Subprime Auto Lenders Utilizing New Technologies to Make Sure Borrowers Make Timely Payments

Subprime Auto Lenders Utilizing New Technologies to Make Sure Borrowers Make Timely Payments

ABI Bankruptcy Brief | September 16, 2014
 
  

September 25, 2014

 
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SUBPRIME AUTO LENDERS UTILIZING NEW TECHNOLOGIES TO MAKE SURE BORROWERS MAKE TIMELY PAYMENTS

Many subprime auto lenders are outfitting vehicles with a starter interrupt device, which allows lenders to remotely disable the ignition if a payment is missed, according to a post in the New York Times DealBook blog. Using the GPS technology on the devices, the lenders can also track the cars' location and movements. The devices, which have been installed in about two million vehicles, are helping feed the subprime boom by enabling more high-risk borrowers to get loans. But there is a big catch. By simply clicking a mouse or tapping a smartphone, lenders can disable the vehicles, ensuring that they retain the ultimate control. Borrowers must stay current with their payments, or lose access to their vehicle. Auto loans to borrowers considered subprime, those with credit scores at or below 640, have spiked in the last five years. The jump has been driven in large part by the demand among investors for securities backed by the loans, which offer high returns at a time of low interest rates. Roughly 25 percent of all new auto loans made last year were subprime, and the volume of subprime auto loans reached more than $145 billion in the first three months of this year. Read more.

HOLDER TO STEP DOWN AS ATTORNEY GENERAL

Attorney General Eric Holder announced that he plans to resign his post, but will stay in office until a successor is confirmed, Bloomberg News reported today. Holder told President Obama of his plans over the Labor Day weekend and formally announced his decision at the White House today. Deputy Attorney General James Cole; Kathryn Ruemmler, the former White House counsel; Deval Patrick, the Democratic governor of Massachusetts; California Attorney General Kamala Harris; and at least three Democratic U.S. senators, Claire McCaskill of Missouri, Mark Pryor of Arkansas and Amy Klobuchar of Minnesota, have been mentioned by congressional and administration officials as qualified successors. Holder is one of three original members of Obama's cabinet still serving in the administration, having been confirmed in 2009. He is the first black attorney general and the fourth-longest serving in U.S. history. Read more.

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FDIC'S HOENIG KEEPS WALL STREET ON EDGE

FDIC Vice Chairman Thomas Hoenig, the former head of the Federal Reserve Bank of Kansas City, has emerged as one of the most influential detractors of big banks — the only top regulator in Washington, D.C., who has directly called for their dismantling, the Wall Street Journal reported today. His stance has helped shape policies that are restricting and restructuring the way megabanks do business. Hoenig helped push through stricter capital rules adopted earlier this year, won tougher regulatory language outlining how the government would unwind a large, failing financial firm, and urged fellow regulators to send big banks back to the drawing board on their "living will" plans to avoid a taxpayer bailout in the event of a crisis. This week, he signaled that he won't stop pressuring banks to fix those plans — a worrying prospect for Wall Street given that the FDIC and Federal Reserve have the power to force divestitures at firms that can't show they have a credible bankruptcy path. Read more. (Subscription required.)

NEW RULES MAKE INVERSIONS LESS LUCRATIVE, EXPERTS SAY

Inversions, in which U.S. companies reincorporate abroad to lower their taxes, became less profitable and more difficult to pull off after the Treasury Department on Monday announced a series of measures intended to crack down on the deals, the New York Times DealBook blog reported yesterday. But the consensus among corporate advisors was that while the new rules might make some deals less lucrative, they would not halt the rush of companies seeking tax relief abroad. "This doesn't solve the problem or prevent inversions from occurring," said Sam Lichtman, a partner in the tax practice group at the law firm Haynes and Boone. "The announced inversions will still go ahead." Though the notice released by the Treasury Department may affect some announced deals — including AbbVie's $54 billion deal for the British drug maker Shire and Medtronic's $43 billion deal for Irish medical device maker Covidien — it stopped short of outlawing inversions altogether. "While the notice will present challenges for some U.S. companies seeking to invert, most companies should be able to navigate the notice and complete a successful inversion with proper planning," said Linda Z. Swartz, head of the tax group at the law firm Cadwalader, Wickersham & Taft. Read more.

FALL LINE-UP OF FREE ABI COMMITTEE TELECONFERENCES FEATURES TIMELY ISSUES

Members are encouraged to dial-in and listen or participate on upcoming ABI Committee conference calls. (More than 100 attended this week's lively call of the Business Reorganization Committee.) While committee membership is encouraged, it is not required to join the free teleconferences. Upcoming Committee teleconferences include:

  • Asset Sales Committee: Thursday, Oct. 2; 4 pm ET
    Topic: Call to cover "the progeny of Fisker," as well as the practical implications of the decisions.
    Speakers: Oscar Pinkas of Dentons (New York) and Justin Paget of Hunton & Williams LLP (Richmond, Va.)

  • Unsecured Trade Creditors Committee: Wednesday, Oct. 1; 4 pm ET
    Topic: "Tricks of the Trade: New Issues and Strategies in Preference Cases"
    Speakers: Mark Felger of Cozen O'Connor (Wilmington, Del.) and Travis Powers of Buchanan Ingersoll & Rooney PC (Buffalo, N.Y.)

All committee teleconferences will utilize the same dial-in information:
Call in: (712) 432-1500
Participant code: 692933

NEW CASE SUMMARY ON VOLO: STATE OF MICH. WORKERS' COMP INS. AGENCY V. ACE AM. INS. CO. (IN RE DPH HOLDINGS CORP.; 2D. CIR.)

Summarized by Weston Eguchi of Willkie Farr & Gallagher LLP

The Second Circuit did not have jurisdiction to review the district court's permissive abstention decision. Regarding mandatory abstention, there was no evidence of abuse of discretion to require abstention under Buford v. Sun Oil Co., 319 U.S. 315 (1943). The court agreed with the plaintiffs/appellees that, under Michigan law, their insurance contracts did not apply to the debtors or the debtors' self-insured policies. The Michigan Workers' Disability Compensation Act is not contrary to the contractual provisions regarding which debtor-related entities are provided coverage, and does not render the parties' intent irrelevant. Lastly, the insurer's suit does not violate sovereign immunity because it is an in rem proceeding.

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: CAN AUCTIONING TROUBLED MORTGAGES BOOST THE HOUSING RECOVERY?

A recent post examines whether provisions of the FHA's Distressed Asset Stabilization Program should be loosened in order to auction off troubled loans to boost the housing recovery.

For more information on student debt and bankruptcy, be sure to pick up a copy of ABI's Graduating with Debt: Student Loans under the Bankruptcy Code.

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 debt ceiling for chapter 13 cases should be increased substantially again, perhaps to $5 million.

Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.

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  CALENDAR OF EVENTS
 

2014

October
- abiWorkshop: Government Contracting and Bankruptcy
    Oct. 6, 2014 | Alexandria, Va.
- Midwestern Bankruptcy Institute
    Oct. 16-17, 2014 | Kansas City, Mo.
- Views from the Bench
    Oct. 24, 2014 | Washington, D.C.
- Claims-Trading Program
    Oct. 30, 2014 | New York, N.Y.
- International Insolvency & Restructuring Symposium
    Oct. 30-31, 2014 | London

November
- Complex Financial Restructuring Program
    Nov. 6, 2014 | Philadelphia
- Corporate Restructuring Competition
    Nov. 6-7, 2014 | Philadelphia

  

 


- Chicago Consumer Bankruptcy Conference
    Nov. 11, 2014 | Chicago, Ill.
- Detroit Consumer Bankruptcy Conference
    Nov. 11, 2014 | Troy, Mich.
- Mid-Level Professional Development Program
    Nov. 12, 2014 | Chicago

December
- Winter Leadership Conference
    Dec. 4-6, 2014 | Palm Springs, Calif.
- 40-Hour Mediation Training Program
   Dec. 7-11, 2014 | New York, N.Y.

January
- New Orleans Consumer Bankruptcy Conference
    Jan. 19, 2015 | New Orleans, La.

 

 
 
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