Finance & Bankruptcy Law Blog

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In April 2021, House Financial Services Committee Chair Maxine Waters (D-Calif.) introduced H.R. 2547, the “Comprehensive Debt Collection Improvement Act.” This article examines the bill’s proposed reforms, takes a closer look at a few of the key provisions related to nonjudicial foreclosure, student loan and servicemember debt-collection practices, and considers its prospects for passage in the Senate. With respect to nonjudicial foreclosures, the legislation seeks to amend the definition of “debt collector” under the FDCPA to include entities that conduct non judicial foreclosures. As for student loans, the bill proposes an amendment that would slightly expand private student loan protections…
As expected, on July 28, 2021, the Alternative Reference Rates Committee (ARRC) formally recommended the CME’s SOFR Term Rate.  The SOFR Term Rate is known in advance of the related interest period and provides an indicative, forward-looking measurement of SOFR based on market expectations implied from leading derivatives markets.  In this respect, the SOFR Term Rate functions in a manner similar to today’s LIBOR rates.  In contrast, the Daily Simple SOFR or Daily Compounded SOFR used for interest periods beyond overnight can only be determined in arrears.  The SOFR Term Rate thus facilitates in a significant way the transition away…
This past Monday, July 26, marked passage of the most recent major milestone in the replacement of LIBOR as the benchmark USD interest rate.  Following the recommendation of the CFTC’s Market Risk Advisory Committee (MRAC) Interest Rate Benchmark Reform Subcommittee, on July 26, 2021 interdealer brokers replaced trading in LIBOR linear swaps with SOFR linear swaps.  This switch is a precursor to the recommendation of SOFR term rates.  The switch does not apply to trades between dealers and their non-dealer customers.…
On July 13, the Federal Reserve, FDIC, and OCC proposed risk management guidance to help banking organizations manage risks related to third-party relationships, including relationships with vendors, FinTech companies, affiliates, and the banking organizations’ holding companies.  The proposal is based on existing but disparate third-party risk management guidance from the three prudential regulators, and is intended to promote consistency across the banking agencies.  If finalized, it will replace the guidance that each agency has released independently.…
On July 1, the Federal Housing Finance Agency (FHFA) released a Policy Statement on its commitment to comprehensive fair lending oversight of Fannie Mae, Freddie Mac, and the Federal Home Loan Banks (collectively, “regulated entities”).  The FHFA addressed its position on:  (i) monitoring and information gathering; (ii) supervisory examinations; and (iii) administrative enforcement related to the Equal Credit Opportunity Act, the Fair Housing Act, and the Federal Housing Enterprises Financial Safety and Soundness Act.  The FHFA added that the statement operates as a “foundation for future interpretations by the agency and its regulated entities.”  Comments on the policy statement are…
On July 6, the CFPB posted a blog titled, “Should you buy now and pay later?” describing how buy now pay later (BNPL) deferred payment options work, and the benefits and risks that come with BNPL.  Generally, if a consumer selects the BNPL option at an online checkout, “the purchase is . . . split into a payment schedule – typically four fixed payments made bi-weekly or monthly until the balance is paid in full.”  The CFPB points out that transaction approval takes minutes, with no interest, finance charges, or hard credit inquiries.…
At the recent FDIC conference, “Fintech: A Bridge to Economic Inclusion,” FDIC Chairman Jelena McWilliams remarked that while the proportion of U.S. households that were banked in 2019 was 94.6 percent, 7 million households still reported no banking relationship.  She also noted that “the rates for Black and Hispanic households who do not have a checking or savings account at a bank remain substantially higher than the overall ‘unbanked’ rate.”  Referencing her personal challenges in establishing credit as a young immigrant to the United States 30 years ago, McWilliams discussed technology’s role in creating and facilitating a more inclusive financial…
On June 29, the CFPB and the Georgia Attorney General’s Office settled with a debt-relief and credit-repair company and its owners for allegedly deceiving consumers into hiring the company to lower or eliminate credit-card debts and improve consumers’ credit scores.  The complaint alleges that the plaintiffs’ use of telemarketing and direct mail violated the Telemarketing and Consumer Fraud and Abuse Prevention Act, the Telemarketing Sales Rule, the Consumer Financial Protection Act, and Georgia’s Fair Business Practices Act by, among other things, falsely claiming that:…
On June 29, NYDFS announced that two New York-charted banks engaging in indirect auto lending will pay civil money penalties for violating New York’s fair lending law for engaging in practices that resulted in members of protected classes paying higher interest rates that were not based on creditworthiness.  In particular, NYDFS asserts that the practice of allowing “dealer markup” in setting retail interest rates resulted in statistically significant differences in pricing, disadvantaging Hispanic and African-American consumers, with differences ranging from 20 to 59 basis points.…
On June 24, the U.S. House of Representatives passed S.J. Res. 15 by a vote of 218-208 to repeal the Office of the Comptroller of the Currency’s (OCC) “True Lender” rule under the Congressional Review Act (CRA).  The OCC published the rule last year to establish a “simple, bright-line test” to determine when a national bank or federal savings association is the true lender. Under the rule, a bank is the true lender and makes a loan if, as of the date of origination, it (i) is named as the lender in the loan agreement or (ii) funds the loan.…
Though bankruptcy filings are down in 2021, the expiration of the Paycheck Protection Program and reopening of the courts nationwide could lead to a rise in bankruptcy filings with many businesses still struggling to cope with the economic and supply chain aftereffects of the pandemic and consumer purchasing habits.  These bankruptcies, in turn, will have an inevitable ripple effect on creditors and other claimants, whose abilities to collect on claims and exercise rights, are significantly restricted by the automatic stay.  Generally, the automatic stay requires a party seeking relief against a debtor to do so in, and only in, the…
On June 15, the Senate swore in President Biden nominee Lina Khan as Chair of the FTC following confirmation by vote of 69-28.  Her current term on the Commission will expire on September 25, 2024.  Khan noted that she looks forward to working with her colleagues “to protect the public from corporate abuse.”  In her role as Chair, Khan replaces former Acting Chair, Rebecca Kelly Slaughter, who served in the role since January 2021.  Prior to becoming Chair of the Commission, Khan was an Associate Professor of Law at Columbia Law School. She also previously served as counsel to the…
The United States Supreme Court ruled yesterday in Collins v. Yellin that a restriction on the President’s power to remove the director of the Federal Housing Finance Agency at will is unconstitutional as a violation of the separation of powers doctrine. This decision did not come as a surprise, as the Court had ruled in Seila Law LLC v. Consumer Financial Protection Bureau that a similar restriction on the President’s power to remove the director of the CFPB at will was unconstitutional.…