Analysis: Federal Court Holds that Student Loan Trusts Are Subject to CFPB Enforcement Authority

Analysis: Federal Court Holds that Student Loan Trusts Are Subject to CFPB Enforcement Authority

December 16, 2021

ABI Bankruptcy Brief

Analysis: Federal Court Holds that Student Loan Trusts Are Subject to CFPB Enforcement Authority​​​​​​

Judge Stephanos Bibas, visiting judge in the U.S. District Court for the District Delaware from the U.S. Court of Appeals for the Third Circuit, on Dec. 13 denied a motion to dismiss a lawsuit brought by the Consumer Financial Protection Bureau (CFPB) in Consumer Financial Protection Bureau v. The National Collegiate Master Student Loan Trusts, allowing the enforcement action to proceed directly against The National Collegiate Student Loan Trusts. In allowing the action to proceed, the court ruled that the trusts were “covered persons” under the Consumer Financial Protection Act (CFPA) despite having no employees and contracting with special servicers and subservicers to service and collect on the student loans. 

Student Loan Payment Pause Will Not Be Extended, White House Confirms​​​​​​

The federal student loan forbearance period will end as planned on Jan. 31, 2022, White House press secretary Jen Psaki confirmed at a press briefing last week. Starting in February, federal student loan borrowers will resume their monthly payments, reported. While the Education Department is "still assessing the impact of the omicron variant," Psaki said that "a smooth transition back into repayment is a high priority for the administration." With less than 50 days left in the student loan forbearance period, several progressive Democrats, including Senate Majority Leader Chuck Schumer (D-N.Y.), are urging President Joe Biden to reconsider this decision.​​

Weekly Jobless Claims Increase Slightly to 206,000 After Hitting 52-Year Low​​​​​​

New applications for jobless aid rose slightly last week after dropping to the lowest level since 1969, according to data released today by the Labor Department, The Hill reported. In the week ending Dec. 11, seasonally adjusted initial claims for unemployment insurance totaled 206,000. Claims rose by 18,000 from the previous week’s revised total of 188,000. The four-week moving average for claims fell by 16,000 to 203,750, the lowest level since Nov. 15, 1969. The Labor Department said Thursday it expected a decline of 34,989 claims based on seasonal factors. Without adjusting for the seasonal drop, claims fell by 16,426.​​

Analysis: Three Miles and $400 Apart: Hospital Prices Vary Wildly Even in the Same City​​​​​​

To get inside health care costs, the Wall Street Journal looked at newly public data from one market: Boston, home to some of the world’s most prominent hospitals. U.S. hospitals for the first time this year had to divulge all their prices under a new federal rule. The goal is to make it easier to compare prices for medical care, just as you can with flights, computers or cars. The data reveals the wide variety of prices charged by different hospitals. It also reveals the many rates each hospital charges different patients for the same service, depending on their insurance. The rate is often highest for patients without insurance. The Journal calculated the fees of a hypothetical patient that got hurt in an accident and went to the Massachusetts General Hospital emergency room. The hospital's rate for the level-four ER visit is $946, the price negotiated by Blue Cross Blue Shield of Massachusetts for the patient’s preferred-provider organization plan. Other plans pay more — or less — for the same visit. The patient will owe only a portion of the out-of-pocket cost, as their employer covers most of it. If the patient had gone to another Boston hospital, the price of that visit might have been far less. At Carney Hospital, the rate with the patient’s plan would have been $548. At Boston Medical Center, it would have been $577. Quality differences may explain why some prices vary between hospitals, but not why prices are so different at the same hospital. Those reasons are generally out of a patient’s control. Hospitals and insurance companies set prices through bargaining, where they make trade-offs that save money for some patients but not others. Some hospitals or insurers can have more skill or leverage to negotiate prices, and they typically cut broad deals that may secure a low rate on certain services in exchange for concessions on others. (Subscription required.)​​

IRS Makes Final Monthly Child Tax Credit Payment, Unless Congress Acts​​​​​​

The Treasury Department and IRS on Wednesday made their final monthly child tax credit payment under President Biden’s coronavirus relief law, as the administration and congressional Democrats push to enact legislation to extend the payments, The Hill reported. The agencies distributed more than $16 billion in payments Wednesday to the households of about 61 million children, Treasury said. Since the monthly payments started in July, Treasury and the IRS have sent out nearly $93 billion in payments. “Since July, monthly payments of the Child Tax Credit have helped millions of families pay for essentials such as food, childcare, and other household needs as those expenses arise,” Treasury Secretary Janet Yellen said in a statement. “The lives of tens of millions of children across the country have improved because families have received tax relief when they need it most.” The coronavirus relief law Biden signed in March expanded the child tax credit for 2021. As part of the expansion, Treasury and the IRS sent out monthly advance payments of the credit in the second half of this year. Families have received monthly payments of up to $300 for each child under aged 6 and up to $250 for each child aged 6 to 17. Wednesday’s payment is the final monthly payment absent congressional action. While Democrats intend to extend the monthly payments for one year as part of their social spending and climate package, the Senate has yet to pass a version of the legislation. The IRS has told lawmakers that they should pass an extension by Dec. 28 in order for a monthly payment to be made on Jan. 15.​​

Bank Analysts Grapple with Capital Impact of New Derivatives Rule​​​​​​

Wall Street analysts are trying to understand the extent to which a new derivatives rule will affect the performance of big banks as they wrap up the fourth quarter, Reuters reported. The rule is one of a number of measures introduced by regulators to discourage banks from taking excessive risks in the over-the-counter derivatives market, which contributed toward the 2007-09 financial crisis. After years of industry lobbying and fine-tuning by regulators, the rule goes into full force in January. Citigroup Inc., Morgan Stanley and Goldman Sachs Group Inc. have said that the rule could require them to hold more capital, but how much will depend on their derivatives positions and the measures they take to reduce their exposures.​​

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New on ABI’s Bankruptcy Blog Exchange: Regulators Must Root Out Bias in AI-Based Lending

The fundamental question facing financial regulators when they consider the use of artificial intelligence and machine learning in banking is this: Do the rewards outweigh the risks? That’s doubly true when those tools are used to underwrite consumer loans, according to a recent blog post. Just last month, the chairs of the House Financial Services Committee and the Task Force on Artificial Intelligence sent a letter to the heads of five federal financial services regulatory agencies reminding them to keep up with the advance of AI tech and to make sure they police the industry for biased algorithms that could harm consumers and businesses.

To read more on this blog and all others on the ABI Blog Exchange, please click here.

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