Articles Posted in Student Loans

Could this be the beginning of the end of the Consumer Financial Protection Bureau as we know it?

fair lending enforcementThis month The Trump administration, through acting CFPB Director Mick Mulvaney, announced sizeable restrictions to CFPB’s enforcement and day-to-day oversight of the financial industry’s fair lending practices. The move comes shortly after Mulvaney was installed as Acting Director following the departure of Richard Cordray.

Speculation of the CFPB’s impending dismantlement under the Trump Administration has been swirling since the election and this is just one of the latest in a series of moves pertaining to the CFPB that lends some credence to that speculation.

CFPBThis week, Richard Cordray handed in his resignation as head of the Consumer Financial Protection Bureau (CFPB). The early resignation comes at a time of increased criticism over current financial regulations and an uncertain outlook for many regulatory bodies. The CFPB especially, has been subject of intense criticism from the financial industry as overbearing and stifling.

As Director, Cordray was very much the face and voice of the bureau. Under Cordray, the Consumer Bureau held very close to the guiding tenets under which it was created: to protect financial consumers from unethical behavior. His departure leaves senior officials in the bureau and supporting lawmakers scrambling to secure the future of the CFPB against a regulatory overhaul.

What exactly is the CFPB?

logo-squareFor many retirees, the idea of spending their leisure years in Florida is a goal for which they have striven for many years. According to U.S. News & World Report’s analysis of 2010 U.S. Census Bureau data, the “Sunshine State” has the greatest proportion of people who are at least 65 (17.3%). And that doesn’t necessarily include “snowbirds” who might spend a considerable amount of the winter months in Florida away from their normal array of trusted advisers such as lawyers, investment advisers and other financial professionals who remain behind in the snow.

Whether they are new residents or snowbirds, and like many other Americans, some of Florida’s newest senior citizens probably are hoping to make some new investments to help them recover ground lost during the difficult economic times of the last five years, and that makes them extra-vulnerable to securities fraud schemes targeting the elderly. One such scheme involving the stock of two companies, Miami Beach-based Thought Development Inc. and Virgin Gaming, just resulted in two Boca Raton men being among eight defendants being charged in federal court with conspiracy to commit federal mail and wire fraud.

PalmBeachCoast.com recently reported that Wifredo A. Ferrer, U.S. Attorney for the Southern District of Florida, and George L. Piro, Special Agent in charge of the FBI’s Miami field office are prosecuting the Boca Raton pair on charges based on what Ferrer described as “exorbitant, undisclosed commissions” and misrepresentation of the technology involved, which allegedly projected a green laser line on a football field visible in the stadium to players and fans as well as to television viewers. Ferrer and Piro also took the position that the promoters also failed to mention a pretty significant defect, which was that use of the technology posed a risk of blindness to the players.

logo-squareRecently, President Obama proposed the idea of making student loan discharge through bankruptcy easier for millions of people who can’t make their payments. Soon after, thirteen U.S. Senators introduced the Fairness for Struggling Students Act of 2015 which places private student loans on the same level as other forms of consumer debt.

Although less than 10 percent of loans are with private lenders, talking about making student loans more eligible to discharge in bankruptcy is a step-forward for many drowning in debt.

This discussion is especially pressing because student loans are only behind home mortgages as the largest source of consumer debt in the U.S. There is even more student loan debt than that with credit cards.

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By Alfred Villoch, III, Esquire, at Savage, Combs & Villoch, PLLC

In a recent blog post, the Bankruptcy Blawg addressed how difficult (almost impossible) it is to get rid of student loan debt in bankruptcy.  See http://www.thebankruptcyblawg.com/?p=26. Yesterday, the Tampa Bay Times published an article entitled “Co-signing a student loan carries risks for parents.” The article addresses how parents can feel a knee-jerk, moral obligation to co-sign for their child’s student loan.  But when you co-sign, the parents are on the hook for the debt with equal force as if the loan was theirs alone.  And they might not know that their child is not repaying the loan until they start receiving calls and letters from the bank.  By that time, the parent’s credit score has very likely taken a dip, noted Mark Kantrowitz in the article.

Not only is the student loan default potentially devastating to the parent’s credit score, but it is virtually impossible to discharge in bankruptcy unless a bankruptcy court finds that the parent meets the Brunner test.  See http://www.thebankruptcyblawg.com/?p=26.  That means, the parent or the child must repay the entire debt (with interest and late fees, if applicable) or it may haunt the parent and child for the rest of their lives.

By Alfred Villoch, III, Esquire, at Savage, Combs & Villoch, PLLC

Student loans are very difficult to get rid of in bankruptcy.  Whether you file bankruptcy under chapter 7 or chapter 13, the test remains the same: you have to prove “undue hardship” in order to discharge or get rid of your student loans.  See 11 U.S.C. § 523(8).

But what is undue hardship?  Unfortunately, the Bankruptcy Code does not define “undue hardship” or list any ways in which to determine who meets that standard.  Instead, bankruptcy courts have been left to make their own definition through case law. In Florida, bankruptcy courts follow the Brunner test. This test requires the court to consider the following three categories or prongs to determine whether the debtor (i.e., the person who filed bankruptcy) has an undue hardship:

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