Industry News

March 31

2016

Department of Education Sued for Debt Collection Information

The Education Department is targeted in a new Freedom of Information Act lawsuit seeking details about federal debt collection policies and how they affect minority borrowers.

The National Consumer Law Center, American Civil Liberties Union and ACLU of Massachusetts filed the complaint in U.S. District Court in Boston. They allege that the department didn't fully disclose "critical information" related to its oversight of private companies that collect on federal student loans.

Black and Latino adults are nearly twice as likely as whites to hold student debt, the groups noted, and the NCLC has found that in the past, federal practices gave debt collectors reason to violate borrowers' rights. Sens. Booker (D-NJ) and Mike Lee (R-UT) introduced legislation (The Stop Debt Collection Abuse Act of 2015, S. 2255) in November meant to crack down on abuses.

The Stop Debt Collection Abuse Act of 2015, S. 2255 can be viewed here.

March 31

2016

House Conservatives Oppose Some Parts of Puerto Rico Fix

The Republican Study Committee will oppose the Puerto Rico fix in its currently drafted form. The opposition is focusing on the “cram down” provisions modeled after a specific section of the bankruptcy law that deals with situations in which creditors cannot agree on debt restructuring.

The section of bankruptcy code, 1129(b), used by the draft bill requires a court to decide on a fair and equitable cut to investment among all creditors if an agreement with the borrower (in this case, Puerto Rico's government and/or public corporations) can't be reached. In the bill, a federal oversight board can send a debt-restructuring disagreement between creditors and the government to court under the same parameters as the bankruptcy code.

The RSC does not mandate that its members vote in a certain way but this could cause problems for the bill among House Republicans.

March 30

2016

House Panel Releases Final Draft Bill on Puerto Rico

The House Natural Resources Committee has updated its draft bill to fix Puerto Rico's debt crisis.

Though the new draft is closer to final, more changes will be made before the committee's April 14 legislative markup. The latest draft eliminates a chief management officer position that last version would have created and reduces penalties against Puerto Rican officials providing inaccurate information from up to a year's imprisonment to a $1,000 fine. A fiscal oversight board to be created by this bill will also review all voluntary debt restructuring made between creditors and the commonwealth to ensure they match an economic growth and fiscal health plan laid out by the island's governor.

The island government, congressional Democrats, and the Treasury Department have pushed for the ability to broadly restructure the debt, while conservatives have cautioned against a bailout or changes to municipal bankruptcy code. The draft of the bill allows the control board to supersede Puerto Rican elected officials on revenue and spending matters should they ignore the advice of the board.

View the draft bill here

March 29

2016

Judicial Conference Seeks Conversion of 16 Temporary Bankruptcy Judgeships

On March 15 the Judicial Conference of the United States authorized the Director of the AOUSC to seek legislation to preserve temporary bankruptcy judgeships that will lapse on May 25, 2017.

The Judicial Conference wants to convert 16 temporary bankruptcy judgeships to permanent judgeships in nine districts that have high caseloads. These districts had a 55 percent increase in weighted bankruptcy filings from Dec 31, 2006 until September 30, 2014. If legislative action is not taken, the first bankruptcy judge vacancy that occurs in each of the nine districts after May 25, 2017, will not be filled.

The nine districts include: First Circuit Puerto Rico; Third Circuit Delaware; Maryland, North Carolina Eastern District, and Virginia-Eastern District in the Fourth Circuit; Eastern District of Michigan; and Tennessee-Western District in the Sixth Circuit; Nevada in the Ninth District, and Florida-Southern District in the Eleventh Circuit.

March 28

2016

Bill to be Introduced for Puerto Rico debt crisis

A bill to be introduced this week will allow Puerto Rico some access to bankruptcy-like debt restructuring, but only as a last resort after mediation between creditors and investors.

The bill, written by Rep. Rob Bishop (R-Utah), will not grant a bankruptcy-like debt restructuring, but will allow restructuring after the board is able to work with government agencies to streamline services and re-balance ledgers. The board will also seek audited statements from all parts of the government and consult with the governor and legislature on their fiscal plan and budget - or enact a fiscal plan and budget if elected officials don't. Other areas, like the island's more than $40 billion in pension obligations, will also be examined.

Bishop's bill draws from the Treasury Department's prescription for Puerto Rico, written last fall, without fully adopting it. Bishop's bill also provides mechanisms to fix Puerto Rico's ailing energy infrastructure. It is unknown if the bill will have enough support from Republicans.

Since the bill avoids expanding existing municipal bankruptcy law, it may meet House conservatives' standards: a solution that's neither a bailout nor an expansion of bankruptcy that could open the door for states to ask for similar treatment in the future. The Republican Study Committee has said it opposes 'forcible' restructuring, especially an expansion of Chapter 9 municipal bankruptcy access to the island.

The bill has been negotiated between House leadership, as described by House Majority Leader Kevin McCarthy (R-Ca.) and Minority Whip Steny Hoyer (D-Md.) on the House floor last week. The Treasury Department played an active role in negotiations as well, indicating a potentially speedy path to the Oval Office- so long as rank and file House members, as well as the Senate, like what they see.

Senate Democrats, led by Sen. Robert Menendez (D-N.J.) have sought to give Puerto Rican pensioners preference over bondholders, while Senate Finance Committee Chair Orrin Hatch (R-Utah) wants to maintain preferential treatment for general obligation debt that makes up much of the $73 billion Puerto Rico owes.

Though Senators Menendez and Hatch have been lead voices on Puerto Rico in the Senate, it's unlikely the Senate Finance Committee will have jurisdiction over this bill, given that territories fall under the jurisdiction of the Senate Energy and Natural Resources Committee. Sen. Lisa Murkowski (R-Alaska), chair of that panel, cosponsored a bill written by Hatch to create a financial oversight and management board for the commonwealth, cut taxes and provide up to $3 billion in aid.

additional resource information available here

March 21

2016

Introduction of S 2682

On March 15 Senators Gillibrand (D-NY), Warren (D-MA) and Blumenthal (D-CT) introduced S 2682, a bill to provide territories of the US with bankruptcy protection.

The act is cited as the Territories Relief Act, a copy of which can be found here. The bill was referred to the Committee on Energy and Natural Resources.

March 10

2016

Introduction of HR 4682

This week Rep. Tammy Duckworth (D-Ill) introduced HR 4682, a bill to repeal debt collection amendments made by the Bipartisan Budget Act of 2015.

The bill was referred to the House Energy and Commerce Committee.

View a copy of the bill here.

March 04

2016

FCC Grapples With Robocalls on Student Debt

The FCC cracked down on annoying robocalls last summer, but The Bipartisan Budget Act of 2015, signed into law by President Barack Obama in November, included a provision that allows companies to make autodialed calls to collect government-backed debt, such as student loans, without first obtaining permission from the consumer.

FCC Chairman Tom Wheeler must now accommodate the carve-out, though the proposal he's circulating to fellow commissioners would add consumer protections like limiting the number and duration of government debt robocalls. He's aiming to get the rule approved by the Aug. 2 deadline set by the law.

Consumer groups are concerned the exception could undermine the crackdown and allow a flood of robocalls on behalf of the government, while attorneys representing industries in private debt collection see an opportunity for a loophole of their own.

Wheeler's plan for implementing the exception includes limiting robocalls to collection of delinquent debts or helping consumers avoid default. It would cap the number of monthly debt-related calls per person and give consumers the right to stop unwanted debt calls.

March 03

2016

Introduction of S 2558

S. 2558, a bill to expand the prohibition on misleading or inaccurate identification information, was introduced by Senator Bill Nelson (R-FL).

The bill was referred to the Senate Committee on Commerce, Science and Transportation. It is similar to other legislation introduced in 2015 requiring the FCC to publish on its website a report identifying technologies that consumers can use to protect against misleading call identification information.

View the bill, S 2558, here.

March 03

2016

States Urge Senate to Reverse Amendment Allowing Debt Robocalls to Mobile Phones

Attorneys General from 24 states and Washington DC want the Senate to reverse an amendment to the Telephone Consumer Protection Act accepting calls purporting to collect government backed debt.

The amendment is through a provision in the congressional budget deal signed by President Obama November 2, 2015 and the AGs want it repealed. The bill, S. 2235, would affect the repeal if passed but is still in the Committee on Commerce, Science, and Transportation.

View Bill S 2235 here