Legislative Updates

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American InfoSource is committed to assisting clients with increased compliance requirements resulting from legislative reform. That’s why we have asked John McMickle, former Counsel to the Senate Judiciary Committee, to monitor state and federal legislative developments and provide strategic counsel on issues associated with bankruptcy rules, debt purchase and debt settlement. Updates will be posted here regularly.

March 28, 2012 - ALERT: Durbin Urges Bankruptcy Relief for Private Student Loans

On March 20, 2012, the Senate Committee on the Judiciary held a hearing in the Subcommittee on Administrative Oversight and the Courts entitled “The Looming Student Debt Crisis: Providing Fairness for Struggling Students.”

Senator Durbin , D-Il., a longtime critic of the lending industry presided. The hearing focused on whether an amendment made by PL 109-8, which made private student loans non-dischargeable in bankruptcy should be reversed. The witnesses included Jack Conway, the Attorney General for the Commonwealth of Kentucky, Lisa Madigan the Attorney General for the State of Illinois, Marcus Cole of Stanford University, Deanne Loonin of the National Consumer Law Center and Neal P. McCluskey Associate Director, Center for Educational Freedom at the Cato Institute.

Many of the witnesses focused on student loan debt carried by students from for-profit colleges and trade schools. On the other hand, Professor Cole testified “I think that the removal of the exemption from discharge of privately placed student loans will result in a dramatic increase in the cost of student loans for all student borrowers, ultimately ‘drying up’ the availability of such loans for those who need them most.”

The hearing seems to be in preparation for committee consideration of S. 1102, the “Fairness for Struggling Students Act of 2011.” This bill would provide that federally student loans, or student loans guaranteed by any unit of government, could not be discharged in bankruptcy. However, loans made by private lenders would be dischargeable. The State AGs testified that student lending can be predatory and both indicated their offices have issued subpoenas to for-profit schools seeking information about lending practices. Based on our information, the Senate Judiciary Committee could consider S. 1102 as early as April 2012.

If you have questions regarding this bill, please email us at contactnow@americaninfosource.com.

March 26, 2012 - ALERT: Mortgage Servicing Settlement's Potential Impact on Unsecured Proofs of Claim

As many AIS customers may know, the federal government and states attorneys general recently settled a dispute over so-called robo-signing by mortgage servicing companies. While the terms of the settlement apply to secured loans, the bankruptcy provisions provide a window into how government enforcement agencies might view bankruptcy POCs filed by any creditor, including unsecured creditors.

The settlement requires banks to adhere to new standards for executing documents in bankruptcy cases and for providing back-up documentation. The settlement also requires banks to exercise continuous oversight of third party vendors used to assist in the filing of mortgage-related POCs. As a vendor to many unsecured POC filers, AIS has been studying the settlement with a view towards understanding how it might impact unsecured POC filers, should similar standards be required.

We wanted to call your particular attention to provisions in the mortgage settlement because there have been recent allegations of robo-signing in the context of credit card collections (see the American Banker Article) and, as a result, we believe the federal government may consider examining the procedures used for verifying information contained in unsecured POCs.

Against this backdrop of increased scrutiny of POCs, AIS is launching a Brand Integrity initiative to ensure that all AIS customers are well-positioned if the government begins to question unsecured POCs, as the Department of Justice did with mortgage POCs. In the coming months, AIS will reach out to customers directly to explain our processes and plans for our new Brand Integrity initiative.

If you have immediate questions regarding our POC filing processes, please email us at contactnow@americaninfosource.com.

February 7, 2012 - ALERT: Death Master File Scrutinized at House Hearing

On February 2, 2012, a subcommittee of the Ways and Means Committee of the US Congress conducted a hearing on the Master Death File used by the SSA. The purpose of the hearing was to create a record to support H.R. 3475, the “Keeping IDs Safe Act of 2011,” which would protect Social Security Administration Death Master File information.

The Subcommittee Chairman, Congressman Johnson from Texas, noted that under a 1980 Freedom of Information Act court-mandated settlement, the Social Security Administration is required to make information about deceased Social Security number holders available to the public.

Over time, a broad commercial interest has developed in the Death Master File for use in private benefits management and as a tool to prevent fraud and identity theft. Many groups purchase the file from the Commerce Department including government agencies, credit reporting agencies, financial institutions, law enforcement organizations, and medical and genealogical researchers.

The Subcommittee noted that, with 84 million listed individuals and 1.5 million new individuals added each year, it appears that this File has become a resource for criminals seeking to capitalize on Americans’ identities, particularly the identities of deceased children.

In her recent annual report to Congress, the National Taxpayer Advocate found that the Federal government facilitates tax-related ID theft through the release of the Death Master File. Even Social Security reports that approximately 14,000 living individuals are wrongly placed on the Death Master File each year.

States play a key role in the death reporting process, providing death records to the Social Security Administration Death Master File through a process known as Electronic Death Registration (EDR). Following a recent review of the EDR, the SSA determined that as of November 1, 2011, all death records received through the EDR will be removed from the Death Master File. AIS believes this will result in a 40+% reduction in records, with more than one million new deaths not being reported each year.

However, recent changes and those currently under consideration will not impact American InfoSource and its clients. AIS is in the process of creating a comprehensive new solution that will gather information directly from public record sources (22,000 funeral homes, 4,000 newspaper obituaries) and intersect that data with a proprietary database to append the applicable SSN, essentially building its own Death Master File. This will ensure that deceased are identified within weeks, rather than months. And increase the accuracy of the file by reducing false hits.

If you have questions regarding the new AIS solution, please email us at contactnow@americaninfosource.com.

January 30, 2012 - ALERT: Implications of Cordray Appointment as Director of CFPB

As reported in numerous news outlets, the President used a special procedure known as a recess appointment to name Richard Cordray, a former Ohio attorney general as the official Director of the Consumer Financial Protection Bureau. The recess appointment, if found to be valid, will allow Cordray to serve until 2013.

This action has several practical and political implications of note.

Practical Considerations

First, non-bank financial institutions (payday lenders, commercial finance companies, debt buyers and the like) are now subject to examination by the CFPB, bringing a new level of federal oversight that could affect the business plan and operations of enormous financial players.

Second, the CFPB now has the authority to the enforce prohibitions against "abusive" lending practices. The term abusive is not defined and market actors (both bank and non-banks) will need to monitor developments closely as the CFPB begins to enforce this provision, which will trump state and local law.

Political Considerations

On a political level, the recess appointment has angered Senate Republicans who used pro forma sessions to prevent a recess from occurring with the specific intention of denying the President the power to make recess appointments. On the Hill, GOP leaders accused Obama of ignoring constitutional constraints and Senate precedents. Senate Majority Leader Harry Reid, D-Nev., originated the process of holding pro forma sessions in November 2007 to block recess appointments by President George W. Bush. It is likely that Republicans will halt all Obama nominations for the near term, and perhaps for all of 2012.

Issue Background

At issue in this case is a provision in the Constitution which stipulates that the president can make special appointments when vacancies arise during a Senate recess. A 1993 Justice Department memorandum interpreted the constitutional language to mean more than three days, and recent presidents have not made appointments when the Senate has been out of session for three days or less.

Possible Court Actions

Businesses affected by the CFPB could file lawsuits to protest any actions taken by Cordray. The challengers will assert that Cordray’s appointment is invalid because the Senate was not technically in recess when the appointment was made. It is not clear that the anticipated challenge will have much success because the courts have been reluctant to become involved in disputes between the legislative and executive branches of government over constitutional prerogatives such as what constitutes a recess. If there is a court challenge, determining the validity of Cordray’s appointment will be a lengthy process and will likely begin when a company files a lawsuit alleging some CFPB action is harmful to its business.

If you have any questions regarding the scope of CFPB and the types of businesses that will be most affected by these developments, please email us at contactnow@americaninfosource.com.

June 8, 2011 - ALERT: Speeding Up the Bankruptcy Process for Small Business Debtors

The Senate Democrats and Republicans on the Senate Judiciary Committee have begun a series of meetings on bankruptcy law changes designed to speed the bankruptcy process for so-called small business debtors.

One of the proposals under consideration involves liberalizing the eligibility requirements for Chapter 13 to make more "mom and pop" businesses able to use Chapter 13. If this proposal were accepted, the number, and perhaps the economic value, of Chapter 13 claims could increase. Card issuers could see an increase in business accounts in Chapter 13, for instance. Below you will find a prior version of the small business reform legislation (which does not contain a Chapter 13 component) as an example of the legislative activity that may heat up.

This legislative initiative is in a very early stage and American InfoSource will monitor it closely and provide analysis for its customers as the issue matures. For more information, please contact us at 877-247-7253 or email us at contactnow@americaninfosource.com.

View Prior Version of Small Business Reform Legislation

May 26, 2011 - ALERT: "Fighting Fraud in Bankruptcy Act of 2011"

On Tuesday, Senator Leahy, Chairman of the Senate Judiciary Committee, introduced a bill that would impose penalties on anyone who "negligently" files a Proof of Claim ("POC") in a Chapter 7 or Chapter 13 case. The penalties apply to persons or entities who assist in filing negligent POCs. So far, the bill has all Democratic co-sponsors.

Importantly, the bill seems to apply to all POCs, not merely POCs in mortgage cases. Therefore; the bill will impact, if enacted, credit card claims and claims by hospitals, utilities and any other creditor. Any penalties paid will go to fund EOUST audits of POCs. The bill likely has the votes to pass the Senate Judiciary Committee, but could face a problematic future in the full Senate. The legislation likely presages enforcement priorities of Department of Justice and state attorneys general.

American InfoSource will monitor this bill closely and design processes and procedures to accommodate either the bill or the enforcement issues that arise from S. 1054. For more information, please contact us at 877-247-7253 or email us at contactnow@americaninfosource.com.

View a Copy of the Proposed Bill