Scotiabank Sues Puerto Rico over Loan Repayment
Scotiabank filed a lawsuit against Puerto Rico's government yesterday seeking repayment of a multimillion-dollar loan despite a debt moratorium imposed amid an economic crisis, the Associated Press reported. The Canadian-based bank's Puerto Rico operation argued in the filing that the moratorium is unlawful. It said that it loaned the island's Metropolitan Bus Authority nearly $38 million in 2012 and accused the state agency of not making any payments since November 2015. The lawsuit marks the first time that the U.S. territory's government is being sued over a loan and not over bond payments since the governor declared Puerto Rico’s $70 billion in public debt unpayable last year. The lawsuit is the latest of more than a dozen that Puerto Rico's government is facing as it seeks to restructure its public debt. A federal judge is expected to decide soon whether Puerto Rico will have to pay its debts despite U.S. legislation enacted in June that protects the island from lawsuits through February 2017.
In related news, Puerto Rico's newly created federal oversight board, charged with helping the U.S. commonwealth navigate through its $70 billion debt burden, will hold its first meeting tomorrow in New York City. The seven-member board, created by the U.S. Congress in part to stave off a massive default and help the Puerto Rican government renegotiate its debt obligations, is scheduled to meet at 8:30 a.m. EDT, when it will elect a chairperson. The board also said that it will formally request from Puerto Rico's governor the submission of a fiscal turnaround plan, which is a key requirement of the federal Puerto Rico rescue law that created the board, known as PROMESA. Click here to view the agenda.
For more perspective on Puerto Rico's oversight board, make sure to listen to this ABI podcast.
Commentary: Student Loan Defaults Drop, but the Numbers Are Rigged
The good news is that Americans are taking longer to default on their federal student loans, the U.S. Department of Education announced yesterday, but the bad news is that the overall number of defaults continues to rise, according to a Bloomberg News commentary. Defaults fell by a half percentage point, to 11.3 percent, compared with a year earlier. This measures the number of former students who went 360 consecutive days without making a payment since their first bill came due in fiscal year 2013. About 593,000 former college students out of 5.2 million total borrowers defaulted on their federal debt as of Sept. 30, 2015, the department said. Default rates at public and for-profit colleges dipped, while private, nonprofit schools experienced a slight increase. The default rate doesn’t accurately represent the degree to which former students struggle to repay their loans, federal officials and higher education experts have said. This is because of school efforts to push back eventual defaults to later years by persuading students to postpone payments under federally approved programs. Of 6,155 schools with default rates, just 10 may lose access to federal student aid as a result of their high default rates, the department said.
Wells Fargo Isn’t the Only Bank that Draws Cross-Selling Complaints
Problematic sales practices at banks may extend beyond the abuses revealed in this month’s $185 million enforcement action against Wells Fargo & Co., according to a new analysis of customer complaints maintained by the U.S. government, the Wall Street Journal reported yesterday. While customer complaints don’t equal illegal conduct, the complaint database run by the Consumer Financial Protection Bureau shows that Wells Fargo hasn’t been much of an outlier when it comes to complaints associated with cross-selling and other sales abuses. The analysis of the database by S&P Global Market Intelligence shows that the CFPB received 1,576 complaints about Wells Fargo’s account management, including how it opened and closed accounts, from Jan. 1, 2015 to Sept. 20, 2016. That area, which generally corresponds with the recent allegations that Wells Fargo opened unwanted accounts for its customers, generated about 1.3 complaints for every billion dollars in deposits at the bank as of June 30, according to a Wall Street Journal analysis of the S&P report. Other banks had similar levels of complaints. Citigroup Inc. customers’ 1,722 account-management issues during the nearly 21-month period represented 1.8 complaints for each $1 billion of deposits at the bank. Bank of America Corp. customers had 1.7 complaints, using the same metric, while customers of JPMorgan Chase & Co. had 1.1.
Lehman Brothers to Pay Another $3.8 Billion to Creditors
The team winding down Lehman Brothers Holdings Inc. said Thursday it would be paying out $3.8 billion to creditors next week, more than eight years after the investment bank’s collapse triggered the financial crisis, the Wall Street Journal reported today. The distribution, the 11th since the investment bank failed in 2008, will bring the total payout in the firm’s bankruptcy to more than $113.6 billion. The bulk of the cash – $83.6 billion – has gone to pay so-called third-party claims. Lehman said in a filing today in U.S. Bankruptcy Court in New York that its senior unsecured creditors, Lehman bondholders who were estimated to receive about 21 cents on the dollar when the bank’s bankruptcy plan went into effect in early 2012, will have recovered more than 40 cents on the dollar after the next distribution is completed.
Latest ABI Podcast Examines How Artificial Intelligence and Technology Is Changing the Practice of Law
ABI Editor-at-Large Bill Rochelle talks with Prof. Lois Lupica of the University of Maine School of Law, a former ABI Resident Scholar, about artificial intelligence (AI) in the practice of law. As IBM has already rolled out "ROSS," the first AI attorney, Prof. Lupica discusses the potential ways that AI will change the way that bankruptcy practitioners do business, including document discovery, case-predictive software and more.
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New on ABI’s Bankruptcy Blog Exchange: Lien-Stripping of Mortgage on Property with Co-Owner at Time of Filing Allowed
Bankruptcy Judge Christine Gravelle ruled that a second mortgage secured by property that is owned by a debtor and a non-filing ex-spouse of the debtor can be stripped in a chapter 13 case, according to a recent blog post.
To read more on this blog and all others on the ABI Blog Exchange, please click here.
