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Analysis: For-Profit Colleges Lose Bid to Scuttle Government Rules

 
 

May 28, 2015

 
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  NEWS AND ANALYSIS

ANALYSIS: FOR-PROFIT COLLEGES LOSE BID TO SCUTTLE GOVERNMENT RULES

A federal judge yesterday denied a challenge to the Obama administration's rules limiting the amount of debt students can carry in career-training programs, delivering a blow to the beleaguered for-profit college industry, the Washington Post reported today. The decision arrives as for-profit schools are buckling under government lawsuits, regulatory scrutiny and depressed student enrollment. Defenders of the schools say that the Obama administration is trying to cripple the industry with rules that will disproportionately impact for-profits. Now one of the two lawsuits seeking to block the rule from taking effect in July has been shot down, leaving little hope for the other. Yesterday's ruling by U.S. District Judge Lewis Kaplan in Manhattan scuttled a bid by the Association of Proprietary Colleges, which represents 20 schools in New York. The trade group sued the government on the grounds that the rule sets arbitrary standards and violates due process because schools could lose federal funding based on how much students earn after graduation – something the schools would not be able to challenge. Read more.

STATES TACKLE AMERICA'S RETIREMENT-SAVINGS SHORTFALL

A growing number of state legislatures are trying to solve the nation's retirement savings crisis, the Wall Street Journal reported today. Last week, Washington state became the second state in the nation -- after Illinois -- to authorize its own state-run retirement savings program for a broad spectrum of companies. The goal: to get small businesses, many of which don't currently offer retirement savings plans, to deduct contributions from employees' paychecks and funnel them into individual retirement accounts, where money can grow tax-deferred until retirement. Currently, 25 states are either studying similar state-run retirement savings plans or are actively considering legislation that would establish one, says Sarah E. Mysiewicz Gill, a senior legislation representative at AARP, which supports the efforts through its Work & Save initiative. Read more. (Subscription required.)

COMMENTARY: CHICAGO AND THE STRANGE POLITICS OF RATINGS

Chicago on May 12 received the dubious honor of being the only major U.S. city, apart from already-bankrupt Detroit, to have its credit rating downgraded by Moody’s to below investment grade or "junk," according a recent analysis from NewOak Corporate and Municipal Credit Insights. Unfortunately, the rating agency's downgrade also had the effect of triggering events of default under some of the city's swap agreements and credit facilities, thus creating a short-term liquidity crisis for Chicago and raising some interesting issues about the potentially self-fulfilling nature of credit ratings. The catalyst for the downgrade, according to the rating agency, was the prior week's Illinois Supreme Court decision invalidating the state's 2013 pension reform effort. While the court ruling only dealt with the state's problem, Moody's interpreted it as further constraining the city's ability to fix its own ballooning pension funding problem. The downgrade, coupled with growing investor concern about a potential bankruptcy filing by the city, has led to a significant selloff in Chicago general obligations and bonds for related local entities, such as the Chicago Board of Education. The true problem, according to the commentary, once again lies in the fact that agency ratings have become so woven into the fabric of our financial markets that they have become risk factors in and unto themselves. Read the full commentary.

TRANSUNION: AUTO LOAN DELINQUENCIES REMAIN STEADY AS ACCESS TO LOANS KEEPS INCREASING

More than 71 million consumers had an auto loan in Q1 2015, an increase of 1.2 million from Q1 2014 and the largest growth since the Great Recession, according to a recent report from TransUnion. Consumers under age 30 experienced the largest increase, with 8.5 percent year-over-year growth. Auto loan delinquency rates in Q1 2015 remained steady at 0.99 percent, unchanged from Q1 2014, according to TransUnion. Auto loan debt per borrower rose 3.8 percent from $16,865 in Q1 2014 to $17,508 in Q1 2015. Read more.

COMMENTARY: HOLD BANKERS ACCOUNTABLE FOR THEIR CRIMES

Last week, Attorney General Loretta E. Lynch announced that five major banks were pleading guilty to criminal charges for what she described as a "brazen display of collusion" to manipulate the currency markets, according to a Washington Post commentary yesterday. The banks -- Citigroup, JPMorgan Chase, UBS, Barclays and Royal Bank of Scotland Group -- were hit with $5.6 billion in fines and penalties. Sensibly, the banks were forced to plead guilty, not simply pay fines in settlements where they neither admitted to nor denied the charges. But the charges were still brought against banks, not bankers, according to the commentary. No banker was held accountable, according to the commentary, and the personal fortunes of the bankers who profited were not touched. Read more.

FREE DEMO NEXT THURSDAY OF MODIOLEGAL'S AUDIO EDITION OF THE ABI JOURNAL

Hosted by the ABI's Young and New Members Committee, ModioLegal's CEO will detail next Thursday its streaming audio service, which offers the print content of the ABI Journal in a human-narrated, article-specific audio format. ModioLegal's service allows you to listen to the Journal from your computer, tablet or smartphone at your convenience! All participants will have the opportunity to sign-up for a free 1‑month trial at the webinar's conclusion.

Register today to reserve your seat!

ABI LIVE WEBINAR ON JUNE 16 TO EXAMINE ASSET SALES ISSUES IN OIL AND GAS BANKRUPTCIES

Join the latest abiLIVE Webinar on June 16 to explore the unique challenges that can arise in a § 363 sale of the assets of a business involved in the energy industry, with a particular emphasis on oil and gas bankruptcies. Presented by ABI's Asset Sales Committee, the webinar features experts discussing the interplay in energy company bankruptcy cases among the Bankruptcy Code, federal and state laws, the regulatory structure governing the energy industry, and the political and practical realities of the industry’s significance on national, regional and local levels. Speakers on the program are Bryan M. Gaston of Conway MacKenzie (Houston), Ira L. Herman of Thompson & Knight LLP (New York) and Shari L. Heyen of Greenberg Traurig, LLP (Houston). Click here for the ABI member price.

For additional information on oil and gas company bankruptcies, be sure to pick up a copy of ABI's When Gushers Go Dry: The Essentials of Oil & Gas Bankruptcy.

NEXT ABI WORKSHOP TO FEATURE BANKRUPTCY JUDGES EXAMINING COMMISSION RECOMMENDATIONS ON RESOLVING COURT SPLITS

The next ABI Workshop, the 2015 Bankruptcy Judges Roundtable, will take place at ABI headquarters on Aug. 4 to examine the Chapter 11 Reform Commission's recommendations on resolving court splits. The Commission identified more than 30 splits in case law on important bankruptcy issues. Attend the program from 3:00-4:30 p.m. ET in person or via live webstream to hear five bankruptcy judges discuss the recommendations and issues surrounding the court splits. ABI will seek 1.5 hours of general CLE credit in 60-minute-hour states and 1.5 hours of credit in 50-minute-hour states for the program. Networking reception to follow from 5-7 p.m. ET for in-person attendees, and registration for just the reception is also available. Click here to register.

NEW CASE SUMMARY ON VOLO: HILLSMAN V. ESCOTO (IN RE ESCOTO; 9TH CIR.)

Summarized by David Hercher of Miller Nash Graham & Dunn LLP

The Ninth Circuit ruled that a debtor's concealment from a creditor of an event that triggers a creditor's right to immediate payment of a loan constitutes an extension of credit under § 523(a)(2)(A).

There are more than 1,700 appellate opinions summarized on Volo, and summaries typically appear within 24 hours of the ruling. Click here regularly to view the latest case summaries on ABI's Volo website.

NEW ON ABI'S BANKRUPTCY BLOG EXCHANGE: EFFECT OF ALLOCATION OF BARGAINING POWER AND THE 1978 BANKRUPTCY REFORM ACT

A recent blog post reviews a new Harvard-sponsored article titled, "Financial Distress, Stock Returns, and the 1978 Bankruptcy Reform Act," which delves into how bargaining power in distress affects the pricing of corporate securities.

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

INSOL INTERNATIONAL

INSOL International is a worldwide federation of national associations for accountants and lawyers who specialize in turnaround and insolvency. There are currently 43 member associations worldwide with more than 9,000 professionals participating as members of INSOL International. As a member association of INSOL, ABI's members receive a discounted subscription rate. See ABI's enrollment page for details.

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NEXT WEEK:

5th Annual Memphis Consumer Bankruptcy Conference
June 5, 2015
Register Today!

UPCOMING EVENTS:

22nd Annual Central States Bankruptcy Workshop
June 11-14, 2015
Register Today!

abiLIVE Webinar:
"Asset Sales Issues in Oil and Gas Bankruptcies"

June 16, 2015
Register Today!

Cross-Border Insolvency Symposium
June 18, 2015
Register Today!

22nd Annual Northeast Bankruptcy Conference
July 9-12, 2015
Register Today!

10th Annual Northeast Consumer Forum
July 9-11, 2015
Register Today!

20th Annual Southeast Bankruptcy Workshop
July 23-26, 2015
Register Today!

ABI Workshop: 2015 Bankruptcy Judges Roundtable
Aug. 4, 2015
Register Today!

11th Annual Mid-Atlantic Bankruptcy Workshop
Aug. 6-8, 2015
Register Today!

23rd Annual Southwest Bankruptcy Conference
Sept. 10-12, 2015
Register Today!

20th Annual Views from the Bench Conference
Oct. 9, 2015
Register Today!

8th Annual Chicago Consumer Bankruptcy Conference
Oct. 12, 2015
Register Today!

35th Annual Midwestern Bankruptcy Institute
Oct. 15-16, 2015
Register Today!

 
   
  CALENDAR OF EVENTS
 

2015

June
- Memphis Consumer Bankruptcy Conference
June 5, 2015 | Memphis, Tenn.
- Central States Bankruptcy Workshop
June 11-14, 2015 | Traverse City, Mich.
- abiLIVE Webinar: "Asset Sales Issues in Oil and Gas Bankruptcies"
June 16, 2015
- Cross-Border Insolvency Program
June 18, 2015 | New York

July
- Northeast Bankruptcy Conference
July 9-12, 2015 | North Falmouth, Mass.
- Northeast Consumer Bankruptcy Forum
July 9-11, 2015 | North Falmouth, Mass.
- Southeast Bankruptcy Workshop
July 23-26, 2015 | Amelia Island, Fla.

 

 

August
- Mid-Atlantic Bankruptcy Workshop
Aug. 6-8, 2015 | Hershey, Pa.
- ABI Workshop: Bankruptcy Judges Roundtable
Aug. 4, 2015 | Alexandria, Va.

September
- Southwest Bankruptcy Conference
Sept. 10-12, 2015 | Las Vegas, Nev.

October
- Views from the Bench Conference
Oct. 9, 2015 | Washington, D.C.
- Chicago Consumer Bankruptcy Conference
Oct. 12, 2015 | Chicago, Ill.
- Midwestern Bankruptcy Institute
Oct. 15-16, 2015 | Kansas City, Mo.

 

 
 
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