Welcome to the 12th and final issue of All Consuming for 2022.

As we wind down 2022, we hope you have found this e-newsletter informative and helpful. We are looking forward to 2023 planning and encourage you to provide us your opinion. Let us know if you have any thoughts about this publication and how it can be improved.

We wish you and yours a joyous holiday season and a wonderful new year!

Thanks for reading.

Nicholas P. Mooney II, Editor of All Consuming

Bruce M. Jacobs, Chair, Spilman Consumer Finance Litigation Practice Group

Why this is important: In August, President Biden announced that the U.S. Department of Education would provide student loan forgiveness of up to $20,000 for millions of Americans. Conservatives have argued that the plan is a handout to well-off college graduates and also that the President doesn’t have the power to forgive student loan debt without authorization from Congress. Since the plan was announced, no fewer than six lawsuits have been filed against it. The dispute now is heading to the Supreme Court, and education and legal experts predict the Court will rule against the plan. The expert claims that, if it does so, it will be ruling against the opinions of a majority of Americans (a recent poll states that 51 percent of those surveyed favor the plan) and will add to the skepticism of the Court that conservative justices vote in favor of conservative positions while liberal justices vote in favor of liberal positions. If you are one of the 26 million Americans who has submitted a request for loan forgiveness, keep watch on the Supreme Court’s website and financial news websites to learn the latest in this dispute. The Court will hear arguments on this appeal in February. --- Nicholas P. Mooney II

Why this is important: With inflation cutting into the budgets of Americans, a growing percentage of people with auto loans are struggling to make their monthly payments. TransUnion, a leading tracker of financial information, recently reported that the percentage of loans that are at least 60 days delinquent hit 1.65 percent in the third quarter, the highest rate for 60-day delinquencies in more than a decade. The biggest impact is being felt among subprime borrowers who have lower credit scores and often have lower income.

According to Edmunds, an auto research firm, in September, the average transaction price for a new vehicle was $47,138, up almost $2,600 compared to September 2021. The average price paid for a used vehicle was $30,566, a jump of almost $2,500 from the same period in 2021. The rise in delinquencies also follows the end of loan-accommodation programs set up during the pandemic that were designed to help consumers who may have lost their job to avoid having a car repossessed. These programs have delayed delinquencies, which are rearing their heads now. TransUnion cites that approximately 200,000 auto loans that previously took advantage of the pandemic-era accommodation are now listed as 60 days delinquent. About 100,000 accounts that are more than 60 days delinquent remain in accommodation programs.

Despite the rise in delinquencies, market watchers believe the auto loan market remains healthy. TransUnion’s research shows that the average interest rate for a new vehicle loan climbed to 5.2 percent in the third quarter, while the average rate for a used vehicle loan hit 9.7 percent, each up more than 1 percent compared with the year-earlier period. Despite the higher interest rates pressuring many consumers to increase loan terms to at least seven years, delinquency rates have been kept somewhat in check by low unemployment. --- Bryce J. Hunter

Why this is important: This article discusses the ways in which accounts, or debts, are collected. It argues that aging technology and legacy servicing (collection) infrastructure restricts a lender’s ability to leverage automation and technology. Without this automation and technology, a lender’s ability to collect is diminished, forcing it to sell debts to third parties who are optimized for collection. This hurts the lender as it receives pennies on the dollar when selling accounts. Also, it potentially causes the lender to lose its relationship with its borrower. The article argues that leveraging technology to be more transparent and engage in cross-channel communications with borrowers will boost a lender’s ability to collect and allow it to keep its relationship with its borrowers. The article also rightly mentions the provisions in Regulation F that will permit collection through text messages and other channels, while allowing borrowers to choose the channel on which they want to be contacted. Modern servicing platforms allow borrowers to retain flexibility over their debts by allowing them to change due dates, create payment plans, reverse payments, and more. At bottom, this article sounds like it’s arguing that collection systems should operate like it’s 2022 not 1952. That’s good advice and, while remaining conscious of legal restrictions like those in Regulation F and elsewhere, lenders, servicers, and others engaged in collection should look for ways to include technology into their servicing and connect with borrowers in ways that resemble how people communicate in 2022. --- Nicholas P. Mooney II

Why this is important: The No Surprises Act was designed to protect patients under group and individual health plans from receiving surprise medical bills after most emergency healthcare services and other out-of-network services. Although the new law has purportedly prevented more than 2 million unexpected medical bills from reaching patients, it is difficult to gauge whether patients are not getting these surprise bills. The Act, which went into effect almost a year ago today, is still relatively unknown among medical patients, meaning such patients may not know if their providers and insurers fail to comply with it. Furthermore, not every “surprise” bill falls under the act, which can be confusing to patients. While the kinks in the system are still being worked out, providers and insurers should be especially vigilant about making sure proper procedures are being followed, lest this law gives way to a wave of new consumer-driven litigation. --- Tai Shadrick Kluemper

Why this is important: Last week, the U.S. Supreme Court heard arguments in MOAC Mall Holdings LLC v. Transform Holdco LLC. The case involves the authority of a court of appeals to review a bankruptcy order authorizing a bankrupt tenant to sell its interest in a lease. The dispute involves a Sears store located in the Mall of America. As a result of Sears’ prior Chapter 11 bankruptcy, it agreed to transfer most of its assets to Transform. Eventually, Transform decided that it wanted to retain that store. The landlord (MOAC is the entity that owns the Mall of America) objected, arguing that Section 365 barred an assignment of the Mall of America lease to Transform because Transform could not provide (in the language of Section 365 of the Bankruptcy Code) “adequate assurance” of its performance under the lease, in part because Transform was not “similar to the financial condition and operating performance” of Sears as Sears existed when the lease originally was signed. The bankruptcy court rejected the landlord’s argument.

When MOAC appealed, the U.S. Court of Appeals for the 2nd Circuit declined to address the landlord’s complaint, holding that Section 363(m) of the Bankruptcy Code deprived the appellate court of jurisdiction over the appeal based on earlier 2nd Circuit precedent. This case gets into the finer points of the Bankruptcy Code. MOAC sought Supreme Court review by arguing that Section 363(m) does not deprive appellate courts of jurisdiction and that in this case Transform waived any argument that Section 363(m) provides a defense to Transform. Deciding whether Section 363(m) is a jurisdictional statute would resolve a split among the circuits, with the 2nd Circuit in the minority of appellate courts that have held that the statute deprives jurisdiction on appeal. --- Bryce J. Hunter

Why this is important: Smishing is a text version of a phishing scam that encourages the recipient to provide sensitive personal data, like credit card information. West Virginia’s AG is warning residents that a new smishing campaign is appearing in which the sender of the text claims to be a representative of the U.S. Postal Service and states that she or he needs the recipient’s credit card information to pay a $3 redelivery fee in order to receive a package. West Virginia’s AG has been active in the past in warning residents about current email, phone, and text threats. Responding to unsolicited phishing attacks continues to be a leading way in which threat actors compromise sensitive data of individuals and companies, which depending on type of compromised data could lead to identity theft, unauthorized charges, or a data breach. --- Nicholas P. Mooney II

We have included a listing of pertinent U.S. House and Senate Committee meetings for your reference.

These are events scheduled at press time for the months of December 2022 and January 2023.

U.S. House Committee on Small Business

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