OCC Preemption Brief Regarding the Illinois Interchange Statute

Earlier this year Illinois passed a law that provides that “

an issuer, a payment card network, an acquirer bank, or a processor may not receive or charge a merchant any interchange fee on the tax amount or gratuity of an electronic payment transaction if the merchant 

informs the acquirer bank or its designee of the tax or gratuity amount as part of the authorization or settlement process for the electronic payment transaction.

” The statute defines interchange fees as "a fee established, charged, or received by a payment card network for the purpose of compensating the issuer for its involvement in an electronic payment transaction." In other words, no interchange fees may be levied on taxes or tips.

 

Compliance with the statute would be an administrative and technological hot mess for card networks. Not surprisingly, the banking industry has challenged the law, and the OCC has weighed in with an amicus brief.  I’m not going to address the policy merits of the Illinois statute here. Instead, my interest is the National Bank Act preemption analysis in the OCC’s brief. Although I think the OCC gets the preemption analysis correct in the end, it makes a concerning claim on the way. 

 

If You're Gonna File in Texas, You Gotta Have Your Votes in Hand

J&J’s at it again with a third talc bankruptcy filing, this time in SDTX.  To paraphrase Marx, the first time was tragedy, the second time farce, and now the third time is fubar. 

Why fubar? tl;dr is that J&J's betting the case on the purported authority of a small Mississippi plaintiffs' firm to unilaterally change the votes of its joint clients from "no" to "yes". 😮🤯

Elon's Brazilian Corporate Law Surprise

Elon Musk has just learned that Brazil doesn't give a lot of credence to the fictions of corporate asset partitioning:  affiliated companies can be liable for each other's involuntary obligations.  This shouldn't be a surprise; Mariana Pargendler's work has made clear that Brazil's got a very different approach to corporate law than the US. In particular, limited liability isn't so strongly fetishized. Now if we only had some sort of legal doctrine in the US that ignored limited liability...

Revisiting How Many People Have Filed Bankruptcy

Belisa Pang has an important new paper out about repeat filers, "The Bankruptcy Revolving Door."  Using new techniques and as well as a database of credit reports, she estimates the percentage of bankruptcy filers who are repeat filers is 36%. In 2023, she estimates the figure was 46%. The paper also explores the reasons for repeat filings. It should be required reading for anyone in the consumer bankruptcy space.

Pang's estimate is much higher than the official statistic from the bankruptcy court records which ask filers to disclose repeat filings in the last eight years. According to the FJC database, 19% of filers since 2014 have checked the box that they filed bankruptcy in the last eight years. For the research data from the Consumer Bankruptcy Project, we collects the date of the last filing. Despite the official language asking about bankruptcy in the last eight years, 16% of those who report a repeat filing are reporting a prior case from more than eight years ago. Thus, I wondered how many prior bankruptcies are actually going unreported. I spot-checked some of our own research data. Using Pang's methodology, I found it was pretty easy to locate cases that do not disclose a repeat filing on the bankruptcy forms, but the court's computer system (PACER) has flagged as a repeat filing. 

Pang's paper caused me to revisit my estimate of how many living Americans have filed bankruptcy. When I did the calculations, I came up with a conservative estimate of 1 in 10. The precise number was 11.1% but because of the heroic assumptions I was making, especially with the repeat filing rate, I called it 1 in 10 to be conservative. In my calculation, I used an assumption, based on the then-current FJC records, that 15.2% of filers are repeat filers. Pang's much higher figure means my estimate is a bit too high. If I plug 36% into the numbers I used then, I come up with 9% of the public having filed bankruptcy. If the repeat filing rate is 46%, the percentage drops to 8% percent. So, it is maybe in 1 in 11 or 1 in 12. That is still not a small number.

Conference Opportunities at Boston U. and Cornell

Credit Slips friends have made us aware of two upcoming academic conferences that might be of interest to our readers. First, the seventh annual Consumer Law Scholars Conference will be held at Boston University on March 6-7, 2025. Abstracts are due on September 6, 2024. More information, including on how to submit an abstract is available at their official call for papers web page. 

The second conference aims to bring together mass-tort and bankruptcy scholars at Cornell on September 20. Speakers and papers are already set as set forth in their official event poster. This is a symposium of the Cornell Law Review such that we should expect a law review issue about how these topics will continue to collide.

Preliminary Injunctions After Harrington v. Purdue Pharma

The Supreme Court's opinion in Harrington v. Purdue Pharma left open a lot of questions about the extent of its scope. We now have one of the first opinions exploring those questions. Judge Craig Goldblatt of the Delaware bankruptcy court faced a request for a preliminary injunction in the bankruptcy of right-wing social media platform Parler. Judge Goldblatt concluded that "authority to 'extend the stay' survives Purdue Pharma." I'm skeptical. 

Man Bites Dog, or Debt Collector Restructures Its Distressed Debt

I couldn't let this one pass without noting it. The largest debt collection company in Europe has found itself on the other end of the dunning letter. Swedish debt collection company Intrum has achieved majority (barely) support for a deal with bondholders to swap 10% of its $5.8 billion debt for equity and push out the maturity of remaining notes. Intrum found itself in this mess after "years of borrowing heavily in the low-interest era to buy portfolios"--that is, to buy bunches of distressed debt owed by strapped borrowers all over Europe, which Intrum would then squeeze for repayment at a higher rate than Intrum had paid. Or so Intrum hoped. Apparently this investment strategy went sour after "a slowdown in its business." Hmmm. What an interesting euphemism! Borrowers resisting collection pressure more resolutely now? I wonder if the growing wave of personal insolvency procedures across Europe has contributed to this "slowdown" for Intrum's debt collection efforts. Good news for borrowers is bad new for the debt collector!  

The Hydraulic Effect of Loper Bright Enterprises in Consumer Finance: More Regulation By Enforcement

This term's Supreme Court decisions have completely remade administrative law, both by eliminating Chevron deference and by effectively eliminating the Administrative Procedures Act's statute of limitations. In Loper Bright Enterprises v. Raimondo, the Court held that as a constitutional matter federal courts could not give deference to federal agencies' interpretations of ambiguous statutes. And then the Court opened the door to APA challenges to virtually every existing federal regulation, no matter how old, with Corner Post Inc. v. Board of Governors of the Federal Reserve System, a statutory ruling that the APA's six-year statute of limitations runs from the date a plaintiff is allegedly injured by the regulation, rather than from the date of the regulation's finalization. That means that a business that is incorporated tomorrow has at least six years to challenge any regulation that affects it, and maybe more depending on when it is affected. In other words even New Deal or Progressive era regulations could be challenged tomorrow and there would be no deference to the agency's long-standing interpretation of the statute authorizing the regulations. I pity my colleagues who teach admin law--their course lost at least a credit hour's worth of material. Maybe they'll decide to take up commercial law....

These decisions are, taken together, a major rolling back of the administrative state. But these decisions will affect different agencies differently, and the Court's rulings may have some unintended consequences. To wit, many federal agencies have both rulemaking and enforcement powers. In some instances, enforcement is dependent on rulemaking, as the agency lacks a general statutory prohibition to enforce, but can only enforce its particular rules. The EPA is (I think) an example of this type of agency. It doesn't have a general statutory prohibition of "don't pollute." OSHA and the FDA and NLRB and Dept. of Commerce. For agencies in this category, Loper Bright Enterprises and Corner Post clip not only the agencies' rulemaking power, but also their enforcement power, because they will have to defend the rules they are enforcing. 

In other instances, however, the enforcement powers are independent of rulemaking, as there is a broad statutory prohibition that the agency can enforce without rules. This is where federal financial regulators sit.  In these cases, Loper Bright Enterprises and Corner Post will have a hydraulic effect:  agencies are going to do what they're going to do, so if they can't do it through rulemaking, they'll do it through enforcement and supervision. In other words, what the Supreme Court did was to supercharge regulation by enforcement in the financial regulatory space.