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The Consumer Financial Protection Bureau (CFPB) and seven state attorneys general sued Strategic Financial Solutions (SFS) and its web of shell companies for running an illegal debt-relief enterprise, according to a CFPB press release on Friday. The CFPB and state attorneys general also sued the chief architects of the illegal enterprise, Ryan Sasson and Jason Blust. The CFPB and attorneys general allege the enterprise has collected hundreds of millions of dollars in exorbitant, illegal fees from vulnerable consumers. The CFPB and attorneys general filed the suit under seal on January 10, 2024. They are requesting the court to order a stop to the enterprise’s illegal actions, order redress for consumers, and impose a civil money penalty. The seven states joining with the CFPB are Colorado, Delaware, Illinois, Minnesota, New York, North Carolina, and Wisconsin. Under the Consumer Financial Protection Act, the CFPB has the authority to take action against nonbank financial institutions, including debt-relief companies, for violating consumer financial protections laws and rules, including the Telemarketing Sales Rule. The lawsuit seeks to stop SFS’s alleged unlawful conduct, require SFS to make harmed consumers whole, and require SFS to pay a civil money penalty, which would be deposited in the CFPB’s victims relief fund.

President Biden on Friday canceled nearly $5 billion in student loan debt for 74,000 people, the latest effort by the administration to deliver piecemeal relief after the Supreme Court struck down Mr. Biden’s more ambitious loan cancellation plan last year, the New York Times reported. Most of the people who will benefit from the latest round are teachers, nurses, firefighters and others in public service, who qualify for relief under existing programs that have been plagued by bureaucratic and other problems for years. “My administration is able to deliver relief to these borrowers — and millions more — because of fixes we made to broken student loan programs that were preventing borrowers from getting relief they were entitled to under the law,” Mr. Biden said in a statement. More than 43 million people across the country owe about $1.6 trillion in federal loans for college, according to government data.

Lower-income Americans are starting to face nascent signs of financial turbulence now that government support programs tied to the coronavirus pandemic have wound down, but any problems are relatively contained so far, Reuters reported. The Federal Reserve Bank of New York said in a report yesterday that for lower income households, “early delinquencies” on car and credit card loans started to rise in 2022 and are now higher than they were before the pandemic began in the spring of 2020. “Financial stress appears to have risen” for lower-income households, the report said, while noting any rise in trouble compares to very low levels of financial trouble seen before the pandemic. The report noted that even higher-income Americans are facing challenges on mortgages, auto loans and credit cards since 2021, with all measures at or just above where they were before the pandemic. But the researchers added, “lower-income areas have seen higher delinquency rates compared to high-income areas.” The report saw lower-income Americans as caught between a pull back in support and a more challenging economic environment. Read more.

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Former New York mayor Rudolph Giuliani may soon find out how far chapter 11 bankruptcy can go in sheltering him from overwhelming legal bills, Bloomberg News reported. Giuliani is scheduled to make his first appearance Friday in New York bankruptcy court, where he has asked a judge’s permission to challenge the $148 million judgment that drove him to seek protection from creditors. The hearing is slated for 11 a.m. The onetime prosecutor went bankrupt last month after losing a defamation lawsuit to two 2020 Georgia election workers he falsely accused of trying to rig the election for Joe Biden. Giuliani must ask Judge Sean Lane permission to appeal their $148 million award because filing bankruptcy pauses all litigation against him and prevents the election workers from immediately collecting the judgment. The election workers and others who have sued Giuliani, including Dominion Voting Systems, are challenging his request.

The Consumer Financial Protection Bureau (CFPB) on Wednesday proposed a rule that would sharply limit overdraft charges at America’s largest banks and credit unions, a change that the agency estimated could save households up to $3.5 billion a year in fees, the New York Times reported. The proposal, which must go through a comment period and would not take effect until at least late 2025, aims to end the $35 overdraft fee that has become the standard at many banks. The bureau’s rule would give banks a few options for setting a lower fee. They could charge a break-even fee — based on the individual bank’s own costs — or a benchmark fee determined by the bureau. The agency has proposed a range of $3 to $14 for the benchmark. Alternatively, the banks could treat overdrafts as a line of credit and provide the disclosures required by the Truth in Lending Act, including interest rates. “Decades ago, overdraft loans got special treatment to make it easier for banks to cover paper checks that were often sent through the mail,” said Rohit Chopra, the consumer bureau’s director. “Today, we are proposing rules to close a longstanding loophole that allowed many large banks to transform overdraft into a massive junk fee harvesting machine.” The proposed rule would apply only to institutions with assets of $10 billion or more, a category that includes roughly 175 of the nation’s more than 9,000 banks and credit unions. Those large providers collect about two-thirds of all overdraft fee revenue, the bureau said.

A key provision of President Joe Biden’s Saving on A Valuable Education, or SAVE income-driven repayment plan, will be implemented next month, providing loan forgiveness for more borrowers, YahooFinance.com reported. This provision was not expected to take effect until July and will provide immediate debt cancellation for borrowers who have an original loan balance of $12,000 or less and have been in repayment for 10 years. "This action will particularly help community college borrowers, low-income borrowers, and those struggling to repay their loans," Biden said in a press release. One of the benefits of enrolling in an income-driven repayment (IDR) plan is that after 20 or 25 years of repayment — depending on the plan — any remaining balance is discharged. The new provision cuts that timeline to 10 years for borrowers with smaller balances. Beyond that, for every $1,000 borrowed above $12,000, a borrower can receive forgiveness after an additional year of payments, which means those who originally borrowed less than $21,000 will be eligible for forgiveness faster than the 20-year timeline, James Kvaal, undersecretary of Education, said in a press call this week. "Giving borrowers with smaller loans a faster path to being debt free will help many borrowers avoid financial distress and have peace of mind," Kvaal said.