GAO: MORE SENIORS ARE CARRYING STUDENT LOAN DEBT INTO RETIREMENT
A report released yesterday by the Government Accountability Office found that the total outstanding debt load held by seniors grew to $18.2 billion in 2013, up from $2.8 billion in 2005, the Washington Post reported today. The share of households headed by people between the ages of 65 and 74 who have student loan debt also grew, reaching 4 percent in 2010 from 1 percent in 2004. The GAO report cited a number of reasons why older Americans might still be paying off student loans even as they're gearing up for retirement. The majority of the college debt carried into retirement, about 80 percent, came from loans that seniors took out for their own educations. Some of the loans may have been taken out to pay for graduate or continuing education courses required by their jobs, the report notes. The remaining 20 percent of the debt was for loans people took out for their children or other dependents. Read more.
Financial businesses like banks, credit card issuers, payday loan companies, student and car lenders, credit bureaus, money transmitters and retirement funds are being challenged from all sides, according to a commentary yesterday on Forbes.com. One driver, according to the commentary, is regulation itself, as banks increasingly find that profit margins in their consumer business lines are not worth the regulatory costs and risks they carry. The financial industry overall is hiring thousands of new compliance personnel and paying billions of dollars in redress for past actions exemplified by this month's record $16.65 billion Bank of America mortgage settlement but it is still losing ground in containing risks. Rising regulatory ambiguity, including subjective, high-penalty mandates to ensure consumer "fairness," are making it impossible for providers to assess and limit legal exposure. Many are quietly doing so, especially in vulnerable lower-end markets, according to the commentary, where regulatory uncertainties are highest. Some will fully exit consumer businesses where risks seem unmanageable. As a result, private capital is flowing into less-regulated financial businesses, while technology innovators are leveraging the revolutions underway in big data, social media, and smartphone-based mobile payments that are rapidly transforming the industry. Established companies with cumbersome IT systems and costly branch networks face novel threats, including millennial consumers' attraction to phone apps that manage bill-paying, saving, and borrowing. An industry that has not recovered the public trust lost in the financial crisis could find it itself with unexpected vulnerability. Click here to read the full commentary.
S&P: INVERSIONS COULD LEAD TO CREDIT DOWNGRADES
Standard & Poor's Ratings Service yesterday warned that companies trying to lower their tax rates by moving their headquarters overseas may get hit with lower credit ratings, the Wall Street Journal reported today. Many U.S. companies have recently sought to cut their tax rates by acquiring foreign firms and then reincorporating in lower-tax jurisdictions. The controversial strategy has raised the ire of the Obama administration, which has decried the tactic as harmful to the U.S. Companies no longer domiciled in the U.S., which has a 35 percent corporate tax rate, could pay lower taxes and have access to vast stores of cash formerly trapped overseas for buybacks and dividend payments. But S&P's analysts argued that bondholders would suffer from credit downgrades as a result. "All you have left is weaker liquidity and higher debt," said S&P analyst Andrew Chang. Read more (subscription required).
NEW CASE SUMMARY ON VOLO: LOPEZ V. BANK OF AMERICA (IN RE LOPEZ; 11TH CIR.)
Summarized by Walter Kelley of Kelley, Lovett & Blakey, PC
The Eleventh Circuit ruled that the debtor may "strip off" or void a junior lien where the amount of debt securing the senior lien exceeds the value of the house.
There are more than 1,400 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: HAS APPLE INADVERTENTLY BECOME A REGULATED FINANCIAL INSTITUTION WITH ITS "PAY" SERVICE?
A recent post examines whether Apple's new "Pay" service may have made the company a "service provider" for purposes of the Consumer Financial Protection Act, which would make Apple subject to CFPB examination and UDAAP.
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.
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