Multiple draw and revolving loan lenders and counsel can find three important lessons in the 84 page trial ruling after eight years of litigation, three federal judges, and more than five interesting opinions. See Weisfelner, Trustee v. Blavatnik (In re Lyondell Chem. Co.), 567 B.R. 55 (Bankr. S.D.N.Y. 2017). First, the conditions precedent to further funding should be independent, robust, and not a simple absence of a Default (or a circumstance that with notice or passage of time would be a Default). Second, at least for this company and this loan document, a financial decline into insolvency was not a material adverse change, so keep the concepts separate in both the conditions to funding and the Events of Default. Consider defining a material adverse change to include the fall into insolvency. Third, a contractual limitation on damages in a loan agreement should give some comfort in declining a borrower’s request for a $750 million draw on the eve of bankruptcy. (more…)
Regulated entities should be prepared to defend their policies and practices surrounding fee-based pay-by-phone options in light of new guidance issued by the Consumer Financial Protection Bureau (CFPB).
Last week, in the wake of CHOICE 2.0 and continued questions regarding the constitutionality of its structure, the CFPB released a special edition of its monthly complaint report. The report contained statistical information from consumer complaints that were received by the Bureau during the first quarter of 2017.
Businesses across America are waiting with bated breath for a ruling in ACA International, et al. v. FCC, a case brought by a debt collection industry group challenging the FCC’s order interpreting the Telephone Consumer Protection Act with an extraordinarily broad brush. A three-judge panel from the United States District Court for the District of Columbia heard oral argument late last year and a decision is expected any day now. (more…)
Last month oral arguments were heard by the U.S. Supreme Court in the matter of Henson v. Santander Consumer USA Inc. The case focuses on Santander’s activity while they were collecting defaulted auto loans and if said activity is covered under the Fair Debt Collection Practices Act. The FDCPA only applies to “debt collectors” so the question becomes who is a “debt collector” under the FDCPA. Santander is arguing that they ceased to remain a debt collector the moment they purchased the assignment of the debt they were collecting. They argue at that moment they are not collecting debt that was owed or due another, rather they were collecting debt they were owed. This case will settle a circuit split amongst the appeals courts with the Third, Fifth, Sixth and Seventh Circuits, and the District of Columbia Court of Appeals holding that collectors of purchased defaulted debt are debt collectors within the meaning of the FDCPA, while the Fourth, Ninth and Eleventh Circuits all holding that collectors of purchased defaulted debt are not debt collectors within the meaning of the FDCPA. (more…)
The Supreme Court’s newest bankruptcy case, Jevic Holdings Corp. (3/22/17), illustrates three important lessons for secured creditors and lessors. It holds that the dismissal of a Chapter 11 case cannot, without the consent of the affected parties, depart from the statutory priority rules. The Court disapproved this structured dismissal of the Chapter 11 case, even though it implemented multiparty settlements. The Court reserved generally on the legality of structured dismissals and common “first day” orders paying prepetition wages, “critical vendors,” and “roll-ups” of pre-petition secured claims into post-petition DIP financing. (more…)
On February 3, President Trump issued an Executive Order titled “Core Principals for Regulating the United States Financial System.” This order outlines the President’s policy for the regulation of the U.S. financial system and directs the Secretary of the Treasury to report how the aforementioned policy is being promoted in current “laws, treaties, regulations, guidance, reporting and recordkeeping requirements, and other Government policies.” The Order itself has very little to no immediate effect on the regulation of the U.S. financial services industry; however, the order is a great way to gain insight as to what is to come over the next four years under the Trump administration.
Lending institutions can implement the use of disaggregated ethnic and racial categories in their home loan applications beginning January 1, 2017, an entire year ahead of HMDA’s original deadline.
The CFPB suffered a blow yesterday in the most significant attack against its authority to date. In PHH Mortgage’s appeal from a $109,000,000 disgorgement order issued by the CFPB in June of 2015, the U.S. Court of Appeals for the D.C. Circuit held that “the CFPB is unconstitutionally structured” and violates Article II of the Constitution. The court also found that the CFPB violated PHH’s due process rights and rejected the Bureau’s determination that its enforcement actions brought as administrative proceedings are not bound by any statutes of limitations.