The Consumer Financial Protection Bureau (CFPB) is urging policymakers to reconsider how student loan debt is treated under the Bankruptcy Code, American Banker reported today. In the agency's annual report on student loans, released today, it said that there are severe roadblocks for struggling student borrowers in getting modifications or other flexible options to help them pay off their debt. As a result, the CFPB said Congress should revisit a 2005 change to the Bankruptcy Code that made most private student loan debt and other "qualified loans" exempt from discharge. The agency is also recommending more favorable tax treatment on any debt that is forgiven. "Unlike mortgage servicing, there are no specific laws or rules that require specific procedures on loan modifications and the laws we administer," said Rohit Chopra, the CFPB's student loan ombudsman. "That is something that we are going to take a very close look at . . . We are going to weigh every option to see that these problems are corrected." The CFPB noted that the 2005 amendment, which raised the threshold to discharge student loan debt, made it easier for debt collection firms to increase recoveries on defaulted private student loans compared to other types of unsecured debt. Read more. (Subscription required.)
MORTGAGE LENDING REGULATION COMPLIANCE COSTS UP 30 PERCENT
Most lenders believe new regulations have had a "significant" impact on their business, according to the Third Quarter Mortgage Lender Sentiment Survey of senior mortgage executives conducted by Fannie Mae, HousingWire.com reported yesterday. In particular, lenders reported a nearly 30 percent median increase in compliance costs compared with 2013. Lenders also reported increased reliance on outsourcing due to increased regulations and associated costs, particularly in relation to post-closing Quality Control review and servicing. Moreover, compliance risk is reported by most lenders as their top area of focus this year. Read more.
ANALYSIS: STRUGGLING JAILS CAN BE A FINANCIAL RISK FOR INVESTORS, SMALL TOWNS
Jails in particular can pose a risk to investors in the relatively safe and stable $3.7 trillion municipal bond market, and financial hardship can spread to the small towns where the facilities are often located, the Wall Street Journal reported today. Bonds that pay for jails have the second-highest default rate in the municipal sector, at 2.1 percent, behind retirement community debt, which has a 4.9 percent default rate, according to data from the research firm Municipal Market Advisors. Jail debt also has the second-fastest growing default rate, having risen from 1.1 percent in the second quarter of 2013. Eighteen jail bonds have defaulted since 2010, with a par value of about $400 million, said Matt Fabian, managing director at the firm. Rhode Island's Donald W. Wyatt Detention Facility has struggled since officials at U.S. Immigration and Customs Enforcement pulled out their detainees in 2008, following the death of a Chinese national held there. That pullout happened shortly after the facility expanded to hold 770 detained people. The detention center, which owes about $97.3 million in bonds, was taken over by an outside financial professional earlier this year. The facility is supposed to kick in money to the city of Central Falls, R.I., which had its own financial problems and eventually filed for chapter 9 bankruptcy in 2011. When the city's lawyers redrew revenue forecasts as part of its financial revival, lawyers pointed out that they hadn't been getting — nor did they expect to receive — payments from the facility, which takes in detained people from Rhode Island, Connecticut, Massachusetts, New Hampshire, Maine and Vermont, according to its website. Read more. (Subscription required.)
HOLIDAY SEASON PRESENTS OPPORTUNITIES FOR CYBERCRIMINALS
While retailers look forward to the holiday season, the heightened shopping activity that accompanies it comes with increased risk as cybercriminals ramp up their efforts to steal store data, the Wall Street Journal reported yesterday. Retailers need to be vigilant against attacks on their payment systems, but must keep transactions as quick and easy as possible, lest they lose impatient consumers, said Aaron Press, director of payments and e-commerce for Lexis Nexis Risk Solutions. Higher sales volumes can compensate for a lot of fraud losses, so some retailers tweak their systems to make it easier to process sales during the holidays, even though they know the bad guys are ramping up their attacks, Press said. But there are limits to how far they can go. While a merchant might accept 1.5 percent of revenue lost to fraud when racking up extra sales, credit card issuers and processors might object if charge-backs exceed 1 percent of volume. A recent LexisNexis survey on the true cost of fraud found every $1 in fraud in 2014 is actually costing merchants $3.08, up from $2.79 in 2013. Merchants, on average, lost 0.68 percent of their revenue to fraud, up from 0.51 percent in 2013. The increases are due in part to the increased number of fraud attempts and the additional number of payment channels used to transact mobile sales, the survey said. Read more. (Subscription required.)
For further perspectives of issues surrounding cybersecurity, be sure to attend Theresa Payton's keynote at ABI's Winter Leadership Conference. One of the nation's most respected authorities on Internet security, Payton is the former Chief Information Officer at the White House and now directs an international net fraud prevention firm. To register, please click here.
USTP UPDATES MEDIAN FAMILY INCOME DATA FOR CASES FILED ON OR AFTER NOV. 1
The U.S. Trustee Program (USTP) has updated the Census Bureau's Median Family Income Data and will apply the updated data to cases filed on or after Nov. 1. For the latest data required for completing Form 22A and Form 22C, please click here.
ABI MEMBERS INVITED TO ATTEND RETIREMENT DINNER FOR BANKRUPTCY JUDGE PETER J. WALSH ON NOV. 19
ABI members are invited to a special retirement dinner on Nov. 19 honoring the Hon. Peter J. Walsh's 50 years of dedicated service to the bench and bar. The event will be held at the Chase Center on the Riverfront in Wilmington, Del., and is being hosted by the Bankruptcy Section of the Delaware State Bar Association and the Delaware Chapter of the Federal Bar Association. Questions should be directed to Karen B. Owens at 302-654-1888. To attend, please go to https://sites-pepperhamilton.vuturevx.com/107/772/uploads/judge-walsh-retirement-dinner-form.pdf
NEXT FREE COMMITTEE TELECONFERENCE WILL BE NEXT THURSDAY WITH ABI'S UTC COMMITTEE EXPLORING STRATEGIES IN PREFERENCE CASES
Members are encouraged to dial-in and listen to or participate in upcoming ABI Committee conference calls. While committee membership is encouraged, it is not required to join the free teleconferences. Upcoming Committee teleconferences include:
- Unsecured Trade Creditors Committee: Thursday, Oct. 23; 4 pm ET
Topic: "Tricks of the Trade: New Issues and Strategies in Preference Cases"
Speakers: Eric J. Haber of Cooley LLP (New York)
- Unsecured Trade Creditors Committee: Tuesday, Nov. 4; 3 pm ET
Topic: "Bank Secrecy Act and Anti-Money Laundering"
Speakers: Mark Gittelman of PNC Bank and Brent Weisenberg
All committee teleconferences are free to ABI members and registration is not required. Simply utilize the following dial-in information:
Call in: (712) 432-1500
Participant code: 692933
WE WANT TO HEAR FROM YOU: MAKE SURE TO FILL OUT ABI'S ANNUAL MEMBER SURVEY!
ABI's Annual Member Survey was sent via e-mail a few weeks ago. Please take the time to fill out the survey so that we can better tailor our products, events and services to your needs. If you did not receive an e-mail containing the Annual Member Survey, please contact ABI Membership Director Chris Thackston at [email protected].
NEW CASE SUMMARY ON VOLO: MILLER V. U.S. TRUSTEE (IN RE MILLER; 10TH CIR.)
Summarized by Lars Fuller of BakerHostetler
For purposes of chapter 7 eligibility, the means test under 11 U.S.C. §707(b) and §101(10A) requires calculation of all income received by a debtor in the six-month look-back period, rather than just income both earned and received during the six-month look-back period. The Tenth Circuit BAP affirmed the bankruptcy court's ruling dismissing the debtor's chapter 7 case based on a presumption of abuse because the debtor's income under the means test exceeded the median income in Wyoming for his family size. The debtor argued that only income both earned and received in the six-month look-back period should be counted for purposes of the chapter 7 means test. The BAP, on an issue of apparent first impression, reviewed the plain language of 11 USC §§101(10A) and 707(b), as well as the legislative history. The BAP concluded that notwithstanding Congress's choice to not use the word "received" in the statute, the plain language in §101(10A) of the phrase "income[] derived during the 6-month period" means "received," rather than "earned and received."
There are nearly 1,500 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: DEBT COLLECTORS TURN TO SOCIAL MEDIA?
A recent blog post examined the continuing trend of debt collectors turning to social media, such as Facebook, to find and contact consumers who are delinquent on debts.
Be sure to check the site several times each day; any time a contributing blog posts a new story, a link to the story will appear on the top. If you have a blog that deals with bankruptcy, or know of a good blog that should be part of the Bankruptcy Exchange, please contact the ABI Web team.
ABI Quick Poll
The §547(c)(2) ordinary course preference defense should be repealed.
Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.
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.
