activities, as well as other relevant information in a blog or internet social networking site.

    The following is a sample guideline, or at least several of the issues to consider.

    • Employees must at all times maintain confidentiality of member information;
    • A member of the credit union should never be named in any internet social networking or blog posting;
    • It would be a breach of confidentiality to refer to a specific member as being a member of the credit union;
    • No references should be made to member contacts or member business, even in the most general of terms;
    • There should be no public reference to any credit union-related cash or security procedure;
    • The employees must be respectful in referring to the credit union on a social networking site, personal website or blog;
    • The employees should refrain from disparaging or discrediting the credit union;
    • There should be no harassment of any employees; and
    • Employees must not post pictures of members or other employees taken at the credit union without obtaining the express written permission of those pictured.

    The above policies could also apply to the credit unions vendors and other organizations. They are just some of the suggested topics or issues to be considered in a social networking policy. Credit unions are encouraged to consult their legal counsel regarding the very significant labor and employment matters that may apply to social networking issues.

    Why Homeowners Walk Away From Their Mortgage Loan

    Given that homes in numerous parts of the country have lost more than 30% to 40% of their value, many homeowners say that they would simply walk away from their loans without fear of repercussions. A new paper entitled ‘Moral and Social Restraints to Strategic Default on Mortgage’ carefully studies and analyzes mortgage loan defaults and the views of consumers who just merely turn in the keys to their homes. By using new survey data, the paper estimates that more than a quarter of defaults on mortgage loans are strategic, planned and determined, especially when home values have fallen by more than 15%.

    According to the researchers, moral and social variables play a significant role in predicting strategic default. People surveyed who said it was immoral to default were 77% less likely to declare their intention to do so. People who knew someone who defaulted were 82% more likely to say that they would default themselves. The predisposition to default increases with the number of foreclosures in the same zip code.

    The report gives statistics that are particularly of note are as follows:

    • People under the age of 35 and over the age of 65 were less likely to say it was morally wrong to default compared to middle-age respondents;
    • People with higher education and certain minority groups were less likely to think it is morally wrong to default; whereas people with higher income were more likely to think it is morally wrong; and
    • Default is considered less morally wrong in the United States Northeast and West.

    The survey was conducted by the Financial Trust Index in conjunction with the Kellogg School of Management at Northwestern University. To assess the frequency in determinations of strategic default, the researchers included variables and surveys conducted with more than 1,000 individuals over two two-week periods in December 2008 and March 2009.

    For information on the survey findings or to read the entire paper, a copy can be downloaded in PDF format by clicking here.

    26th Annual Employment Law Update – Your Employment Law Survival Kit

    On April 22nd, the K&C Employment Law Team will host the second showing of the 26th Annual Employment Law Update: Your Employment Law Survival Kit at the Greater Richmond Convention Center. The 26th Annual Employment Law Update is designed to provide employers with an employment law survival kit, particularly during these tough economic times. Anyone involved in employment decisions and/or practices should attend. In addition to a general update, all attendees will be given the opportunity to have specific employment law questions answered by specialists in the field.

    Attendees will select their choice of several of our educational workshops. Topics include: Handling a Government Investigation, Controlling Workers Compensation, Effective Performance Reviews, Drafting/Updating Employee Handbooks, and more. For more information, contact Kerry Martinolich at (757) 624-3232 or (804) 771-5722.

    This program has been approved for 5 credit hours toward PHR and SPHR recertification through the Human Resource Certification Institute (HRCI). For more information about certification or recertification, please visit the HRCI homepage at

    The contents of this publication are intended for general information only and should not be construed as legal advice or a legal opinion on specific facts and circumstances.

    The contents of this publication are intended for general information only and should not be construed as legal advice or a legal opinion on specific facts and circumstances. Copyright 2024.