Biden Forgives $1.2 Billion in Student Loans in Latest Relief​​​

President Joe Biden canceled an additional $1.2 billion in student debt for public servants today, Bloomberg News reported. The assistance will affect 35,000 public service workers enrolled in the government’s loan forgiveness program, including nurses, firefighters and teachers. The individuals received waivers or were affected by regulatory changes that gave them more credit toward the system’s decade-long payment requirement. The Education Department has now forgiven $168.5 billion in student debt for 4.76 million Americans, mostly through administrative changes to existing programs. The agency is finalizing rules for another attempt at broader relief expected to be released this fall. It’s also likely to face legal challenges. Read more.
 

CFPB Cracks Down on Paycheck Advance Products​​​

The Consumer Financial Protection Bureau (CFPB) proposed a new rule Thursday that would categorize popular paycheck advance products as consumer loans, which the agency says will ensure lenders provide borrowers with key information about costs and fees, The Hill reported. Nearly three-quarters of workers are paid biweekly or monthly, according to the CFPB, and lenders have long bridged the days between when an expense comes due and a worker’s paycheck comes in. As inflation has eaten into Americans’ savings and paychecks, there has been rapid growth in the market for paycheck advance products, employer-partnered or direct-to-consumer loans that allow employees to receive their paycheck days before it’s scheduled to hit their account. The number of transactions processed by these companies ballooned 90 percent from 2021 to 2022, when more than 7 million accessed around $22 million, according to a CFPB study of data from eight employer-partnered companies, which it says make up just under half of the employer-partnered market. Read more.
 

U.S. Weekly Jobless Claims Jump Amid Usual Seasonal Volatility​​​

The number of Americans filing new applications for unemployment benefits increased more than expected last week, but there has been no material shift in the labor market, as the data is typically noisy in July because of temporary factory closures, Reuters reported. The weekly jobless claims report from the Labor Department on Thursday, however, suggested that it was getting harder for the unemployed to land new jobs relative to last year. Unemployment rolls swelled to the highest level in more than 2-1/2 years in the first week of July, in line with a recent increase in the jobless rate. A loosening labor market and ebbing inflation position the Federal Reserve to cut interest rates in September, with financial markets anticipating additional cuts in November and December. Initial claims for state unemployment benefits increased 20,000 to a seasonally adjusted 243,000 for the week ended July 13, the Labor Department said on Thursday. Economists polled by Reuters had forecast 230,000 claims for the latest week. The rise pushed claims back to the upper end of their 194,000-243,000 range for the year. They had dropped in the prior week, pulling further away from a 10-month high touched in early June. Some of that decline was attributed to difficulties adjusting the data around holidays, like the U.S. Independence Day. In addition, automakers typically shut down assembly plants starting the July 4 week to retool for new models. Read more.
 

Firms Point to Slowing Activity and Softer Labor Market, Fed Survey Shows​​​

U.S. economic activity expanded at a slight-to-modest pace from late May through early July, with firms expecting slower growth ahead as they also reported signs that the jobs market continues to soften, in line with the Federal Reserve's recent pivot to more keenly assessing slowing demand for labor to ensure it doesn't wait too long before cutting interest rates, Reuters reported. The U.S. central bank's latest temperature check on the health of the economy also showed that inflation pressures increased at a modest pace, with most Fed districts reporting that input costs were beginning to stabilize. "Economic activity maintained a slight-to-modest pace of growth in a majority of districts this reporting cycle," the Fed said in its survey released yesterday, which polled business contacts across the central bank's 12 districts through July 8. While seven Fed districts reported some level of increase in activity, five noted flat or declining activity — three more than in the prior reporting period, the survey noted, as firms forecast a dimming outlook. "Expectations for the future of the economy were for slower growth over the next six months due to uncertainty around the upcoming election, domestic policy, geopolitical conflict, and inflation," the Fed survey said. Read more.
 

Analysis: Loan Issuers Build In Rate Cuts as They Wait for Fed​​​

Leveraged loan issuers are capitalizing on strong investor demand to push for provisions that would lower their future borrowing costs and give them a buffer if the Federal Reserve keeps interest rates elevated, Bloomberg News reported. They’re increasingly asking to add so-called step-down clauses within their loans, which could reduce their interest rates — often by a quarter of a percentage point — if they meet certain targets. These goals typically include an initial public offering, a credit-rating upgrade or a company reducing its debt load. In June, 14 leveraged loan transactions featured step-down provisions, the most this year and the largest amount since January, which saw 10 such deals, according to data compiled by Bloomberg. Insurance broker Ardonagh and more recently KKR & Co.-backed BMC Software snagged similar concessions contingent on their respective goals. An imbalance between supply and demand has given borrowers more room to negotiate better terms with lenders, said John McAuley, Citigroup’s head of North America debt capital markets. “When you have a good transaction in this market, you can embed more issuer-friendly options in it than when the market is balanced,” he said. Step-downs are just one way that companies and often their private-equity owners are coping with elevated borrowing costs that have stung issuers exposed to floating-rate debt. Companies have also been repricing their debt this year — lowering margins on a loan without tying it to a target — saving over $1 billion in annual interest expenses through the end of May. Read more.
 

Two Upcoming Webinars to Provide Insights on Filing Trends and Merchant Cash Advances​​​

Two upcoming abiLIVE webinars will present expert perspectives on bankruptcy filing trends and the intersection of merchant cash advances and bankruptcy:

- "Filing Trends and Predictions for the Second Half of 2024," July 30. Year-over-year bankruptcy filings continued to show double-digit increases across nearly all chapters for the first six months of 2024. Join ABI and statistical partner Epiq Bankruptcy Analytics for a special abiLIVE webinar featuring experts who will break down the consumer and business filing trends that emerged in the first half of 2024, and offer their predictions on what might unfold over the remainder of the year. Complimentary registration.

- "Intersection of MCAs and Bankruptcy," August 1. This panel of bankruptcy practitioners will discuss all facets of merchant cash advance (MCA) funding, its history, and its interplay with bankruptcy. The panelists will provide different perspectives — MCA company, debtor and subchapter V trustee — on the legal implications of merchant cash advances in chapter 11 bankruptcy proceedings, as well as practical solutions for dealing with MCAs in chapter 11 cases. Complimentary registration. 

Donate to the Kevin J. Carey Memorial Scholarship ​​​

Hon. Kevin J. Carey (ret.), who served as ABI’s President from 2022-23 after previously having served as ABI’s Vice President-Membership, among other leadership roles, died on April 11 at his home in Devon, Pa., at the age of 69. An ABI member since 1997, he had served as a U.S. Bankruptcy Judge for the District of Delaware from 2001-19, then as senior counsel at Hogan Lovells in Philadelphia from 2019 until his death. The Carey family is grateful for the continued prayers and support they have received since Judge Carey’s passing, and have since formed a scholarship in his name at Villanova University School of Law, which will be awarded to academically talented students enrolled in the Charles Widger School of Law with demonstrated financial need. To donate in support of the Kevin J. Carey Memorial Scholarship, please send a check to Villanova University at 299 North Spring Mill Road, Villanova, PA 19085, with “The Kevin J. Carey Memorial Scholarship” in the memo. Donations also can be made online at givecampus.com/campaigns/36916/donations/new. From there, select “Other/Your Choice” to write in “The Kevin J. Carey Memorial Scholarship.”  

Get Your Copy of The Purdue Papers — Now Updated with the Supreme Court’s Ruling!​​​

The Purdue Pharma L.P. case, overturned at the end of June by the U.S. Supreme Court, generated a mountain of commentary in the form of amicus briefs, petitions and other related background material. Guided by editor David R. Kuney (who represented one group of amicus filers), ABI has gathered together all of this material in a fully searchable form — more than 3,500 pages worth! This digital book includes the final Supreme Court decision, a commentary by ABI Editor-at-Large Bill Rochelle, and a transcript of ABI’s July 2 webinar discussing the implications of the decision. It’s an invaluable resource for anyone working in the area of third-party releases, whether as a practitioner, an academic or just an interested party. Get your digital copy for only $25!

Pick Up Your Copy of Driving the Recovery Bus​​​

Make sure to pick up your copy of Driving the Recovery Bus: Augmenting Creditor Recoveries Through Claims Brought by a Litigation Trustee. Written by Gordon Z. Novod, this book is not only for litigation trustees, but also for creditors who serve on official committees of unsecured creditors, attorneys and other professionals who frequently represent official committees of unsecured creditors, and others with a general interest in the pursuit of causes of action by litigation trustees. Get your copy of Driving the Recovery Bus. 
 

Have an Idea for a Topic for an ABI Conference Session? Submit Your Proposal via ABI’s “Call for Abstracts” Page!​​​

ABI has launched an online portal for professionals to submit proposals for educational sessions at future ABI conferences. Submitters can describe their proposed topic, outline the session’s focus and learning goals, suggest speakers, and provide contact information via the portal’s detailed form. The portal can be accessed here.

All submissions will be reviewed by an internal Education Committee, which will contact the submitter to ask questions as needed and to discuss the status of the proposal. Submissions will be reviewed on a rolling basis.

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