Advocates Sue Education Department over Delays for Defrauded Students​​​

Student loan reform advocates are suing the Education Department (ED) over the slow-moving debt-relief process for students who had been defrauded by a defunct for-profit college, YahooFinance.com reported. “For nearly six years, across administrations, the Department has shirked its obligations, leaving countless borrowers in the dark about whether or when they’ll receive the relief they’re owed under federal law,” Student Defense Litigation Director Eric Rothschild said in a press release. The Lawyers' Committee for Civil Rights Under Law, the National Consumer Law Center and Student Defense filed a lawsuit today against the Department of Education and ED Secretary Miguel Cardona on behalf of former Westwood College students, who they said had been "waiting six years" for debt relief under the borrower-defense-to-repayment process. Westwood College, which shuttered in 2015, had made "substantial misrepresentations" about its job-placement rates, ED's website stated. In November 2016, the Illinois Attorney General filed a group borrower defense claim on behalf of defrauded students, specifically for those who had attended a criminal justice program in Illinois. The AG's efforts ended with the discharge of institutional student loans, but the ED has not fully erased the federal student loans owned by the federal agency. ED has erased the debts of some Westwood students, however: In February 2022, the department announced that it had approved debt-relief claims filed by some Westwood students, as well as former students of DeVry University, ITT Technical Institute and others, totaling $131 million in cancellation of student debt.

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Number of People Receiving Jobless Benefits Reached 52-Year Low in Early May​​​

The number of people receiving unemployment benefits fell in early May to the lowest point in more than 50 years, adding to signs that the U.S. labor market remains unusually tight, the Wall Street Journal reported. So-called continuing claims, a proxy for the total number of people receiving payments from state unemployment programs, declined to 1.3 million for the week ended May 7 from the previous week’s level, the Labor Department said on Thursday. That was the lowest level since December 1969. Continuing claims are reported with a one-week lag from totals for initial filings for jobless benefits. New applications for the week ended May 14 rose for the third week in a row, increasing 21,000 to a seasonally adjusted 218,000. Despite the recent upward trend, claims remain historically low, with last week’s figure matching the 2019 average ahead of the COVID-19 pandemic. (Subscription required.)

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Top U.S. Competition Chief Vows to Crack Down on Private-Equity Deals​​​

The top U.S. antitrust enforcer has warned that the Justice Department will take a tougher stance on private-equity firms attacking swathes of the U.S. economy while it targets buyout groups that have largely circumvented watchdog scrutiny, the Financial Times reported. “Occasionally [the motive of a private-equity firm is] designed to dig or grow an industry and basically cash in,” said Jonathan Kanter, the head of the DoJ’s antitrust unit. “This business model is often very inconsistent with the law and very inconsistent with the competition that we are trying to protect.” Kanter, who joined the DoJ in November, said the buyout groups were “an extremely important part of our enforcement program” and that a more comprehensive evaluation of their deals was “a priority for me, and . . for the team.” Its move to target the sector comes as buyout firms such as Blackstone, KKR and Apollo have grown into diversified conglomerates controlling large swathes of the U.S. economy, from retail chains to hospitals and centers of data. Private-equity groups, which sit on trillions of dollars raised from their investors, announced a record 14,730 deals last year with a global value of $1.2 billion, nearly doubling from the previous record high in 2007, according to Refinitiv data. The surge in deals by private-equity firms reflects only part of the size of the industry, which in recent years has also become a major provider of capital to acquire or rescue companies.

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Retailers Call Out Visa and Mastercard for Fee Hikes that Could Make Inflation Worse​​​

Consumers could soon see even higher prices at some stores after credit card giants Visa and Mastercard raised their "swipe fees" — generating an additional cost that some retailers could be forced to pass on to their customers, CNN.com reported. Last month, the two credit card companies raised some of their interchange rates, or fees that merchants pay with each credit or debit card transaction. These so-called "swipe fees" are then paid to the bank that issues the card but are largely invisible to the consumer. However, some retailers claim that the added fees will force them to raise prices or stop accepting certain credit cards altogether. The changes to interchange rates — which also include some decreases, such as certain transactions under $5, the credit card companies said — were meant to go into effect in April 2020, but were postponed due to the pandemic. Two years later, retailers say the timing for increases isn't much better, citing the worst inflation in 40 years, the ongoing pandemic, disruptive supply-chain issues, spiking costs and general economic uncertainty. Credit, debit and prepaid cards were used to make $9.4 trillion in purchases last year, according to the Nilson Report, a publication covering the payment industry. Out of those purchases, merchants paid about $138 billion in processing fees, Nilson reported. In a recent report, Visa noted that a typical swipe fee for its cards includes a flat charge of about 5 cents to 25 cents and around 1.15% and 3% of the purchase price. Visa noted that the fees aren't charged directly to consumers, and they are not tied to inflation or the price of goods. However, the company said, "Like any line item for their business, merchants price their goods based on their costs…. Any increases in the amount of interchange fees paid year to year often reflect an increase in merchant transactions or sales revenue." The inflationary concerns were highlighted earlier this month during a Senate Judiciary Committee hearing on interchange fees. Sen. Richard Durbin, who was behind a 2010 financial reform push that limited debit card interchange fees, chaired the hearing. Retailers are pushing for an expansion of the Durbin Amendment to include credit cards, but so far the senators have stopped short of calling for such an extension. Instead, they floated potential reforms, such as adding interchange fee disclosures to credit card statements.

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SEC Chairman Gary Gensler Predicts More Cryptomarket Turmoil​​​

Securities and Exchange Commission Chairman Gary Gensler said yesterday that he worries that more investors will be harmed in cryptocurrency markets, after this month’s implosion of the stablecoin known as TerraUSD, the Wall Street Journal reported. “I think a lot of these tokens will fail,” Mr. Gensler told reporters after a House Appropriations Committee panel hearing Wednesday. “I fear that in crypto … there’s going to be a lot of people hurt, and that will undermine some of the confidence in markets and trust in markets writ large.” Cryptomarkets have shed more than $1 trillion of value over the past six months as the Federal Reserve started to unwind its easy-money policies and regulators dialed up their attention regarding crypto. The selloff accelerated in early May after the central bank lifted interest rates. TerraUSD, a token whose price was supposed to remain pegged to the dollar, suddenly dropped, along with the coin that was meant to back it, known as Luna. Read more. (Subscription required.)

In related news, the head of crypto-exchange Binance.US said last week’s crash of TerraUSD could accelerate the Biden administration’s efforts to regulate stablecoins, or digital coins whose value is tied to traditional currencies like the dollar, the Wall Street Journal reported. “I would suspect that they would actually — especially now — move forward with stablecoin regulation,” Binance.US President and Chief Executive Brian Shroder said yesterday. The U.S. could benefit from such regulation by encouraging crypto-investors to use U.S.-regulated, dollar-based stablecoins instead of offshore variants, Mr. Shroder added. “I think there would be a flow to safety, as the USD is kind of the reserve currency. You would see it as the digital reserve currency as well,” he said. The implosion of TerraUSD and a related cryptocurrency, Luna, cost investors tens of billions of dollars and rattled the crypto markets. Unlike some other stablecoins that maintain their value by holding cash, Treasury bills or other traditional assets, TerraUSD was an algorithmic stablecoin that sought to keep its value at $1 through financial engineering. Critics had warned in the run-up to the collapse that TerraUSD could be vulnerable to a sudden crash if market participants lost confidence in its ability to maintain its $1 peg. Read more. (Subscription required.)

Don't Miss Two Informative abiLIVE Webinars on Subchapter V and Mediation Next Week!​​​

ABI will be hosting two special complimentary webinars next week that you’ll want to tap into! Tuesday's abiLIVE webinar, hosted by ABI's Financial Advisors and Investment Banking Committee, is titled, "Feasibility and Valuation in Subchapter V: Does It Matter?" The program features nonlawyer subchapter V trustees sharing their perspectives on how they have used their financial and accounting experience to help subchapter V debtors successfully negotiate and confirm plans where feasibility and valuation issues have been raised. Click here for complimentary registration.

Next Thursday's webinar, hosted by ABI's Mediation Committee, will be the second part of "The Effects of Stress and Remote Work on Mediation." The expert panel will discuss the impacts and pros/cons of remote mediation, which has forced mediators to adapt their skills to an environment where the parties never get in the same room. Click here for complimentary registration.

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