News
Americans’ Credit Card Balances Hit New Peak
Credit & Collection e-newsletter of 8/28/23 reports that Americans’ credit card balances rose briskly in the second quarter of 2023, hitting a sobering milestone of more than $1 trillion, the Federal Reserve Bank of New York reported this month. Credit cards are the most prevalent type of household debt, New York Fed researchers wrote in a blog post, and saw the biggest increase of all debt types. More than two-thirds of Americans had a credit card in the second quarter, up from 59% roughly a decade earlier, the researchers found. And, they noted, card balances were more than 16% higher…
Credit Card And Car Loan Delinquencies Surpass Pre-Pandemic Levels
Credit & Collection e-newsletter of 8/15/23 reports that Credit Card And Car Loan Delinquencies Surpass Pre-Pandemic Levels More Americans are falling behind on their credit card payments. Driving the news: The rate of new credit card delinquencies has surpassed its pre-COVID level, clocking in at 7.2% in the second quarter, per a report out this month from the New York Fed. Auto loan delinquencies were at 7.3% in Q2, also higher than pre-pandemic levels. Meanwhile, mortgage delinquencies remain very low. Why it matters: Even as inflation declines, Americans are increasingly relying on credit cards to make their budgets work —…
On 8/10/23 the U.S. Supreme Court announced it will review confirmation of the Purdue Pharma LP chapter 11 plan and decide
“Whether the Bankruptcy Code authorizes a court to approve, as part of a plan of reorganization under Chapter 11 of the Bankruptcy Code, a release that extinguishes claims held by nondebtors against nondebtor third parties, without the claimants’ consent.” This issue does not only affect the Purdue Pharma Ch11 plan, where the non-debtor Sackler family members received non-consensual releases in exchange for contributing several billion dollars to fund the Purdue Pharma Ch11 plan. Cases where a subsidiary is created and the subsidiary files bankruptcy (like J&J, which twice set up, and had a subsidiary file bankruptcy, to seek to discharge…
RS Air LLC v. NetJets Aviation Inc. 9th Circ BAP
An Alter Ego Suit Doesn’t Violate the Discharge Injunction, BAP Says At least where nondebtor releases are prohibited, and if Delaware law controls, a suit against an alter ego doesn’t violate the discharge injunction, the Ninth Circuit BAP says. At least when Delaware law controls, suing an alter ego does not violate the discharge injunction protecting a corporate debtor, according to the Ninth Circuit Bankruptcy Appellate Panel. The corporate debtor owned a partial interest in aircraft. The corporation filed a petition under Subchapter V of chapter 11. The entity that sold the aircraft to the corporate debtor had a claim…
Debt Owed by America’s Consumers Hits New Record Of More Than $17 Trillion
As Americans dealt with high inflation and recession fears, they also faced record debt, according to the latest data by the New York Fed. Total household debt increased to $17.05 trillion in the first quarter of 2023, the NY Fed reported. That marked an increase of $148 billion quarter-over-quarter. Overall, America’s debt balance now stands about $2.9 trillion above where it was at the close of 2019, right before the COVID-19 recession. Credit card balances remained flat at $986 billion, the NY Fed said. Nonetheless, credit card debt remains at record highs, according to the Consumer Financial Protection Bureau (CFPB).…
Student Loans Didn’t Qualify as Commercial Debt for Sub V Eligibility
To be eligible to file a “SubV” Chapter 11 bankruptcy case, that “not less than 50% of the total debt” of the debtor must be “business debt”. But what constitutes “business debt”? In re Reis, – BR – (Bankruptcy Court, D. Idaho 5/2/23) discusses that question, and ruled two things: The business debt necessary to qualify for Subchapter V need not to have arisen from the debtor’s business at the time of filing, Bankruptcy Judge Meier says. Debtor’s student loan debt did NOT constitute business debt. Educational loans obtained to earn a professional degree will not qualify as arising from…
IRS Plans To Resume Collection Notices
As of April 29, 2023, the IRS said it had 3.8 million unprocessed individual returns. These include tax year 2022 returns, 2021 returns that need review or correction, and late filed prior-year returns. Of these, 2.4 million returns require special handling such as correcting errors. The agency has another 1.4 million paper returns to review and process. It takes the IRS over 21 days to issue a refund in these cases because they require special handling although an employee typically does not have to contact the taxpayer, the agency said. The General Accounting Office said in a report issued in…
Credit & Collection e-newsletter reports that all sides could be losers in the litigation about the legality/lack of legality of how the federal agency, the Consumer Protection Financial Bureau (“CFPB”) is funded
The Consumer Financial Protection Bureau (CFPB) is at a crossroads. Rather than live up to its “independent” promise, the agency has been nothing short of a political football. There is plenty of blame to go around on both sides of the CFPB battle, but the legal maneuvering and the race to the Supreme Court is not the solution. Rather, now is the time for Congress to act like adults and find the remedy for the CFPB that will allow the agency to be true to its mission of protecting consumers while at the same time ensuring a robust and compliant…
Consumer Financial Protection Bureau (CFPB) has taken action against one of the largest debt collectors in the United States
Credit & Collection e-newsletter of 3/30/23 reports: On March 23, 2023, the Consumer Financial Protection Bureau (CFPB) has taken action against one of the largest debt collectors in the United States, Portfolio Recovery Associates (PRA), for various violations of law, including a 2015 CFPB order. In the complaint, the CFPB accused Portfolio Recovery Associates of violating numerous requirements of the 2015 order as well as engaging in deceptive conduct in violation of the Fair Debt Collection Practices Act and the Consumer Financial Protection Act, and violating the Fair Credit Reporting Act and its implementing Regulation V. The CFPB filed a…
Did One, or More than One, of the Many regulators–DFPI, FRB, FDIC, CFPB, FINRA and Nasdaq—which each had some responsibility for supervising/regulating the now failed Silicon Valley Bank, fall down on the job?
Silicon Valley Bank was chartered by the State of California and was subject to the supervision of the California Department of Financial Protection & Innovation. The DFPI was not the bank’s regulator. The bank had adopted a bank holding company structure and elected financial holding company status. Thus, the bank’s holding company, SVB Financial Group, was subject to primary regulation, supervision, and examination by the Federal Reserve Board under the Bank Holding Company Act of 1956, as amended. The bank was subject to supervision and examination by the Federal Reserve and the DFPI. But wait, there’s more. The bank was…