Powers of attorney and subpoenas present risks and potential liabilities for credit unions. When presented with a power of attorney, credit unions must verify the document is valid and the agent's authority is not terminated. Credit unions should establish policies for reviewing powers of attorney to minimize fraud risks. When served a subpoena, credit unions must comply with applicable state and federal laws while protecting members' privacy. Procedures are needed for timely and secure response to subpoenas and requesting reimbursement of costs.

1. Powers of Attorney and Subpoenas –
The Risks, Abuses and Potential
Liabilities to Credit Unions
NAFCU
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2. E. Andrew Keeney, Esq.
Kaufman & Canoles, P.C.
150 West Main Street, Suite 2100
Norfolk, VA 23510
(757) 624-3153
eakeeney@kaufcan.com
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3. Demographics
• U.S. population over the age of 65 is expected to
double within the next few decades
• Some studies report that as many as 40% of the
individuals aged 85 and older will develop
Alzheimer’s
• With improvements in medical treatment, patients
often survive strokes, but not always with their
faculties intact
• A power of attorney provides a form of “insurance”
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4. What is a
Power of Attorney?
• A writing to an agent to “stand in the shoes” or to act
in the place of the principal for financial matters
• Not necessary to use the term power of attorney
• Typically see spouse to spouse, parent to child or
other family relationship
• Previously, powers of attorney became ineffective
upon principal’s incapacity or death
• Powers of attorney that survive principals’ incapacity
become known as durable powers of attorney
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5. Why Use a
Power of Attorney?
• Incapacity or disability
• Aging
• Illness
• Foreign travel (i.e. deployment)
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6. What Does a Credit Union Do
When Presented With a
Power of Attorney?
• Uniform Power of Attorney Act – credit union can
accept a power of attorney, in good faith, as long as
the credit union has:
– No knowledge that the power of attorney has been forged,
void, invalid and terminated; and
– No knowledge that agent’s authority is void, invalid or
terminated; and
– No knowledge that agent is exceeding the authority granted
in the power of attorney
• Practical considerations – credit union due diligence
is a good business practice
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7. Types of Durable
Power of Attorney
• A general durable power of attorney grants
the agent the authority to do virtually anything
• A special durable power of attorney limits the
authority of the agent to one or more specific
transactions
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8. How to Create a Durable
Power of Attorney
• Must be in writing
• Most states require language similar to: “This
power of attorney shall not be affected by
subsequent disability or incapacity of the
principal or lapse of time”
• There are exceptions – check your state law
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9. Does the Member Have the Legal
Capacity to Execute a Durable
Power of Attorney?
• Principal must have the capacity to delegate an act or
a transaction
• Many adults believe or have the legal presumption
that all adults are presumed to have legal capacity
• Definition of incapacity varies from state to state
• Potential questions to ask:
– Does the member know who his or her agent is?
– Does the member know the names of their family members?
– Does the member understand the consequences of his
actions?
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10. What If the Durable Power of
Attorney Appoints Co-Agents?
• Common practice since parents want to name
all their children as co-agents to avoid
showing favoritism
• Potential conflicts when co-agents act in
perhaps different directions
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11. Form and Execution
• Contains words to show the principal’s intent – no termination
upon disability
– Some states only require a signature
– Other states allow for an individual directed by the principal to sign
the principal’s name
– In some states, there is no requirement for a notary
• Presumption of genuineness if the signature is acknowledged
before a notary
– Some states require an agent execute an acknowledgement before
he will have authority to act under the durable power of attorney
– Some states require that the durable power of attorney be
witnessed or executed in the same manner as a will or deed
– Sometimes states prohibit the witnesses from being related
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12. Form and Execution (cont.)
• Execution requirements can cause problems
where the DPA is drafted and executed in
one state, but must be used in another state
• Safest approach is for the principal’s
signature to be witnessed by two unrelated
and disinterested witnesses and the
signatures of the principal and the witnesses
to be notarized with a seal attached
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13. Revocation or Termination
of an Agent’s Authority
• Inform the agent of revocation
• Destroy all the originals
• No legal or formal requirements
• How does a credit union protect itself?
– How about an affidavit or letter executed by the agent stating
the agent does not have actual knowledge of the termination
of his authority by revocation or the principal’s death?
• The trend in the law is to afford more protection for
financial institutions and other third parties
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14. What Are the Risks
for Credit Unions?
• Although increased acceptance of POAs by the public, an increased
risk of liability if a POA is not recognized by credit union. NEED A
VALID REASON
• Examples
– Fraud
– The agent’s authority has been revoked
– Agent is exceeding the authority granted to him
– Principal not a member
– Request for certification refused
• Standards to refuse include requirement for reasonableness, good
faith
• Internal procedures in place for reviewing and accepting DPAs
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15. Other Suggestions
to Minimize Risk
• Require the POA to be executed on a credit union
form
• Limit the types and amounts of transactions an agent
may engage in at the credit union
• Require additional information
– an affidavit that the POA or the agent’s authority has not
been revoked
– any doubt, the credit union may decide to refer the matter to
their legal counsel for review and comment
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16. Checklist for Review
• Does the POA comply with the POA legal execution
requirements (signature, witnesses, notary
acknowledgement)?
• If the POA must be recorded, does it comply with the
recording rules?
• Was the principal competent to sign the POA?
• Does the DPA comply with “durability requirements”?
• Is the DPA effective immediately?
• Is the principal alive?
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17. Checklist for Review (cont.)
• Whom did the POA name as the agent?
• Has the agent been identified?
• If a successor agent is acting, have the conditions to
the agent’s succession occurred?
• If there are multiple agents, must they act jointly, by
majority decision, or may they act independently of
each other?
• Has the POA been terminated or revoked?
• Does the POA contain a termination date?
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18. Checklist for Review (cont.)
• Would it be advisable to obtain an affidavit from the
agent?
• Does the POA expressly authorize the agent to do
what he seeks to do?
• Are there statutory requirements or restrictions on the
action the agent wishes to undertake?
• Does the POA set out any restrictions, limitations or
exclusions on the agent’s authority to act?
• Are there any unusual facts or matters present that
might indicate the POA should not be accepted?
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19. Effect of Death
• A durable power of attorney is automatically
invalidated by the death of the principal
• Exceptions:
• usually, if the agent does not have actual notice of the death
or revocation of the power of attorney
• good faith
• transaction in process
• Hold harmless and indemnification agreements by
credit union
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20. Subpoenas
The Risks, The Abuses,
The Potential Liabilities
to Credit Unions
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21. Subpoenas
• Types of subpoenas
• When and how must a credit union respond
to a subpoena
• Compliance issues
– State law
– Federal law
– Privacy concerns
• Reimbursement for costs and expenses
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22. • Subpoena is an order directed to the credit union or
their agent that requires attendance at a particular
time and place to testify as a witness
OR
• To bring with the credit union’s agent, books,
documents, records or other filings under their
control to produce as evidence
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23. Types of Subpoenas
• Most common – Subpoena duces tecum
– Request for production of documents, records and
other information
• Witness Subpoena
– Summons an individual to testify before a court or
a grand jury
• Garnishment Subpoena
– Either to enforce a garnishment order or to seek to
garnish money from a member’s account
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24. Types of Subpoenas (cont.)
• Subpoena from State’s law enforcement officer
– Criminal proceeding to determine if probable cause exists
• Subpoena from family law attorney
– Seeks documentation regarding adverse party’s financial
information and assets
• Subpoena pertaining to credit union litigation
– Discovery process in litigation
• Subpoena for attendance of a witness or custodian of
records
• Other – Department of Human Services
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25. Receipt of a Subpoena
• Issued by:
– Judge
– Clerk
– Magistrate
– State’s Attorney
– Attorney for a party
• Named Party, Individual or Custodian of
Records
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26. Receipt of a Subpoena (cont.)
• Service of a Subpoena/Service of Process
(often personal or physical delivery)
– Individual State laws describe service of process
and what a credit union can expect
– Federal Rules of Civil Procedure – Rule 45
• Service by any person 18 years or older and not a party
• Delivering a copy of the written document to named
person AND if attendance payment required for 1 day’s
attendance and mileage
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27. Receipt of a Subpoena (cont.)
– Who can be served:
• Credit union should establish procedures
• President/CEO vs. Receptionist
• BB&T Garnishment Example
• IRS Example
• Power of Attorney Litigation Example
• Bank of America Litigation Example
• If issuer of subpoena does not designate an
individual, credit union may select an agent to testify
on their behalf
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28. Response to a Subpoena
• If a subpoena from a government agency
• If a subpoena from a court in the state where the credit union is
headquartered
• If a subpoena from a court in a state where the credit union has
a branch
• If a subpoena from a court that is in a state where credit union
is neither headquartered nor has a branch
• Other
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29. Response to a Subpoena (cont.)
• If a subpoena from a government agency
– Federal Law
– Right to Financial Privacy
• Government may subpoena the disclosure of
financial records if
• legitimate law enforcement inquiry;
• copy of subpoena served on member on or before date
subpoena served on credit union; and
• 10 days expired from date of service or 14 days from date of
government’s mailing notice to member – no timely legal
objection by member
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30. Strict Compliance
by Credit Union
• Violation =
– Civil penalties equal to $100 plus actual damages
to member plus punitive damages if willful or
intentional breach plus costs of litigation and
reasonable attorneys’ fees
• Not a violation to prepare to comply and
assemble the records and be prepared to
deliver to Government
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31. Exceptions to Strict
Compliance by Credit Union
• Federal Grand Jury Subpoena
– Credit union prohibited from notifying any person
named in grand jury subpoena
– Potential penalties
• Loss of NCUA insurance
• Civil penalties from $5,000 to $1,000,000
• USE EXTREME CAUTION
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32. Gramm Leach Bliley
• Annual Credit Union Privacy Notice explains
information collected by member and ways in
which credit union shares information
• Does NOT apply to disclosure made to
comply with properly authorized
investigations or subpoenas
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33. State Laws Vary
• Credit union headquartered in Virginia receiving subpoena
issued by a Virginia court – must respond and comply
– Conducting business in state
– Subjects itself to personal jurisdiction
• Credit union headquartered in Virginia receiving a subpoena
issued by a Virginia licensed attorney (officer of court) – must
respond and comply
• Credit union headquartered in Virginia receiving subpoena
issued by a Florida court – need not comply
– Letter to issuer of subpoena (DOCUMENTATION)
– Comply due to reciprocity laws or savings in time and expense
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34. How to Determine State Law
• Consult an attorney
• Google
– Example: Virginia Code of Laws
– Example: Virginia Rules of Supreme Court
• State statutes and rules detail procedural aspects of
issuing, receiving and answering subpoenas
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35. Examples of Safeguards
• Virginia permits right to object to the subpoena if the issuer
gave less than 14 days to respond
• Oregon provides that a financial institution shall not disclose
the financial records of a customer, in response to a subpoena,
for 10 days after service
• Oregon provides that if a customer challenges the subpoena
(moves to quash) within the 10-day period, no need to comply
with subpoena unless customer consent or court order
• Check with counsel for credit union
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36. Reimbursement
• Generally, credit union can charge issuer of a
subpoena for costs associated with preparing and
copying documents
• Costs of compliance
– Lost personnel time
– Document copying expenses
– Electronic discovery costs
– Attorney fees
• Witness fees
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37. Reimbursement (cont.)
• Mileage
• Re: subpoenas issued by U.S. government
authorities
– Photocopy - 25¢ per page
– Staff time for processing - $22 per hour
• Others – reasonable costs to be reimbursed
• Witness subpoena
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38. Reimbursement (cont.)
• Federal case – fee must accompany
subpoena
– Witness fee/appearance fee - $40 per day
– Mileage – 48.5¢ per mile from place of business
to court
– Recovery of reasonable copying costs
• Non-federal cases – check state law
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39. Reimbursement (cont.)
• New Jersey provides banks (?) not a party to lawsuit
to recover, in advance, costs of complying with a
subpoena
– Search and processing costs
– Transportation costs
– Reproduction costs
• Credit union should contact issuer of the subpoena
and ask for reimbursement – up front
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40. Conclusion
• Risks and liabilities for non-compliance
• Observe federal law and state law
• Establish detailed policy and procedures
• Go slow
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41. E. Andrew Keeney, Esq.
Kaufman & Canoles, P.C.
150 West Main Street, Suite 2100
Norfolk, VA 23510
(757) 624-3153
eakeeney@kaufcan.com
kau fC AN .com

42. Powers of Attorney and Subpoenas –
The Risks, Abuses and Potential
Liabilities to Credit Unions
NAFCU
kau fC AN .com