%1

Yesterday, the Supreme Court granted certiorari in City of Chicago v. Fulton, 19-357 (Sup. Ct.), to resolve a circuit split and decide whether inaction can violate the automatic stay under Section 362(a), Rochelle's Daily Wire reported. The case will likely be argued and decided before the high court’s term ends in late June. An opinion by Bankruptcy Judge Brian F. Kenney of Alexandria, Va., demonstrates how the Supreme Court could dramatically impair the efficacy of bankruptcy by ruling that creditors are not required to unwind actions they have already taken when notified of bankruptcy. Former matrimonial counsel had a judgment against the debtor for more than $10,000. The law firm had obtained a garnishment order under which $1,000 was being held by the clerk of the state court after having been deducted from the debtor’s wages. A hearing was scheduled in state court to rule on turning the garnished funds over to the firm as the judgment creditor. One month before the hearing in state court, the debtor filed a chapter 7 petition, listed the judgment as a debt, gave notice of the filing to the judgment creditor, claimed an exemption in the $1,000, and filed a suggestion of bankruptcy in the state court. Claiming to have performed legal research, the judgment creditor responded to the debtor by saying he was unaware of any obligation to take affirmative action to terminate the garnishment. The judgment creditor said he would appear in state court on the return date, where he expected the state court judge would rule “as the Court deems appropriate.”

The Trump administration is considering ways to help Americans with their student-loan debt, according to senior administration officials, including by refinancing loans at lower interest rates and eliminating debt in bankruptcy, the Wall Street Journal reported. President Trump has asked advisers for a plan that would rely on policy changes at the Education Department, which oversees federal student-loan lending, and possibly Congress. It would counter student-debt-forgiveness proposals by some Democratic presidential contenders. Sen. Bernie Sanders has called for canceling all student loan debt, and Sen. Elizabeth Warren has proposed canceling up to $50,000 in debt for anyone earning under $100,000 a year, with lower amounts for those making between $100,000 and $250,000. About 42 million Americans owe $1.5 trillion in student debt, the second-highest form of consumer debt after mortgages. Student debt soared during the recession and in the expansion, driven by escalating tuition costs and a surge in college and graduate-school enrollments. White House and Education Department advisers think a program to cancel a large portion of student debt would be unfair to taxpayers and unpopular among Republican voters, senior administration officials said. Instead, officials are looking at ways to help borrowers lower their debt. The proposals are in flux and would likely require approval by Congress, aides said. One senior official said a plan probably wouldn’t be completed until next year but the administration believes it can gain bipartisan support.

A new Bankrate survey found that nearly 46 percent of U.S. adults with a net worth of at least $100,000 are more likely to have credit card debt, compared with 40 percent of those who have a negative net worth, USA Today reported. The survey also found that 57 percent of those with a net worth between $100,000 and $199,999 are the most likely to carry credit card debt versus 42 percent of all Americans. Three culprits are to blame, experts say, ranging from lifestyle creep, which refers to a rise in spending as wages increase, better access to credit and lack of liquidity. About 77 percent of Americans with a net worth of $100,000 or more have some amount of debt, led by credit cards, mortgages and car loans or leases, the study showed. Among those who have credit card debt, 58 percent owe at least $2,500 and 39 percent owe at least $5,000.

A Federal Reserve Bank of New York survey of consumer credit released Monday showed a spike in the rate of auto-loan rejections, to 8.1 percent in October from 4.5 percent in the same month last year, MarketWatch.com reported. And for the full year, the average rate of car-loan rejections was 7.1 percent, up from 6.1 percent for 2018, even through applicants reported fewer denials in other parts of the record $14 trillion consumer debt market for the same 12-month period. “The reported rejection rates for credit cards, mortgages and mortgage refinancing applications all declined compared to 2018,” according to the Fed’s snapshot of its annual survey, which covers consumer experiences when applying for auto loans, credit cards, credit-card balance increases, mortgages and mortgage refinancing. Read more. 

Click here to access the survey. 

Banks that have long lamented rules requiring them to do some of their business in less wealthy areas would get a break under a proposal released on Dec. 12 by two regulatory agencies. But the industry’s most prominent regulator, the Federal Reserve, isn’t on board, the New York Times reported. The central bank did not join in a proposal from the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation that would give the Community Reinvestment Act its first major overhaul in a quarter-century. Joseph Otting, the comptroller of the currency, who spearheaded the effort, said that regulators had worked for 18 months on a plan, “but not all three agencies could move forward together at this time.” The Federal Reserve chair, Jerome Powell, had signaled his disapproval on Wednesday, saying that the central bank had worked hard to get on the same page. “My hope is that we can still do that. I don’t know whether that will be possible or not,” he said. “If we can’t, I’m not sure what the path forward would be.” Should the changes be enacted without the Fed’s support, it would create two sets of rules: One for those overseen by the central bank and one for those overseen by the other two agencies. Banks have long called the Community Reinvestment Act’s requirements burdensome and impractical, but shirking them is not an option. Banks that do not meet the requirements face heavy regulatory scrutiny and can have difficulty getting approval for mergers or expansions.

The share of credit card borrowers who are at least 90 days past due on their accounts will probably tick up to 2.01 percent next year, the highest level since 2010, according to a forecast by TransUnion, Bloomberg News reported. Still, the credit-rating company said that the increase isn’t a cause for concern, noting that bad card debt still remains much lower than the level seen during the last recession. The number of people with access to revolving credit reached a record 200.5 million in the third quarter. That figure was helped by private-label credit card originations, which reversed a 10-quarter slump by posting 2.4 percent growth, according to TransUnion. Major card issuers including American Express Co. and Discover Financial Services have warned they’ve begun to tighten their credit standards in anticipation of a potential economic downturn. Still, lenders say that their customers have continued to keep up with their bills as the U.S. unemployment rate remains near historic lows.

Federal regulators yesterday proposed an overhaul of rules governing how banks lend hundreds of billions of dollars in low-income neighborhoods, setting up a potential break with the Federal Reserve, the Wall Street Journal reported. The overhaul is a priority for Comptroller of the Currency Joseph Otting, who says that it will boost lending under the Community Reinvestment Act and make existing requirements more transparent and consistent. The act requires banks to serve borrowers of all income levels in their communities. The plan is backed by a second regulator, the Federal Deposit Insurance Corp., but not by the Fed, which is considering a separate overhaul, according to people familiar with the central bank’s thinking. Community groups have also objected to the plan. Officials at all three regulators say they hope they can ultimately agree on a plan.