‘A Stay-in-Debt-Forever Scheme’: Student Loan Debt-Collection System Is Too Harsh, Education Department Official Says​​​

Defaulting on your student loans could lead to the federal government withholding your wages, your tax refunds and possibly your Social Security income — a process that’s both blunt and punitive, one government official says, MarketWatch.com reported. “Even if you were a hard-nosed accountant who only cared about collecting money for taxpayers, it makes no sense to try and collect a loan by driving borrowers into poverty and preventing them from getting back on their feet,” Education Department Undersecretary James Kvaal said in his opening remarks during a virtual panel held by the Student Borrower Protection Center. “There are lives at stake here,” he added. According to Kvaal, more than 7.5 million student loan borrowers, or one out of every six borrowers, was in default prior to the pandemic. In fact, before the pandemic-era payment pause began, Kvaal said, a million debtors had defaulted for the first time every year. Defaulting can have wide-ranging effects on a borrower’s life. In addition to seeing their wages garnished, Social Security checks seized and tax refunds withheld, borrowers can take a hit to their credit scores — “driving up the cost of every financial product,” Kvaal said. The Biden administration has repeatedly extended the student loan collection pause enacted by the Trump administration in response to the pandemic’s economic impact. That payment pause has been a boon to millions of student debtors, according to a new report from the New York Federal Reserve. Over the last decade, prior to the payment pause on federal student loans, around 15% of borrowers had loans that were in delinquency status, or in default, in 2019. The pause on payments — and debt collections — helped a wide swath of the 38 million debtors who hold federal student loans, with the share of borrowers with a delinquent or defaulted loan falling to 7.5% at the end of last year.
​​​​​​
Read more. 

Soaring Rent Prices Have Advocates Calling on White House to Intervene​​​

The White House hasn’t done enough to fight rent inflation, says a coalition of tenant unions, community organizations and legal groups calling on the Biden administration to launch an all-out government intervention, The Washington Post reported. A set of proposals shared with The Washington Post calls on the Biden administration to declare a state of emergency on housing and explore ways to regulate rents. The proposals span six government agencies and are intended to push federal regulators to consider new ways to curb rental costs, which were up 5.8 percent in June compared with the year before. Overall prices are up 9.1 percent compared with last year, and inflation remains the top economic problem facing households, businesses and policymakers alike. In recent months, the Biden administration has come under enormous pressure to find any means of slashing gas prices, another major way people feel inflation in their daily lives. The White House has responded with oil releases and by calling on Congress to consider a gas tax holiday, which didn’t happen. “We urge the President to act immediately to regulate rents, as part of the Administration’s efforts to curb inflation, and as a critical foundation for long term protections to correct the imbalance of power between tenants and their landlords,” the coalition wrote in a memo sent to National Economic Council Director Brian Deese and other White House advisers. The effort, part of a campaign called Homes Guarantee, comes one week after the White House held a summit on its efforts to prevent evictions during the pandemic and keep financial support flowing to struggling renters. During an online forum, White House officials touted progress under the Emergency Rental Assistance program, which was propped up in the thick of the coronavirus crisis to stave off a wave of evictions once a federal moratorium was no longer in place.

Read more. 

Historic Debt-Relief Program for Farmers of Color Takes Hit After Discrimination Suits​​​

Congress is on the verge of rolling back a significant debt-relief program intended to provide aid to farmers of color after the Democratic-led effort hit a roadblock last year following legal challenges brought by white farmers claiming discrimination, The Hill reported. Democrats are planning to repeal the program in a sprawling economic package the party could pass as early as this week. But there are new plans to put more than $5 billion toward helping farmers whose operations are deemed “at financial risk,” as well as those who have faced discrimination. Specifically, the bill outlines $3.1 billion to help “distressed borrowers of direct or guaranteed loans administered by the Farm Service Agency,” and $2.2 trillion for a program to provide assistance for farmers that experienced discrimination in Department of Agriculture (USDA) farm lending programs prior to January 2021. Agri-Pulse was the first to report on the plan, which was tucked away in Democrats’ 700-plus-page Inflation Reduction Act, a mammoth tax, climate and health care plan the Senate passed over the weekend. The plan comes more than a year after Congress passed the American Rescue Plan, a coronavirus relief package that President Biden signed into law in March 2021, which included $4 billion in aid for underserved farmers.

Read more. 

U.S. Jobless Claims Rise Slightly to New 2022 High​​​

U.S. workers’ filings for unemployment benefits edged up last week, reaching their highest level so far this year, the Wall Street Journal reported. Initial jobless claims, a proxy for layoffs, increased to a seasonally adjusted 262,000 last week from a revised 248,000 the previous week, the Labor Department said Thursday. The weekly number has been on an upward trend since reaching a 50-year low in March. Last week’s total was slightly above the prior 2022 peak set in July of 261,000 and was above the 2019 weekly average of 218,000. The four-week moving average for initial claims, which smooths out weekly volatility, rose by 4,500 to 252,000. Continuing claims, a proxy for the number of people receiving government unemployment payments, increased by 8,000 to 1.43 million in the week ended July 30. Continuing claims are reported with a one-week lag. The new figures come as other signs indicate that the U.S. labor market remains strong even though the U.S. economy shrank in the first two quarters of this year, according to the Commerce Department, as rising interest rates and inflation took steam out of business and consumer spending. Employers added 528,000 jobs in July, fully recouping the 22 million positions lost in the early months of 2020, when the COVID-19 pandemic first hit the U.S. economy, the Labor Department reported last week. The U.S. unemployment rate fell to 3.5% from 3.6%, where it had held for the previous four months.

Read more. 

A Shake-Up Could Be Coming for Banks Working with Crypto​​​

As efforts to pass federal crypto legislation are maybe, finally, picking up steam in Washington, so too is the debate about how traditional banks should approach the sector, Protocol reported. A group of progressive senators, including Elizabeth Warren and Bernie Sanders, are calling on a federal banking regulator to pull Trump-era guidance that gives banks limited clearance to engage in crypto-related business. In a Wednesday letter addressed to the Office of the Comptroller of the Currency, the senators pushed forward an ongoing debate over the role banks should play in the crypto ecosystem. Banking industry groups say the regulated institutions can bring stability to the volatile sector, but the lawmakers fear crypto could introduce systemic risk to the broader banking system without strict guardrails. “In light of recent turmoil in the crypto market…we are concerned that the OCC’s actions on crypto may have exposed the banking system to unnecessary risk,” reads the letter, which was also signed by Sens. Sheldon Whitehouse and Dick Durbin. Sen. Warren circulated a draft version of the letter within the Senate Banking Committee last week, as first reported by Bloomberg and American Banker. The OCC’s current guidance was published in late 2020 and early 2021. It gives federally chartered banks clearance to provide crypto custody service, hold cash reserves backing stablecoins and use blockchain technology and stablecoins to verify bank-to-bank payments. The senators cited the bankruptcies of firms Celsius and Voyager, which ran cryptolending businesses that operated outside of the OCC’s purview. The bankruptcies make “clear that stronger protections are necessary to mitigate crypto’s risks to the financial system and consumers,” the letter reads.

Read more. 

Cryptoverse: Blockchain Bridges Fall into Troubled Waters​​​

When thieves stole an estimated $190 million from U.S. crypto firm Nomad last week, it was the seventh hack of 2022 to target an increasingly important cog in the crypto machine: Blockchain “bridges” — strings of code that help move crypto coins among different applications, Reuters reported. So far this year, hackers have stolen cryptocurrency worth some $1.2 billion from bridges, data from London-based blockchain analysis firm Elliptic shows, already more than double last year's total. At present, most digital tokens run on their own unique blockchain, essentially a public digital ledger that records crypto transactions. That risks projects using these coins becoming siloed, reducing their prospects for wider use. Blockchain bridges aim to tear down these walls. Backers say they will play a fundamental role in “Web3” — the much-hyped vision of a digital future where crypto is enmeshed in online life and commerce. Yet bridges can be the weakest link. The Nomad hack was the eighth-biggest crypto theft on record. Other thefts from bridges this year include a $615 million heist at Ronin, used in a popular online game, and a $320 million theft at Wormhole, used in so-called decentralized finance applications.

Read more. 

Equifax Should Face Curbs on Selling Credit Scores, Rep. Maxine Waters Says​​​

A top-ranking Democrat is calling on a federal regulator to take action against Equifax Inc. for its erroneous credit scores, the Wall Street Journal reported. Rep. Maxine Waters, chairwoman of the House Financial Services Committee, has asked the Consumer Financial Protection Bureau to stop Equifax from selling credit scores to lenders until the credit-reporting firm can prove it has the controls in place to ensure its scores are correct. In a letter to the CFPB viewed by the Wall Street Journal, the California congresswoman also called for “more robust enforcement action” against the company that goes beyond fines. Rep. Waters also sent a letter to Equifax asking how many financial institutions received erroneous scores, how many consumers were affected and how the error occurred. Equifax sent out inaccurate credit scores on millions of U.S. consumers seeking loans during a three-week period earlier this year, the Journal reported last week. The erroneous scores were for people applying for auto loans, credit cards and mortgages at lenders big and small. The scores were at times off by about 20 points or more in either direction and were enough to alter the interest rates consumers were offered or to result in their applications being rejected altogether, the Wall Street Journal reported. (Subscription required.)

Read more. 

Don't Miss the "Dealing with Digital Assets" abiLIVE Webinar on August 24!​​​

Sponsored by ABI's Secured Credit Committee, the August 24 abiLIVE webinar will delve into issues involving digital accounts, cryptocurrency and NFTs, including how to get secured and perfected, how to liquidate, and bankruptcy-specific considerations. The panelists also will discuss UCC Article 12 and its impact on the digital-asset world for secured parties. The presentation will help practitioners better understand the considerations and issues they should be spotting when advising their constituents on dealing with digital assets.
​​​Register for free!

International Committee Seeking Nominations for Its First Annual "Matter of the Year" by Sept. 15​​​

ABI's International Committee is proud to announce its First Annual International Committee Matter of the Year Award! The nominated matter needs to involve the U.S. and other jurisdictions and be of some international legal significance and/or impact to international insolvency, as well as international cooperation. Nominations are due September 15, 2022, by 5:00 PM EDT. For more information, visit the International Committee page.

USTP Seeking Applicants Interested in Serving as Subchapter V Trustees​​​

The U.S. Trustee Program is seeking resumes from persons wishing to be considered for inclusion in a pool of trustees who may be appointed on a case-by-case basis to administer cases filed under the Small Business Reorganization Act of 2019 (subchapter V), according to a release from the U.S. Department of Justice. Those with business, managerial, consulting, mediation and operational experience are encouraged to apply. The appointment is for cases filed in the U.S. Bankruptcy Court for the Western District of Michigan. Subchapter V trustees may receive compensation and reimbursement for expenses in each case in which they serve, pursuant to court order under 11 U.S.C. § 330. Trustees are not federal government employees. For additional information, qualification requirements and application procedures, click here.

Court Vacancy Announcement in South Carolina​​​

The U.S. Bankruptcy Court for the District of South Carolina has posted a vacancy announcement for a law clerk to serve in Greenville, S.C. Applications are being accepted now through Sept. 2. For more information on the vacancy, please click here.

Sign up Today to Receive Rochelle’s Daily Wire by E-mail!
Have you signed up for Rochelle’s Daily Wire in the ABI Newsroom? Receive Bill Rochelle’s exclusive perspectives and analyses of important case decisions via e-mail!

Tap into Rochelle’s Daily Wire via the ABI Newsroom and Twitter!