3 posts from November 2020

Debt Relief on Day One

posted by Alan White

In a comprehensive review of existing student loan cancellation laws, Demos, the Student Borrower Protection Center, and the UCI Student Loan Law Initiative have compiled an impressive report and road map for the incoming Administration. The roadmap authors review the closed school, false certification, and disability discharges, public service loan forgiveness, income-driven repayment loan cancellation, borrower defenses to repayment, and protections for servicemembers and veterans, all of which have been sabotaged by Secretary Devos, and all of which could be marshaled to cancel millions of student loan debts. 

To be clear, these are existing debt cancellation programs enacted by past Congresses, and signed by past Presidents Republican and Democrat. Their full implementation would result in billions of dollars in debt relief to disproportionately low-income and minority workers and their families. While I remain skeptical of the ability of any Education Secretary to deliver on these programs given the contracting-out model under which federal loans are administered, and sympathetic to proposals for across-the-board loan cancellation, this detailed road map helps us imagine a new way forward.

The OCC Stands Up for Fossil Fuels, Gun Makers, Opioid Manufacturers, and Payday Lenders

posted by Adam Levitin

Those wascally wabbits at OCC are back at it again in the waning light of the Trumpshchina. The OCC has proposed a rule on "Fair Access to Financial Services." 

The gist of the rule is that banks cannot deny service to business based on the bank's opinion of "the person's legal business endeavors, or any lawful activity in which the person is engaging or has engaged."  Instead, the bank may deny service only based on "quantified and documented failure to meet quantitative, impartial, risk-based standards established in advance by the covered bank".  

This means that if a bank has moral qualms about financing the fossil fuel industry, opioid manufacturers, firearm manufacturers, payday lenders, reproductive health services, pornographers, gay conversion therapy, fur farming, makers of drug paraphernalia, the private prison industry, or businesses involved in the deportation of immigrants, to give a range of examples of businesses that pose serious reputational risk to banks (and very direct financial risk in some instances), well, too bad. Unless the bank can show that the borrower doesn't meet quantitative, impartial, risk-based underwriting standards, it must lend because these are all legal industries. Is it like that any bank will ever have "quantitative, impartial, risk-based underwriting standards" regarding a particular disfavored industry? The standard for denial of service is near impossible to meet, as it seems to require some sort of empirically grounded underwriting by industry that banks are unlikely to have. 

Put another way, the OCC's proposed rule says reputation risk doesn't matter. That's insane. It's a quite reasonable business decision for a bank to say that it doesn't want to be known as the bank that financed school shootings or consumer lending products that it would never offer itself. A bank might reasonably fear that it would lose a chunk of its deposit base if it became known as the go-to bank for a controversial industry. If you don't think reputation risk matters, look at the law firms that have been dropping President Trump's election appeals like a hot potato. They are terrified that they are going to lose other clients who don't want to be associated with those efforts. All the more so with a bank, where depositors are literally financing the loans.  

Continue reading "The OCC Stands Up for Fossil Fuels, Gun Makers, Opioid Manufacturers, and Payday Lenders" »

Update on Churches Filing Chapter 11 Bankruptcy

posted by Pamela Foohey

As parts of the country are counting ballots, I thought I'd post about counting church chapter 11 cases. The headlines about churches and other religious organizations filing chapter 11 still focus predominately -- almost exclusively -- on Catholic Diocese filings. As of June 2020, 27 Catholic religious organizations have filed chapter 11, as detailed on a site put together by Professor Marie Reilly. But Catholic religious organizations' filings are a very small sliver of churches filing bankruptcy, as my prior research has shown. The last time that I updated my count of religious organization chapter 11 cases was at the end of 2017, and the last time I updated denominations and demographics of the congregations that file was in 2013. Since then, I've continued to track religious organizations' chapter 11 filings, using the same methodology, through the end of 2019. 

Preliminary results are in. Highlights: churches, synagogues, mosques, and other religious organizations are still filing bankruptcy, and the denominations and demographics of the congregations that filed have remained basically the same.*

RI Ch 11 Thru 2019As shown on the graph to the right, between 2014 and 2019, an average of 59 religious organizations filed chapter 11 each year.** This is lower than the average of 87 cases between 2006 and 2013 that I've previously reported, but it is consistent with a decline and leveling off of consumer bankruptcy filings overall during this period. As I've noted, in the past, religious organization chapter 11 filings tracked personal bankruptcy filings, not business bankruptcy filings. This continues to be true.

Find tables with congregation denominations and demographics, and some more detailed discussion after the jump.

Continue reading "Update on Churches Filing Chapter 11 Bankruptcy" »

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