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CFPB's Mulvaney Dismisses PHH Case

ABI Bankruptcy Brief

June 7, 2018

ABI Bankruptcy Brief

CFPB's Mulvaney Dismisses PHH Case

Acting Consumer Financial Protection Bureau Director Mick Mulvaney today dismissed the bureau's case against PHH Corp., ending a contentious legal battle that resulted in no fines against the company and no change to the independent agency's structure, American Banker reported. Mulvaney wrote in a two-paragraph legal filing that the Mount Laurel, N.J., company did not violate the Real Estate Settlement Procedures Act, which bans kickbacks in exchange for referrals. "PHH did not violate RESPA if it charged no more than the reasonable market value for the reinsurance it required the mortgage insurers to purchase, even if the reinsurance was a quid pro quo for referrals," Mulvaney wrote. Lawyers had expected acting CFPB Director Mick Mulvaney would dismiss the case after a CFPB official filed a joint statement with PHH's lawyers on Tuesday recommending that Mulvaney drop the case outright.
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Commentary: The Scholarly Debate over Medical Bankruptcy that Won’t Go Away*

Sen. Elizabeth Warren (D-Mass.) is still sparring with academics over a paper she published when she was a Harvard University Law professor in 2005, according to a commentary in the New York Times. The latest round came yesterday, in The New England Journal of Medicine, where she and her co-authors critiqued a recent paper that argued that medical problems cause a much smaller share of personal bankruptcies than many people think. In 2005, Warren, along with David Himmelstein, Deborah Thorne and Steffie Woolhandler, published a paper in the journal Health Affairs documenting a memorable statistic: More than 40 percent of all bankruptcies in America were a result of medical problems, they wrote. In 2009, they updated that research with an even more startling number: Medical bills were responsible for more than 62 percent of all American bankruptcies. But from the beginning, many economists had questioned the paper’s approach, which relied on surveys of nearly 1,800 Americans who had declared bankruptcy in 2001 and interviews with about half of them on their views about the causes of their financial woes after the fact. The researchers counted a bankruptcy as due to injury or illness if a person (1) had a medical debt of more than $1,000; (2) said an illness or injury caused a bankruptcy; (3) missed more than two weeks of work because of illness; or (4) mortgaged a home to pay medical bills. Last March, a team of economists from M.I.T., Northwestern University and the University of California, Santa Cruz published another paper, making use of a California database of every hospitalization in the state. By examining the credit reports of all the hospitalized people to see who filed for bankruptcy afterward, the researchers concluded that medical shocks related to hospitalization could explain 4 percent of all bankruptcies.
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*The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.


Study: Women Carry Two-Thirds of the U.S.’s Trillion-Dollar Student Debt

Sixty-five percent of the student debt in the U.S. belongs to female borrowers, and women repay student loans at a slower rate than men, according to the American Association of University Women (AAUW), Financial Advisor magazine reported. The AAUW announced in May updates to its findings in its "2017 Deeper in Debt: Women and Student Loans" report. The report is based on the organization’s analysis of U.S. government data. College costs have been rising faster than median household income. When the AAUW also considered gender pay gaps and the fact that women take out larger loans, it concluded that student debt is “burdening women disproportionately.” The AAUW reports that women are responsible for $890 billion in student loan debt as of mid-2018, compared with $833 billion a year earlier. The amount of men’s student loans remained roughly the same: about $479 billion in 2018 compared with $477 billion last year.
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Commentary: Payday Lenders Are Cashing In on High-Interest Products*

Payday lending stocks are beating records, but mostly because they’re no longer payday lenders, according to a Bloomberg News commentary. Enova International Inc. stock has more than doubled so far this year, the best performer in the Russell 2000 Consumer Lending Index, followed by rival Curo Group Holdings Corp., up 64 percent. Helping to drive those gains are a raft of new financing products that carry the same ultra-high interest as payday loans. But, because of their length, size or structure, these offerings aren’t subject to the same regulatory scheme. These products quickly became so popular that Enova and Curo now report that a vast majority of their revenue comes from them rather than payday loans, as before. Enova now mostly offers installment loans and lines of credit. Curo is also largely focused on installment loans too, while also doing some gold-buying, check-cashing and money-transferring. Whereas payday loans are ideally paid back in a single payment, many of the new products are paid back in installments over time. The companies have had little choice but to reinvent themselves, according to the commentary. Payday lenders were widely criticized for allegedly creating debt traps through their loans, ensnaring debtors in a spiraling vortex of ever-increasing fees and loan renewals.
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*The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.

Banks Don’t Share Wells Fargo’s ‘Systemic’ Account Problems, Regulator Says

A banking regulator’s review has concluded that there weren’t “systemic issues” at other banks that were similar to the Wells Fargo & Co. phony-account scandal, though it found some instances of banks opening accounts without proof of customers’ consent, the Wall Street Journal reported. The review by the Office of the Comptroller of the Currency, undertaken to determine whether similar problems ran deep at other banks, lasted months and looked at more than 40 large banks with a significant retail footprint. The review hasn’t been released publicly, but an OCC spokesman said that it had “identified some weaknesses in policies, procedures, and controls and in the risk governance framework addressing sales practices” at some banks. The OCC disclosure offered general details about the review and didn’t name other banks or quantify how many potentially phony accounts it discovered at other firms. Wells Fargo has said it opened as many as 3.5 million “potentially unauthorized” customer accounts, a number significantly higher than the 2.1 million figure the bank made public when the OCC and other regulators first sanctioned the firm in September 2016.
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Commentary: A Costly, Deadly Obsession with Coal*

Coal has become a sunset industry as cleaner energy sources have rapidly gotten cheaper, according to a Wall Street Journal commentary. If President Donald Trump succeeds at reversing the tide, it will come at a steep price, in both dollars and lives, most tragically for the coal miners he seeks to help, according to the commentary. Centuries ago, coal was a miracle material. Cleaner, safer and more efficient than wood, it made the Industrial Revolution, steam power and electrification possible. In much of the world, it remains ridiculously plentiful and will be the power generation fuel of choice for years to come. In the U.S., though, coal is headed toward obsolescence. Thanks to the fracking revolution, natural gas-fueled power plants are now cheaper to build and operate than coal-fired plants. Solar- and wind-generated power now costs less per kilowatt-hour to produce than coal. Renewables cost slightly more than coal when you include the cost of backup power, since the sun doesn’t always shine and wind doesn’t always blow, according to the Energy Policy Institute at the University of Chicago. But as innovation in shale gas, wind and solar continues to drive down costs, coal will lose whatever advantages it has now, according to the commentary.
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*The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.

Nominations Now Being Accepted for the 2018 Class of ABI's “40 Under 40” Program!

Nominations are now open for ABI's “40 Under 40” program. This program recognizes outstanding young insolvency professionals who are driven by success, motivated by challenges and are role models for their peers. If you are, or know of, a dynamic insolvency professional who is committed to growth and excellence both professionally and in your community, this is one opportunity not to be missed! Visit the website for additional details on nominations and applications.

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New on ABI's Bankruptcy Blog Exchange: Disabled Vets’ Federal Student Loans to Be Forgiven

Over the next few months, the Department of Education will be sending letters to totally and permanently disabled veterans that they are eligible to have their student loans forgiven, according to a recent blog post. These loans will be federal student loans or aid from the Teacher Education Assistance for College and Higher Education grant program. Veterans should receive a letter letting them know that they are eligible to have their student loan debt forgiven over the next few months, federal officials said in a statement earlier this month.

A forthcoming podcast will preview the work of ABI's Veterans' Task Force. 

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


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