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Consumer Agency Condemns Abuses in Loan Forgiveness Program

The government’s consumer watchdog is adding its voice to a growing chorus of warnings about problems with a federal program that permits people who take public service jobs to have their student loans forgiven after a decade, the New York Times reported today. Confusing rules, bureaucratic tripwires and outright errors are hindering thousands of people as they try to take advantage of the program, according to a report released yesterday by the Consumer Financial Protection Bureau. These are people who teach, serve in the military or work for a nonprofit organization, for example. The volume of complaints is especially alarming because the program has not yet reached its first milestone: forgiving debts. Created in 2007, the program requires borrowers to do 10 years of service before any federal student loan debt is eliminated. The first wave of qualifying borrowers can submit applications in October. But hundreds of complaints in the last year indicate many applicants are encountering obstacles, the agency said. Read more

In related news, Federal Reserve chairwoman Janet Yellen weighed in on one of the more contentious financial policy debates in Congress in a private conversation, a lawmaker said yesterday, and suggested that Congress should change the way that the Consumer Financial Protection Bureau is funded, the Washington Examiner reported today. Currently, the consumer agency is funded by Yellen's agency, which earns income through its portfolio of government bonds. Republicans critical of the agency's mission have argued that the arrangement prevents them from exercising authority over the bureau by controlling its spending. However, Rep. Blaine Luetkemeyer (R-Mo.) said yesterday that Yellen had questioned that arrangement during a recent conversation with him over breakfast. Read more

Aquion Energy Assets Likely to be Exiting Pennsylvania after Auction

After a bankruptcy auction where four bidders vied for battery maker Aquion Energy Inc., an entity called Juline-Titans LLC had the winning $9.16 million bid, the Pittsburgh Post-Gazette reported today. The firm, which registered in Delaware on May 30, is an affiliate of the China Titans Energy Technology Group. Titans is an investment holdings company that “engages in research, development, manufacture and sale of electric products and equipment” in China. Aquion, the Lawrenceville, Pa.-based saltwater battery manufacturer, filed for bankruptcy in March after a decade of raking in Silicon Valley bonafides and capital. It will go before a bankruptcy judge to certify the sale.

Takata to Likely File for Bankruptcy on Monday

Takata Corp. will seek bankruptcy protection from creditors on Monday as the Japanese company faces billions of dollars in liabilities stemming from the biggest recall in automotive history, Reuters reported yesterday. The firm, whose defective air-bag inflators have been blamed for at least 16 deaths and more than 150 injuries worldwide, will file for protection in Tokyo District Court under the Civil Rehabilitation Act, Japan's version of U.S. chapter 11 protection, according to Reuters. Takata will then seek bridge loans from the core banking unit of Sumitomo Mitsui Financial Group Inc., which will provide tens of billions of yen (hundreds of millions of dollars) in bridge loans, one source said. Takata spokesman Toyohiro Hishikawa said nothing had been decided regarding any filing or financing.

Consumer Agency Seeks to Hold South Carolina Company in Contempt

The nation’s top consumer regulatory agency is seeking to hold a South Carolina housing finance company in contempt for moving too slowly to respond to a judge’s order that it turn over documents and audio recordings, the New York Times reported today. A federal judge on Tuesday referred the matter to a United States magistrate judge for a hearing. The unusual legal maneuver by the agency, the Consumer Financial Protection Bureau, to hold National Asset Advisors and a related company in contempt shows that the agency is proceeding with an investigation into businesses associated with the sale of homes to lower-income borrowers with seller financing. The motion for contempt arises from a court battle with National Asset Advisors and Harbour Portfolio Advisors, one of the nation’s largest sellers of homes on contracts for deed — a type of seller financing usually aimed at low-income consumers who cannot qualify for conventional mortgages. The consumer bureau filed a lawsuit last year in federal court in Michigan to require Harbour Portfolio Advisors and National Asset Advisors to comply with a subpoena seeking information about Harbour’s sale of rundown homes to thousands of people in more than a dozen states.

Honeywell Seeks Info From Bankruptcy Trust; Asbestos Firm, Trustee Object

Honeywell International has interjected itself into the bankruptcy proceeding of the successors to Chicago Fire Brick and Wellsville Fire Brick, companies that spent a decade creating a trust that would pay individuals with asbestos claims, Forbes reported yesterday. On May 3, Honeywell asked the federal bankruptcy court in Oakland, Calif., to make those ballots public. Those holding claims against companies are asked to vote on proposed bankruptcy plans. Objecting to Honeywell's request is the trustee of CFB’s trust and the Pittsburgh asbestos firm Goldberg, Persky & White. “This court’s local rules required the Plan Proponents to file ‘all ballots,’” Honeywell’s attorneys wrote. “Yet the Plan Proponents failed to do so and have refused to provide copies of the ballots to Honeywell.”

SEC Charges General Counsel With Fraud in Fake Loan Scheme

The U.S. Securities and Exchange Commission has charged Arista Power Inc., its general counsel, Michael Hughes, its CEO and a third party with securities fraud involving a scheme to disguise the public company’s financing and its money difficulties, Corporate Counsel reported today. Arista, which previously operated under two other names, purported to develop and sell energy-producing wind turbines. A penny stock company, it filed for bankruptcy in December 2015 during the SEC’s investigation and is undergoing liquidation, according to the commission. Attorney Michael Hughes began doing legal work for the company in 2008, and in 2013 became general counsel, the SEC stated. He also continued as a partner in the New York office of Schwell Wimpfheimer & Associates, which also has offices in Jerusalem and Tel Aviv. Neither Hughes nor the law firm immediately returned phone calls seeking comment. Hughes and the other two defendants were charged with two counts of fraud, while the company was also charged with violating SEC reporting rules for filing false and misleading documents.