NYT Editorial on Student Loan Debt

Spurred by the Consumer Financial Protection Bureau's recent ombudsman report on student loan debt (about which we posted), the New York Times has penned this editorial about the subject, focusing in part on private student loans (which amount to a mere $150 billion of the outstanding $1 trillion in student loan debt). The Times suggests that private student loans should be accompanied by the same or similar consumer protections and disclosures as federally-guaranteed student loans (for instance, with respect to the debtor's right to defer repayment in certain circumstances). It recommends that

The federal government needs to open up refinancing and debt relief opportunities for these people, as it did for some mortgage holders. The bureau should also set national standards for loan servicers to require clear disclosure of conditions, advance notice of any changes in the status of the account and prompt resolution of customer requests for information. And borrowers who might be eligible for federal loans should be advised to examine that option before plunging headlong into private debt.

Will the Government's Bank of America Mortgage Fraud Suit Deter Future Fraud?

Yesterday, we posted about the government's fraud suit against Bank of America. Today's Washington Post has this coverage, which quotes a former regulator who says that the suit is not big enough to deter future fraudulent conduct and who ties deterrence to the threat of jail time for bank executives:

“This is an act of tiny margins relative to the size of the organizations and relative to the fraud committed,” said William K. Black, a former bank regulator who teaches economics and law at the University of Missouri. “Prosecutors can’t argue that these cases will serve as a deterrence when there have been no criminal indictments of senior executives.”

Government sues BoA for fradulent mortgage scheme

Today the United States filed a civil complaint for more than $1 billion against Bank of America, alleging that its component Countrywide engaged in a massive scheme to sell defective mortgage loans to Fannie Mae and Freddie Mac from 2007 to 2009. According to the lawsuit, "In order to increase the speed at which it originated and sold loans ... Countrywide eliminated every single checkpoint on loan quality and compensated its employees solely based on the volume of loans originated."

Check out this AP report for more detail.

International Consumer Law Conference

More information here.  Abstracts are due December 7.  (HT: Kathleen Engel)

Debt Collection Lawyers Now Under the CFPB's Jurisdiction

Read about it in this National Law Journal article. Here's an excerpt:

Big banks, little banks, credit card companies, student lenders – it seems like just about every player in the financial services industry has complained about the power of the Consumer Financial Protection Bureau. Now it's the lawyers' turn. On October 24, the CFPB released its final rule for overseeing debt collectors, and included attorneys among those who will be subject to direct federal supervision for the first time. Under the rule, which goes into effect on January 2, the CFPB will have the power to send field examiners out to the law offices of attorneys who engage in debt collection to review their procedures, evaluate the quality of their compliance and identify risks to consumers. In comments filed with the agency before the rule became final, the American Bar Association, the Commercial Law League of America and the National Association of Retail Collection Attorneys protested that the CFPB was going too far.

Paper on Whether the Treatment of Student Loans in Bankruptcy Should be Changed

Daniel A. Austin of Northeastern has written The Indentured Generation: Bankruptcy and Student Loan Debt, 53 Santa Clara Law Review (forthcoming)  Here's the abstract:

A generation of Americans has borrowed heavily for their education, and hundreds of thousands of them are deeply in debt. Some 37 million Americans owe a total of approximately $1 trillion dollars in student loans. They constitute an Indentured Generation as many of them will be paying student loan debt for much of their lives. Some will eventually pay their loans, others will obtain full or partial loan forgiveness, and many will default or die before completing payments. Members of the Indentured Generation in particularly dire circumstances will look to consumer bankruptcy for relief. But with very few exceptions, student loan debt cannot be discharged in bankruptcy. This is because the Bankruptcy Code excepts student loan debt from discharge unless the debtor can prove that repaying the debt would result in “undue hardship.” Courts have held this to be a very strict standard, one that few debtors are able to meet. Accordingly, the relief that is provided to most debts under the United States Bankruptcy Code (“Code”) is denied for student loan debt.

This article proposes that the Bankruptcy Code be amended to allow a student loan to be revalued to its actual fair market value. The fair market amount would be nondischargeable, and the remaining balance of the loan would dischargeable as general unsecured debt. This ensures that debtors who can pay their student loans will do so, but that those who are truly unable to do so will not be denied the “fresh start” that bankruptcy is intended to provide.

Company's case against Consumer Product Safety Commission sealed and decided based on secret proceedings; Public Citizen appeals

Pursuant to congressional mandate, since March 2011 the Consumer Product Safety Commission (CPSC) has maintained an electronic database of reports of harm associated with consumer products. This database serves a crucial function in helping alert consumers to dangerous products; before the database existed, as Public Citizen has reported, the CPSC took on average more than six months to report product hazards.

In the fall of 2011, a company calling itself “Company Doe” sued the CPSC to keep a report about one of its products out of the database, and it also sought to litigate its case under seal and without revealing its name. Public Citizen, along with Consumer Federation of America and Consumers Union (the publisher of Consumer Reports), objected to the seal.

Just yesterday, the court released a decision granting Company Doe’s motion to seal crucial portions of the case and proceed under a pseudonym. The decision also granted judgment to Company Doe on the basis of nine months’ worth of proceedings conducted entirely in secret. Crucial portions of the decision discussing the facts are blacked out in the version released to the public, so it's impossible to comprehend or assess the district court's application of law to fact.

The consumer groups have appealed the sealing and pseudonymity rulings to the U.S. Court of Appeals for Fourth Circuit. The public has a First Amendment right to open judicial proceedings so that the courts, no less than other branches of government, are subject to public scrutiny. That interest is especially acute in this case, the first-ever legal challenge to a report in the CPSC database.

CFPB Establishes Portal For On-Line Consumer Complaints About Credit Reporting

The Consumer Financial Protection Bureau yesterday added complaints about credit reporting to its on-line complaint system. That system also provides consumers the opportunity to register complaints about mortgages, credit cards, bank accounts, vehicle or other consumer loans, and student loans.

Who Are the 47%?

The Center on Budget and Policy Priorities answers that question in some detail. For an overview check out the chart below.

Is the LSAT Administered in Violation of the Americans With Disabilities Act?

Yes, according to the U.S. Department of Justice and the California Fair Employment Department. They have sued the Law School Admission Council claiming that it has violated the Americans Disabilities Act in administering the Law School Admissions Test. Karen Sloane explains here. Here's an excerpt:

A 29-year-old congressional aide claims his dyslexia impairs his ability to read and write. A San Jose, Calif., woman who is paralyzed in all four limbs says she cannot write without a brace. A sports marketer from Maryland alleges that pain from her scoliosis and attention deficit hyperactivity disorder make it difficult to concentrate. The three reside in different parts of the country and have different physical or cognitive disabilities, but they have one thing in common: Each claims that the Law School Admission Council violated their rights by denying them extended time on the Law School Admission Test. They are among the 22 would-be LSAT takers on behalf of whom the California Department of Fair Employment and Housing and the U.S. Department of Justice have filed suit, alleging that the council's accommodations process violates the Americans With Disabilities Act.