News

Volcker Rule Change Backed in House Panel’s Dodd-Frank Remedy - ABI

A group of consumer bankruptcy experts have given a wish list of changes they would make to bankruptcy law’s rules on student loans to another group of experts who could take those changes to Congress later this year, WSJ Pro Bankruptcy reported. Bankruptcy lawyers, trustees and other experts who are part of the American Bankruptcy Institute’s Consumer Bankruptcy Committee declared it “time to explore options for dealing successfully with student loan debt in bankruptcy” in a nine-page memo that lays out their frustrations with existing laws. The group of more than 800 ABI members called for Congress to implement several changes, including giving borrowers the power to cancel private loans and creating mediation programs. “We have all seen the effects of burdensome student loans,” committee officials said in the memo. “While we cannot do much about the root causes of skyrocketing education costs and diminishing public support for institutions of higher learning, we can try to suggest ways in which the bankruptcy process can aid the honest, but unfortunate student loan debtor.” The wish list was released to a panel of law professors, federal judges and consumer advocates that formed last year to examine the problems that have arisen within the U.S. consumer bankruptcy system since 1978, the year of the law’s last major overhaul. The Commission on Consumer Bankruptcy, which is also led by the nonpartisan American Bankruptcy Institute, is expected to release a report in December with recommendations on how to fix the problems.


Supermarket Bankruptcies Are Beginning to Pile Up - ABI

The outlook is bleak for the grocery sector that was supposed to be rebounding this year, Bloomberg News reported. Regional chains are filing for bankruptcy, while European-born discounters are expanding, forcing competitors to keep their own prices low. And Kroger Co. and Walmart Inc., the two largest grocers in the U.S., are investing in technology and expanding delivery as they try to fend off an incursion by Amazon.com Inc. A historic bout of food deflation — which fueled a price war in the past two years — has ended, but efforts to sell more groceries online are gobbling up investment dollars. Southeastern Grocers, owner of the Winn-Dixie and Bi-Lo supermarket chains, filed for bankruptcy last week. Along with Southeastern Grocers, Tops Friendly Markets also filed for bankruptcy in the past month. Based in Williamsville, New York, Tops has about 170 stores. As the pressure mounts, other regional chains could go under, according to Roger Davidson, an industry consultant.


CFPB to Work With FTC on Policing Debt Collectors - Wall Street Journal

American consumers increased their borrowing by $20.5 billion in October. It was the biggest gain in 11 months and reflected strong increases in the use of credit cards and in auto and student loans.  The October followed a $19.2 billion gain in September and was the best showing since November 2016, the Federal Reserve reported Thursday.  The category that covers auto loans and student loans was up $12.2 billion, slightly slower than the $13.2 billion rise in September. Borrowing in the category that covers credit cards rose by $8.3 billion, up from a $6 billion increase in September and the strongest showing since November.  The solid gains were good signs for strength in consumer spending heading into the holiday shopping season. Consumer spending accounts for 70 percent of economic activity.  Reports from the retailers have indicated a strong start to the holiday season with shoppers buying more than last year.  The U.S. economy, as measured by the gross domestic product, grew at a healthy rate of 3.3 percent in the July-September quarter after a 3.1 percent rate in the spring. It marked the first back-to-back quarterly gains above 3 percent in three years.  The overall gain in borrowing pushed consumer credit to a new record of $3.8 trillion. The Federal Reserve's monthly consumer credit report does not cover home mortgages or any other loans secured by real estate such as home equity loans.


Stech’s Take: Consumer Bankruptcy Panel Calls for Student Loan Reform - Wall Street Journal

A group of consumer bankruptcy experts have given a wish list of changes they would make to bankruptcy law’s rules on student loans to another group of experts who could take those changes to Congress later this year, WSJ Pro Bankruptcy reported. Bankruptcy lawyers, trustees and other experts who are part of the American Bankruptcy Institute’s Consumer Bankruptcy Committee declared it “time to explore options for dealing successfully with student loan debt in bankruptcy” in a nine-page memo that lays out their frustrations with existing laws. The group of more than 800 ABI members called for Congress to implement several changes, including giving borrowers the power to cancel private loans and creating mediation programs. “We have all seen the effects of burdensome student loans,” committee officials said in the memo. “While we cannot do much about the root causes of skyrocketing education costs and diminishing public support for institutions of higher learning, we can try to suggest ways in which the bankruptcy process can aid the honest, but unfortunate student loan debtor.” The wish list was released to a panel of law professors, federal judges and consumer advocates that formed last year to examine the problems that have arisen within the U.S. consumer bankruptcy system since 1978, the year of the law’s last major overhaul. The Commission on Consumer Bankruptcy, which is also led by the nonpartisan American Bankruptcy Institute, is expected to release a report in December with recommendations on how to fix the problems.


Toys ‘R’ Us Stores May Be Closing, But Name Will Live On - ABI

Barring a last-minute buyer, Toys ‘R’ Us will soon disappear from U.S. shopping centers, but the name and its iconic Geoffrey the Giraffe mascot are likely to survive for another generation of Toys ‘R’ Us kids, Reuters reported. Buyers often swoop in on retailers that are going out of business and scoop up brands with an eye on maintaining ties with loyal customers, minus the bricks and mortar. “Toys ‘R’ Us — that’s a fabulous name,” said Cathy Hershcopf, an attorney who specializes in retail bankruptcies. “The jingle, the customer lists, the logo ... and the giraffe goes along with it.” Brand specialists said that they could not put an estimated value on the name, but it will be among the most valuable ever to become available through a bankruptcy liquidation. The name adorns stores in 38 countries, from Australia to Zambia.


Trump Picks CNBC’s Larry Kudlow as Top Economic Adviser - ABI

President Trump officially chose Larry Kudlow, a CNBC television commentator, to serve as the next director of the National Economic Council, the New York Times reported. Kudlow is an unabashed prognosticator who relishes making the kinds of provocative statements that Mr. Trump has turned into an art form. He has lamented “growing government dependency,” touted tax cuts for the wealthy and lavished praise on high-flying corporate executives. Kudlow will assume the role of Mr. Trump’s top economic adviser, replacing Gary D. Cohn, who said he would resign after losing a battle over the president’s longstanding desire to impose large tariffs on steel and aluminum imports.


Bipartisan House Bill Would Replace Consumer Director with Panel - ABI

A bipartisan group of House members on Wednesday released a bill that would replace the director of the controversial Consumer Financial Protection Bureau (CFPB) with a five-person commission, The Hill reported. The bill from Reps. Dennis Ross (R-Fla.), Kyrsten Sinema (D-Ariz.), Ann Wagner (R-Mo.) and Bobby Scott (D-Ga.) would rename the CFPB and replace its director with a bipartisan panel. While the bill would easily pass the House, it would likely be filibustered in the Senate by Democrats who have protested changes to the CFPB. Under the bill, the CFPB would become the Financial Product Safety Commission, directed by a panel appointed by the president. No more than three commissioners could be from the same political party, and the president could remove a member for “inefficiency, neglect of duty, or malfeasance.” The bill is an attempt to rein in the CFPB director’s sole control over the agency’s extensive authority. Republicans have long insisted that the bureau, opened in 2013, is too powerful, immune from congressional oversight and dependent on the whims of the director.


Senate Passes Bill Loosening Banking Rules, but Hurdles Remain in the House - ABI

A decade after the federal government rescued the first of many faltering financial firms, the Senate voted on Wednesday to pass legislation that would relax restrictions on large parts of the banking industry, representing the most significant changes to the rules that were put in place after the 2008 financial crisis, the New York Times reported. In a rare showing of bipartisanship, the Senate voted 67 to 31 to pass the bill, which is intended to help small- and medium-size banks but which critics say is a dangerous rollback of financial regulations intended to prevent another meltdown. The legislation faces an uncertain fate going forward, as House Republicans are expected to push for a much more expansive rollback of the 2010 Dodd-Frank Act. Senate Democrats who voted for the bill that passed yesterday have insisted that major changes along the lines of what the House passed last year will sink the effort but expressed hope that the legislation could herald a return to the kind of cooperation that has recently eluded Congress. The bill, which the Senate Banking Committee drafted over several years, would let hundreds of smaller banks avoid some federal oversight such as stress tests, which measure a bank’s ability to weather an economic downturn.


Fifth Circuit, in Bankruptcy Ruling, Lets Convicted Businessman Pay Criminal Defense Counsel with Ho

The U.S. Court of Appeals for the Fifth Circuit has ruled that a Texas businessman who was sentenced to two years in prison for bankruptcy fraud may use the sale of the proceeds of his house to pay his criminal defense attorneys, rejecting a U.S. bankruptcy trustee’s attempts to claim the home sale proceeds as part of his estate, Texas Lawyer reported. Curtis Harold DeBerry, the former owner of a failed produce company in Boerne, Texas, was eventually sentenced to two years in prison last year for hiding assets from creditors in bankruptcy. As part of DeBerry’s chapter 7 bankruptcy case, which he filed in 2014, he used the Texas homestead exemption law to protect his house from the bankruptcy estate. DeBerry sold his house later that year for $364,592, did not reinvest the proceeds and instead transferred the money to his wife and to San Antonio’s Goldstein[,] Goldstein & Hilley for the benefit of Gerry Goldstein and Cynthia Orr, two firm partners who represented DeBerry in a criminal matter.


Senate Democrats Again Propose Making Private Student Loans Dischargeable - ABI

A Senate banking bill that is designed to roll back rules made after the 2008 financial crisis would extend a helping hand to struggling student loan borrowers. On Thursday, Sen. Dick Durbin (D-Ill.) introduced an amendment to the bill that would give people who have taken out private student loans the power to cancel that debt if they file for bankruptcy protection, WSJ Pro Bankruptcy reported. The amount of private student loan debt currently stands at $165 billion, he said. The Democratic Whip’s amendment would eliminate the 2005 rule that made canceling private student loans very difficult, even for borrowers who face extreme financial problems. In a speech on the Senate floor, Sen. Durbin told his colleagues that bankruptcy judges have the power to cancel loans borrowed for homes, boats and other property. Their power, however, stops at student loans, he said. The measure has support from several Senate colleagues, including Jack Reed (D-R.I.), Elizabeth Warren (D-Mass.), Patty Murray (D-Wash.), Sherrod Brown (D-Ohio), Richard Blumenthal (D-Conn.), Tammy Baldwin (D-Wis.), Tammy Duckworth (D-Ill.), Sheldon Whitehouse (D-R.I.), Maggie Hassan (D-N.H.) and Chris Van Hollen (D-Md.).