Analysis: DC Circuit Shows No Sign of Punting on CFPB's Constitutionality
When the full U.S. Court of Appeals for the D.C. Circuit agreed earlier this year to consider the Consumer Financial Protection Bureau’s constitutionality, it teed up the possibility of punting on that question and instead ruling on narrower grounds, Law.com reported yesterday. But the 11-judge panel that heard the case Wednesday appeared poised to take on the issue of whether the CFPB’s independent, single-director structure runs afoul of the Constitution. The judges, sitting in the court’s ceremonial courtroom, focused squarely on the question of whether it was lawful, under the separation of powers clause, to restrict the president’s power to remove the director “for cause” only. Cabinet secretaries can be dismissed for any reason. Several judges appeared skeptical that they could strike down that structure, citing a 1935 case — Humphrey’s Executor v. United States — in which the U.S. Supreme Court said a member of the Federal Trade Commission could not be fired at will by the president. The arguments marked a pivotal point in mortgage provider PHH Corp.’s challenge to the CFPB. New Jersey-based PHH, represented by Gibson, Dunn & Crutcher partner Theodore Olson, prevailed before a divided three-judge panel that struck down the bureau’s structure last year. But that split decision, authored by Judge Brett Kavanaugh, was later vacated by the D.C. Circuit’s decision in February to grant an en banc review. The company is fighting a $109 million penalty — and many companies are riding on PHH’s argument against the agency. Under the Trump administration, the Department of Justice is now siding with PHH and opposing the CFPB. The DOJ participated in yesterday’s oral argument.
Report: Women Hold Nearly Two-Thirds of Student Loan Debt in U.S.
A report released yesterday by the American Association of University Women (AAUW) found that the burden of student debt is having an outsized impact on women, who now hold nearly two-thirds of the $1.3 trillion in outstanding education loans, the Washington Post reported today. Based on data from the Education Department, Kevin Miller, senior researcher at the AAUW, and his team estimated that women enrolled in college borrow about 14 percent more on average than men in a given year. Women typically owe $1,500 more than their male counterparts upon completion of a bachelor’s degree, and African American women take on more student debt on average than any other group of women, the study said.
FDIC: U.S. Bank Loan Growth Slows But Profits Climb in First Quarter
The Federal Deposit Insurance Corp. (FDIC) reported yesterday that the pace of U.S. bank lending slowed in the first three months of the year — the second consecutive quarter of such easing — but profits across the industry were higher, Reuters reported. A decline in loan demand could signal weakness in the economy but regulators will not know for sure until later in the year, said FDIC chair Martin Gruenberg. While loan demand eased, quarterly profits rose 12.7 percent in the first quarter, higher than a year earlier, said the FDIC. Banks call their failed loans ‘charge-offs’ and that tally increased 13.4 percent, or $1.4 billion, compared to the year-ago numbers. It was the sixth consecutive quarter that charge-offs posted a year-over-year increase, according to the FDIC.
Bond Buyers Forgive and Forget, Flock Back to Online Lenders' Debt
The initial appeal of upstart, online lenders was that they would disrupt traditional loan markets. But after big setbacks last year, the firms are adjusting to be a little more Wall Street and a little less Silicon Valley, the Wall Street Journal reported today. Changes include holding on to the risk of some loans they make, securitizing their loans — or selling them in packages — themselves rather than through third parties, and naming veterans of banks and investment firms to executive roles. Investors in bonds backed by the loans these online platforms helped broker welcomed the moves. Last year, as skepticism mounted about their offerings, these investors pulled back from purchasing their loans. But since the start of April, more than $2 billion in securities backed by loans made by LendingClub Corp., Prosper Marketplace Inc. and their peers have either been sold or are being prepared for an imminent sale, according to credit-rating firms. That is already more than was issued in the entire second quarter of 2016, according to data tracker PeerIQ. (Subscription required.)
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New on ABI’s Bankruptcy Blog Exchange: Lenders Protest Proposed FHA Fee for Risk Upgrades
Lenders are objecting to the Trump administration’s proposed $30 million fee designed to partially fund upgrades to the FHA, according to a recent blog post.
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