%1

The American Bankruptcy Institute today announced the creation of a Commission on Consumer Bankruptcy. The 15-member expert panel will examine the consumer bankruptcy system and issue a report with recommended improvements that can be implemented within the existing structure. The Commission aims to modernize the consumer bankruptcy system with practical and cost-effective recommendations, building on the framework established by Bankruptcy Code of 1978 and Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. The Commission will employ an open, information-gathering model that will allow interested parties across the consumer bankruptcy spectrum to provide input. Read more.

U.S. consumer debt outstanding in January posted the smallest gain since July 2012 as American households reduced their credit card balances, Bloomberg News reported yesterday. The $8.8 billion advance last month followed a revised $14.8 billion gain in the prior month, Federal Reserve figures showed Tuesday. Revolving debt, which includes credit cards, declined by the most since December 2012 as households got to work reducing balances that had built up over the holiday-shopping season. The figures also help explain a moderation in consumer spending so far in the first quarter. At the same time, the pace of non-revolving credit picked up in January from a month earlier on financing of big-ticket purchases such as cars and school loans. Revolving debt, which includes credit cards, dropped $3.8 billion after a $3.6 billion increase, the Fed’s report showed. Non-revolving debt, such as that for college tuition and the purchase of vehicles and mobile homes, climbed $12.6 billion after an $11.2 billion increase. Lending by the federal government, which is mainly for student loans, rose by $27.3 billion in January before adjusting for seasonal variations.

President Trump’s post-election agreement to pay $25 million appeared to settle the fraud claims arising from his defunct for-profit education venture, Trump University. But a former student is now asking to opt out of the settlement, a move that, if permitted, could put the deal in jeopardy, the New York Times reported today. Lawyers for the student, Sherri Simpson of Fort Lauderdale, Fla., yesterday asked a federal judge in San Diego to reject the settlement unless former students are given an opportunity to be excluded from the deal so they can sue Trump individually. If the judge, Gonzalo Curiel, decides that Simpson and potentially others should have that chance, legal experts say that it could disrupt the settlement because Trump and his lawyers saw the deal as a way to resolve all of the claims, once and for all, to avoid a trial and distractions to his presidency. “If even one person could opt out of the settlement and force a trial, that might, in fact, crater the deal,” said Shaun Martin, a professor at the University of San Diego School of Law. “I’m sure Judge Curiel will be aware of that.”

The U.S. revealed last Friday that it now supports PHH in its landmark case against the Consumer Financial Protection Bureau, switching sides from its original stance back in December, HousingWire.com reported. Back in February, the U.S. Court of Appeals for the District of Columbia Circuit ruled in favor of the CFPB and granted a rehearing of the case en banc, meaning that it would allow the entire court to hear the case, rather than the three judges who ruled on the case in October. Procedurally, after the court’s decision, amicus briefs supporting PHH are required to be filed by March 10 and amicus briefs supporting the CFPB to be filed by March 31. PHH must file its opening brief by March 10 and the CFPB must respond by March 31. The Solicitor General hasn’t filed its amicus brief yet, but it did file an “unopposed motion” with the D.C. Circuit to file an amicus brief by March 17, according to a new piece in Ballard Spahr’s CFPB Monitor blog by Barbara Mishkin. By doing so, the blog stated that the United States appears to be signaling that its brief will support PHH rather than the CFPB. The U.S wouldn’t need an extension if it chose to support the CFPB.

U.S. consumer spending rose less than expected in January as the largest monthly increase in inflation in four years eroded households' purchasing power, pointing to moderate economic growth in the first quarter, Reuters reported. The Commerce Department said that consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased 0.2 percent after an unrevised 0.5 percent rise in December. In January the personal consumption expenditures (PCE) price index increased 0.4 percent - the largest gain since February 2013 - after rising 0.2 percent in December.

SolarCity, the nation’s leading installer of rooftop solar panels and a renewable energy darling, has pitched its value to investors on a simple premise: Once customers sign up to lease a system, they will make payments to the company month after month for at least 20 years. But even when the customers look good enough on paper, it does not always work out that way, according to a New York Times report today. In dozens of cases over the last three years, SolarCity has reached long-term lease agreements with homeowners shortly before or even after they defaulted on mortgages. In at least 14 cases, the homeowners were already in default, or had other liens on the property, by the time SolarCity filed paperwork about the panels with the government. The cases raise questions about how well the company vets customers. In addition, it is unclear how many foreclosure lawsuits involve the company over all.

The total amount of debt held by American households climbed in 2016 by the most in a decade, driven by broad and steady increases in credit card debt, auto and student loans, and a fourth-quarter surge to the highest amount of mortgage originations since before the financial crisis, the Wall Street Journal reported today. Total household debt climbed by $226 billion in the final three months of 2016, according to a report yesterday from the Federal Reserve Bank of New York. Total household debts are now just $99 billion shy of the all-time peak of $12.7 trillion set in the third quarter of 2008 just as the banking system began crashing down. The New York Fed estimates that debt is highly likely to set a new record in 2017. The New York Fed doesn’t adjust its figures for inflation. When measured against the broader economy, total household borrowing today is 67 percent of nominal gross domestic product, compared with about 85 percent in 2008.

Judge Nancy G. Edmunds of Federal District Court in Detroit has ruled that one of the nation’s largest providers of seller-financed homes must comply with a demand for documents and other information from the Consumer Financial Protection Bureau (CFPB), the <em>New York Times</em> reported today. The CFPB has been looking into whether the terms of some of these sales violated federal truth-in-lending laws. The agency filed a lawsuit in November after one such provider, Harbour Portfolio Advisors of Dallas, refused to comply with an administrative subpoena. Harbour Portfolio had argued that the agency had no authority to investigate its sale of formerly foreclosed homes to poor people through high-interest installment payment contracts — often referred to as contracts for deed.