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CFPB Announces Action Against Student Loan Debt-Relief Operation - ABI

The Consumer Financial Protection Bureau (CFPB), along with the Minnesota Attorney General’s Office, North Carolina Department of Justice and the Los Angeles City Attorney, announced an action yesterday to halt a student loan debt-relief operation engaged in allegedly unlawful conduct and consisting of several related companies: Consumer Advocacy Center Inc., which does business as Premier Student Loan Center; True Count Staffing Inc., also known as SL Account Management; and Prime Consulting LLC, which is known as Financial Preparation Services. Defendants also include Albert Kim, Kaine Wen and Tuong Nguyen, whom the Bureau alleges substantially assisted the student loan debt-relief companies. The CFPB alleges that since at least 2015, the debt-relief companies operated as a common enterprise, deceived thousands of federal student loan borrowers, and charged over $71 million in unlawful advance fees in connection with the marketing and sale of student loan debt-relief services to consumers. The CFPB alleges that Premier, along with its company co-defendants, violated the Consumer Financial Protection Act of 2010 (CFPA) and the Telemarketing Sales Rule (TSR) by making deceptive representations about the companies’ student loan debt-relief and modification services. Specifically, the complaint alleges that Premier charged and collected improper advance fees before consumers had received any adjustment of their student loans or made any payment toward such adjusted loan. ABI


U.S. Farm Bankruptcies Surge 24% on Strain From Trump Trade War - Bloomberg

U.S. farm bankruptcies in September surged 24 percent to the highest level since 2011 amid strains from President Donald Trump’s trade war with China and a year of unpredictable weather, Bloomberg News reported. Growers are also becoming increasingly dependent on trade aid and other federal programs for income, figures showed in a report by the American Farm Bureau Federation, the nation’s largest general farm organization. The squeeze on farmers underscores the toll China’s retaliatory tariffs have taken on a critical Trump constituency as the president enters a re-election campaign and a fight to stave off impeachment. The figures also highlight the importance of a “phase one” deal the administration is currently negotiating with Beijing to increase agriculture imports in return for a pause in escalating U.S. levies. Almost 40 percent of projected farm profit this year will come from trade aid, disaster assistance, federal subsidies and insurance payments, according to the report, based on Department of Agriculture forecasts. That’s $33 billion of a projected $88 billion in income. Chapter 12 bankruptcy filings in the 12 months ended September rose to 580 from a year earlier. That marked the highest since 676 chapter 12 cases in 2011. The total “remains well below” historical highs in the 1980s, the federation said. Bloomberg


America’s Middle Class Is Addicted to a New Kind of Credit - Bloomberg

The payday-loan business was in decline, but just a few years later, many of the same subprime lenders that specialized in the debt are promoting an almost equally onerous type of credit, according to a Bloomberg News commentary. It’s called the online installment loan, a form of debt with much longer maturities but often the same sort of crippling, triple-digit interest rates. If the payday loan’s target audience is the nation’s poor, then the installment loan is geared to all those working-class Americans who have seen their wages stagnate and unpaid bills pile up in the years since the Great Recession, according to the commentary. In just a span of five years, online installment loans have gone from being a relatively niche offering to a red-hot industry. Subprime borrowers now collectively owe about $50 billion on installment products, according to credit reporting firm TransUnion. In the process, they’re helping transform the way that a large swathe of the country accesses debt. And they have done so without attracting the kind of public and regulatory backlash that hounded the payday loan, according to the commentary. Bloomberg


DeVos Fined $100,000 for Failure to Forgive Student Debt - Bloomberg

U.S. Secretary of Education Betsy DeVos was hit with a $100,000 fine for violating a judge’s order to stop debt collection efforts against former students at bankrupt Corinthian Colleges Inc., Bloomberg News reported. Despite the order, the department went as far as seizing the students’ tax refunds and wages. U.S. Magistrate Judge Sallie Kim in San Francisco issued the fine Thursday, after finding DeVos in contempt of court. Kim ordered the $100,000 to go to a fund held by the students’ lawyers to help the more than 16,000 borrowers who she said suffered damages from the violation. Both sides must submit a plan for administering the fund by Nov. 15. The judge’s rebuke comes hours after DeVos’s point person on overhauling the student loan system abruptly resigned and publicly called for mass debt forgiveness. Bloomberg


Wave of Financial Stress Hits Low-Rated Companies - ABI

An array of business challenges are hitting low-rated companies across the U.S. economy, driving selling in the bottom tier of the corporate-debt market that contrasts with gains in stocks and other riskier assets, the Wall Street Journal reported. In recent months, consumer demands for wireless phones and high-speed internet have helped push one landline telecom company, Windstream Holdings Inc., into bankruptcy protection and another, Frontier Communications Corp., into restructuring talks with its creditors. Meanwhile, competition from cheap natural gas and renewable-energy sources has caused at least seven coal producers to file for chapter 11 protection over the past year. Opioid lawsuits and the threat of legislation that would curb surprise medical bills have exposed vulnerabilities at some highly leveraged health care companies. Retailers continue to be pressured by the shift to online shopping. And a wave of financial distress has again hit the oil patch due in part to persistently low commodity prices. Taken together, these developments have caused yields, which rise when bond prices fall, to climb for months on the lowest-rated group of corporate bonds. Unusually, that has happened even as yields have fallen on higher-rated junk bonds. ABI


Wall Street Banks See Green Light from Fed on Reserves - ABI

Wall Street banks believe they are getting a green light from supervisors to hold more Treasury debt and less cash after last month’s volatility in overnight lending markets, Reuters reported. That change could help boost liquidity in the overnight lending markets, because Treasury bonds are a common type of collateral pledged by companies and investors in exchange for cash. Banks have complained for years that the U.S. Federal Reserve can be painfully prudent with its view that Treasury bonds are not the same as ordinary dollars when used as a liquidity buffer. In recent weeks, they have intensified efforts to get Fed officials and examiners to soften their stance, and initial signs suggest the industry may finally be getting a warmer reception. In private conversations with senior bankers, supervisors have attempted to make banks more comfortable with using excess reserves to lend in repo markets rather than hold onto more cash. Banks hold regular meetings with Fed supervisors, who provide broad guidance on how to interpret regulations but do not offer formal instructions. ABI



Consumer-Watchdog Settlements Reach Four-Year High - The Wall Street Journal

Consumers harmed by financial firms got back $777 million through actions by the Consumer Financial Protection Bureau during the last fiscal year, the largest amount in four years, the Wall Street Journal reported. The amount included settlements of a few significant long-pending investigations, which were among the 22 enforcement cases the CFPB announced during the fiscal year ended Sept. 30, the agency said. That represented an uptick from 12 cases and $344 million in restitution in the previous fiscal year, during which the Trump administration curbed the activities of the CFPB. The trend came as CFPB Director Kathy Kraninger approached her first year on the job amid criticism from Democrats that the bureau has been too friendly to the financial industry. Kraninger, a career government worker, took over the CFPB in December 2018 from Mick Mulvaney, who now serves as President Trump’s acting chief-of-staff. Many of the large cases settled last year were started by Obama-era officials before President Trump installed Mick Mulvaney as acting director in November 2017. Among them was a July settlement with Equifax Inc. over its 2017 data breach, which resulted in the credit reporting company’s pledge to return $425 million to consumers. The bureau’s settlements with ITT Education Services Inc., a now defunct for-profit college, and CU Connect CUSO LLC, a lender that targeted its students, were a result of an investigation initiated in 2014. The two agreements brought a combined $228 million in loan forgiveness. The Wall Street Journal


Six-Figure Parent Loans: When College Dreams for Students Mean Nightmarish Debt for Family - ABI

The federal government’s Parent PLUS program helps make attending college a reality, closing the gap between the cost of college and what the student receives in grants and other loans. But while it may sound like a lifeline, the Parent PLUS Loan program can cause economic complications for families, USA Today reported. The loan program was introduced in the 1980s as a way for middle- and upper-income parents to help their children pay for college while keeping their assets liquid. It has since become more popular among lower-income parents. That's possible because the program does not check the ability to repay, considering only the borrower's credit history. When parents borrow, the debt can weigh down families for generations. But the burden falls particularly hard on low-income black families. Few white families with low incomes take out the loan – 10 percent of white Parent PLUS borrowers earn $30,000 or less. Comparatively, 40 percent of black Parent PLUS borrowers have incomes that low. ABI


Fed Eases Post-Crisis Rules for Domestic, Foreign Banks - ABI

The U.S. Federal Reserve yesterday unveiled a final package of rules easing capital and liquidity requirements for domestic U.S. and foreign banks that was originally introduced following the 2007-2009 global financial crisis, Reuters reported. The changes, which should reduce the compliance burden and free up funds for U.S. Bancorp, Capital One and PNC Financial, among others, mark another win for the industry after the Fed also relaxed rules on derivatives trades and banks’ annual health checks. Yesterday’s package stems from bipartisan legislation passed by Congress in May 2018 that rewrote parts of the 2010 Dodd-Frank financial reform law. That 2018 law ordered the Fed to reduce the burden on community and regional lenders, but progressive Democrats and consumer groups are likely to criticize the central bank for giving larger banks too much leeway with its final changes. Randal Quarles, the Fed’s top regulatory official, said the package allows the Fed to more closely tie stricter rules to risks and retains the toughest requirements for the largest firms. ABI