Senator Deb Fischer (R-Neb.) has introduced two bills offering structural reforms to the Consumer Financial Protection Bureau (CFPB), ACAInternational.org reported yesterday. Like similar bills in the House, S. 2213, the "Consumer Financial Protection Commission Act of 2014," would replace the agency's single director position with a five-member, bipartisan commission. Fischer's second bill, S. 2212, the "CFPB Improvement Act of 2014," would change the requirement for the Financial Stability Oversight Council's (FSOC) voting members to overturn CFPB regulations. "The CFPB has an enormous amount of influence impacting all sectors of our economy and every consumer nationwide. Decisions governing such a powerful agency should reflect input from all sides, rather than placing broad regulatory authority in the hands of a single unelected official with little oversight from Congress," Fischer said. In addition to replacing the CFPB director with a bipartisan commission, the Consumer Financial Protection Commission Act of 2014 also establishes that:
- Each member would be appointed by the president and confirmed by the Senate.
- Commissioners would each serve staggered five-year terms, and no more than three commissioners could be from the same political party.
- A chair of the commission position would be created. This position would be filled by one of the five commission members to fulfill administrative and other duties.
- The legislation would not take effect until July 16, 2018, the day after the end of current CFPB Director Richard Cordray's term.
To review both S. 2212 and 2213, along with other pieces of legislation and congressional hearings on matters related to debt and insolvency, be sure to visit ABI's Newsroom.
ANALYSIS: WHO IS RESPONSIBLE FOR THE STUDENT LOANS AFTER DIVORCE?
Legal experts say one of the most common misconceptions about dividing debt in a divorce is the belief that educational debt incurred before a marriage always becomes shared, marital debt once a couple gets hitched, the Wall Street Journal reported yesterday. While no generation is immune to the complications surrounding debt and divorce, the current one may be especially vulnerable: College students who took out loans and earned bachelor's degrees in 2012 graduated with an average $29,400 in educational debt, according to the Institute for College Access and Success, and those earning advanced degrees were typically on the hook for even more. New York divorce attorney Cari Rincker says that generally, educational debt incurred before a marriage is considered separate property and, barring some predetermined contractual agreement, it stays that way after a divorce. Debt division can get a little trickier when the student loans are taken out during the marriage. The person responsible for paying the loans isn't necessarily the person whose name is on them. Indeed, how educational debt is divided may depend on where you live and who benefited from the borrowed money. In many states, divorce courts have the discretion to divide marital property in a holistic way. That means that if the educational debt is considered marital property, they have the option of taking into account contextual issues, such as each spouse's ability to pay it off, said June Carbone, an expert in family law at the University of Minnesota Law School. Read more. (Subscription required.)
For further discussion of the student loan debt crisis, be sure to attend ABI's Student Loan Debt Symposium, which will feature Rep. Tom Petri, sponsor of a new graduated loan repayment bill, as the keynote speaker. Click here for more information or to register.
YELLEN SAYS MORE CAPITAL WOULD HELP BIGGEST, MOST COMPLEX BANKS
Federal Reserve Chairwoman Janet Yellen said today that the largest and most complex financial institutions may be able to strengthen their balance sheets further by raising more capital than regulators have required to date, the Wall Street Journal reported today. Yellen said that Fed staff are "actively considering" additional measures to deal with risks in short-term credit markets, which played a central role in propagating the U.S. financial crisis of 2007-2008. Some of these steps, such as higher capital requirements, would only apply to the biggest, most-interconnected firms, Yellen said. "Other measures, such as minimum-margin requirements for repurchase agreements and other securities financing transactions, could, at least in principle, apply on a market-wide basis," she said. Read more. (Subscription required.)
LENDING PLUNGES TO 17-YEAR LOW AS RATES CURTAIL BORROWING
U.S. mortgage lending is contracting to levels not seen since 1997 as rising interest rates and home prices are driving away borrowers, Bloomberg News reported yesterday. Wells Fargo & Co. and JPMorgan Chase & Co., the two largest U.S. mortgage lenders, reported a first-quarter plunge in loan volumes that's part of an industry-wide drop-off. Lenders made $226 billion of mortgages during the period, the smallest quarterly amount since 1997 and less than one-third of the 2006 average, according to the Mortgage Bankers Association. Lending has been tumbling since mid-2013, when mortgage rates jumped about a percentage point after the Federal Reserve said that it might taper stimulus spending. Concurrently, a surge in all-cash purchases to more than 40 percent has kept housing prices rising, squeezing more Americans out of the market. That will help push lending down further this year, according to the association. Read more.
ANALYSIS: A TOUGH CASE FOR LAW FIRM MERGERS
Mergers can provide law firms with instant access to new markets or help them bulk up in high-profile practice areas, but not every combination lives up to its promise, the Wall Street Journal reported yesterday. There were 88 mergers of law firms in the U.S. last year -- the most since legal consulting firm Altman Weil Inc. began tracking such deals in 2007. Most of last year's combinations involved relatively small acquisitions. The 2008 merger that produced New York's Dewey & LeBoeuf LLP created a firm with 1,300 lawyers worldwide. But both sides went to the altar saddled with debt, including more than $140 million in combined retirement obligations. As demand for legal services dropped during the economic downturn, Dewey & LeBoeuf sought bankruptcy protection in 2012 -- the largest U.S. law-firm failure in history. Prosecutors last month indicted the firm's former chairman and two top executives on charges relating to the firm's demise. While such spectacular flameouts are rare, industry experts say there are several ways that mergers can go south. Teaming up with a weaker firm can drag down both sides if underlying problems, such as runaway expenses or unproductive partners, aren't addressed quickly. On the other hand, a merger between two firms with equivalent financial strengths can devolve into power struggles. Read more. (Subscription required.)
BIG CREDIT CARD ISSUERS DEFEAT COLLUSION LAWSUIT IN U.S.
Consumers suffered a setback on Thursday after three big credit card issuers won the dismissal of U.S. lawsuits that accused them of colluding to require that disputes be settled in arbitration rather than in class action lawsuits, Reuters reported on Friday. U.S. District Judge William Pauley said that cardholders failed to show that American Express Co., Citigroup Inc. and Discover Financial Services conspired to violate the Sherman antitrust law. The plaintiffs had argued that the conspiracy ran from May 1999 to October 2003, when 10 card-issuing banks and their lawyers held 28 meetings to discuss how to impose mandatory arbitration clauses in cardholder agreements. Judge Pauley said that his decision in the decade-old case was a close call, given the "conscious parallel action" among the biggest card issuers to include the clauses. Cardholders had been seeking for eight years to force American Express, Citigroup and Discover to remove arbitration clauses from their cardholder agreements. Read more.
KEVYN ORR KEYNOTE, ENGAGING PANEL SESSIONS, SIGNED COPIES OF SEN. ELIZABETH WARREN'S BOOK AND MORE AT NEXT WEEK'S ANNUAL SPRING MEETING!
Over 1,000 are registered to attend next week's 32nd Annual Spring Meeting at the JW Marriott in downtown Washington, D.C. The conference features a roster of the best national speakers, while the depth and scope of topics offer something for everyone. Detroit Emergency Manager Kevyn Orr will keynote the Friday luncheon at the conference. Former Attorney General and Governor of Pennsylvania Dick Thornburgh will be the special guest at the opening reception. Watch below to find out more about what is on tap for ASM!
Plus, you can pick up a signed copy of Sen. Elizabeth Warren's brand new book, A Fighting Chance, at the ABI Bookstore at ASM!
NEW CASE SUMMARY ON VOLO: KIM V. DOME ENTERTAINMENT CTR. INC. (5TH CIR.)
Summarized by Aaron Kaufman of Cox Smith Matthews Inc.
The Fifth Circuit affirmed the district court's ruling that federal law can trump Texas homestead exemptions to force the sale of the debtor's homestead, notwithstanding the exemption rights of the nondebtor spouse.
There are nearly 1,300 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: GSE REFORM BILL FALLS SHORT OF ASSURING SMALL LENDERS' SURVIVAL
A recent blog post states that the small lender mutual cooperative proposed in recent GSE reform legislation would be expensive for small firms to capitalize, and that their securities might get inferior pricing compared to those issued by large banks and nonbanks.
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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