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U.S. Consumers Boosted Borrowing by $18.4 Billion in December

ABI Bankruptcy Brief
ABI Bankruptcy Brief
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February 8, 2018

ABI Bankruptcy Brief

U.S. Consumers Boosted Borrowing by $18.4 Billion in December

American consumers stepped up their borrowing by $18.4 billion in December, a solid performance that followed a massive gain the previous month, the Associated Press reported. The Federal Reserve says that the increase reflects gains of $5.1 billion in the category that covers credit cards and $13.3 billion in the category for auto and student loans. The overall increase followed a $31 billion surge in November as consumers took on extra credit to finance holiday shopping.
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CFPB Seeks Industry Input on Possible Enforcement Revamp

The Consumer Financial Protection Bureau (CFPB) yesterday issued a request for information (RFI) on the “efficiency and effectiveness” of its enforcement program, Bloomberg BNA reported. The notice is the third in three weeks as the Trump-led bureau conducts a top-to-bottom self-examination under acting Director Mick Mulvaney. The CFPB has already asked for input on civil investigative demands and administrative adjudications. The CFPB’s past crackdowns on auto lenders and debt collectors are two examples of how the agency under former Director Richard Cordray addressed what it saw as bad practices using its broad Dodd-Frank Act enforcement powers against unfair, deceptive, or abusive acts or practices (UDAAP). Critics charged that the bureau was engaging in policy-making outside the formal rulemaking process. “Rather than tell a company, ‘Don’t do the bad conduct again,’ CFPB consent orders often contain detailed and prescriptive conduct provisions,” said James Kim, who is of counsel at Ballard Spahr. “The bureau expected other companies to follow the same instructions. So the injunctive relief in consent orders became substitutes for rulemaking and other ways of providing guidance.” Companies might “suggest that before deciding to use the enforcement tool, the bureau consider guidance and rulemaking,” Ori Lev, a Washington, D.C.-based partner at Mayer Brown, told Bloomberg Law. “That echoes complaints about regulation through enforcement and holding people to a standard that hadn’t previously been articulated.”
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Commentary: Why Privatizing Puerto Rico's Power Grid Won't Solve Its Energy Problems

Although Puerto Rico Gov. Ricardo Roselló recently announced that he would privatize Puerto Rico’s power grid as a solution to repairing the island’s devastated grid, a commentary in yesterday's San Francisco Chronicle said that selling off PREPA will bring Puerto Rico more headaches than relief. In the mid-1990s, the administration of Gov. Pedro Rosselló – father of the current governor — began privatizing Puerto Rican services like telecomms, water, education and electricity, according to the commentary. Thirty percent of the island’s power generation was sold to private coal and gas interests, among them the now-defunct energy company Enron. PREPA's debt tripled from around $3 billion in the 1990s to roughly $10 billion today, according to the commentary. In recent years, austerity measures resulting from Puerto Rico’s financial crisis have further decimated PREPA. By the time Hurricane Maria hit, as Puerto Ricans soon learned, it was unable to fulfill its public mission. Welcoming private energy companies to the island didn’t just weaken PREPA — it also damaged the environment, according to the commentary. The privatization of PREPA could stunt its recent green energy shift. It is unknown which companies have expressed interest in running Puerto Rico’s power grid, but both current political tides and Puerto Rican history suggest they’ll be fossil fuel-focused.
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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. 

Analysis: Illinois Is Awash in Debt Even Before 2019 Budget Pitch Up

As Illinois prepares for Governor Bruce Rauner (R) to unveil a proposed budget next week, Comptroller Susana Mendoza (D) said that the state is already awash in billions of dollars of red ink, Bloomberg News reported. Lawmakers and Rauner will have to contend with deficit spending in the current fiscal year as they work to craft a spending plan for next year, according to Mendoza. Mendoza outlined the following shortfalls:

- $2.3 billion of deficit spending in the form of unappropriated liabilities held at state agencies as of Dec. 31
- $8.4 billion of unpaid bills as of Feb. 7
- $1.03 billion of late-payment interest fees incurred as of Dec. 31, 2017 (Bloomberg notes that at least $143 million has been paid)
- $1.7 billion general fund deficit, according to the governor’s office of management and budget

Rauner is scheduled on Feb. 14 to present his spending plan for the fiscal year that begins July 1. The Republican, who is up for re-election this year, has pledged to roll back an income-tax hike enacted by the legislature in July over his veto. That revenue boost ended an unprecedented two-year budget impasse, which had threatened to send the state to junk status.
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U.S. Announces Takedown of $530 Million Cyberfraud Network

The U.S. charged 36 people in a takedown of an international cybercrime ring that prosecutors say used the slogan “In Fraud We Trust” and stole $530 million with the help of pilfered identities and malware, according to a recent blog post..

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