Welcome to the first issue of All Consuming for 2023.

We took some time at the beginning of this year to evaluate how best to bring you consumer finance news. Our goal is to provide you the most up-to-date information while also providing you information on WHY that topic is of importance. If you have any thoughts or suggestions for this e-newsletter, please let us know!

We do have some congratulatory news. Several of our practice groups and attorneys were recognized in the 2023 edition of Chambers USA, a directory of leading law firms and attorneys.

Chambers and Partners annually researches the strength and reputation of law firms and individual lawyers across the globe. The research process for the United States includes interviewing lawyers and their clients, including influential general counsel at Fortune 100 companies, high-profile entrepreneurs, and significant purchasers of legal services. Considerable credence is given to the opinions of clients. You can learn more about the practice areas that were highlighted and the recognized attorneys here.

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: There will be no AI exemption to consumer protection. That’s the message the CFPB and other regulators are delivering as AI and concerns about it continue to gain popularity. The CFPB, Federal Trade Commission, Equal Employment Opportunity Commission, and the Department of Justice all report that they’re directing resources and staff to identify ways that AI might negatively impact consumers’ lives. They claim there’s a belief that if AI makes decisions there can be no discrimination, but the reality is that bias sometimes is built into the data on which AI is making those decisions. At least some in the industry believe that government involvement is needed. Samuel Altman, CEO of OpenAI, which makes ChatGPT, believes government intervention “will be critical to mitigate the risks of increasingly powerful” AI systems. Although Congress does not yet appear poised to create all-encompassing AI legislation, the fact that Altman and other tech CEOs recently met at the White House to discuss AI may signal that some level of government action is coming. --- Nicholas P. Mooney II

Why this is important: When a deposit account is closed, a consumer normally loses access to that account and may not receive notifications of account activity. If a bank unilaterally decides to reopen that account, a consumer could unknowingly incur a variety of fees, including overdraft, nonsufficient funds, or monthly fees. Overdrawing an account could also lead to negative credit reporting by the bank. Any of these adverse activities expose banks to state and federal law liability. If a financial institution has a legitimate reason for needing to reopen an account, it should consider seeking prior authorization or providing adequate notice to the consumer. --- Tai Shadrick Kluemper

Why this is important: President Trump initially enacted the student loan payment pause three years ago due to the COVID-19 pandemic. The debt ceiling bill included language that prevents President Biden from extending the current student loan pause again unless there is a new national emergency. This means that student loan payments will begin again for 40 million borrowers starting on August 29, 2023. While interest has not been accruing during the pause, starting August 29, 2023 interest will begin accruing again also. However, just because the pause ends on August 29, 2023, that does not mean that payments will be due immediately because billing statements from the Department of Education will need time to be printed and distributed to borrowers. Borrowers will then have to be afforded a reasonable amount of time to make their first payments in three years. Additionally, the Biden administration is looking at other flexible ways to soften the blow of restarted repayments. This includes a granting a grace period where late payments will not be penalized.

There are actions borrowers can take now to prepare for the end of the student loan payment pause. They include reconnecting with your loan servicer, especially if the servicer has changed since the last time a borrower made a payment. If repayment is still financially difficult, then a borrower should investigate an affordable repayment option. These options include income-based repayment plans. This option not only lowers the monthly loan payment (under some plans it slashes them in half), there also may no longer be the huge tax bomb at the end of the repayment period. Finally, if repayment is not possible because of the borrower’s current financial situation, then a borrower may be able to request an economic hardship, unemployment deferment, or forbearance. While these options do not get rid of your payment obligations, they may give borrowers enough room to get back on their feet. The student payment pause has ended, but there are options for those who may need help with their loan payments.

Interestingly, borrowers who were in default when the student loan payment pause began have more options than those who were regularly paying their student loans. That is because the debt ceiling bill does not address their situation. Collection actions on defaulted student loans were also paused during the last three years. While collection actions will also resume with the lifting of the student loan payment pause, those in default will have additional time to become current before the resumed collection actions begin pursuant to the Biden administration’s Fresh Start program. This program is designed to provide borrowers who are in default a path to bring their loan payments up-to-date. The program will run for one year after the payment pause ends, during which time, collection actions will remain suspended. --- Alexander L. Turner

Why this is important: In November 2022, Russian lawmakers announced a plan to create a national cryptocurrency exchange. They now have scrapped that plan. It isn’t surprising that Russia would consider creating a national exchange as cryptocurrency has been an important part of the war in Ukraine, which has been described as the world’s first crypto war. Forces in Ukraine are being supported by cryptocurrency, while those in Russia are attempting to use it to evade economic sanctions. Commentators doubted that a Russian national cryptocurrency exchange ever would be accepted by the crypto community since it would put transactions squarely under the watchful eye and control of the Russian government. One commentator gave the example that using a national exchange to send funds to dissidents or move assets out of Russia would result in a knock on the door in the middle of the night. Even without a national exchange, the use of cryptocurrency and digital currencies are not dead in Russia. It still is home to many cryptocurrency companies, its government is working on legislation targeting the industry, and it is working to develop a Central Bank Digital Currency. --- Nicholas P. Mooney II

Why this is important: Car prices continue to be on the rise. Between 2020 and 2021, the average new car price rose 17.2 percent. With car prices rising along with interest rates, a new kind of car financing is emerging. Leasing has a lower barrier to entry for owning a new car. A McKinsey Mobility Consumer Pulse Survey across Europe asked car buyers how they valued leasing offerings and add-on features, and whether they were willing to pay for these features. The survey also investigated the adoption and true cost of all-in service deals. An all-in service deal is where insurance and maintenance are included in the lease payment, and was found as the top reason for a new car customer to lease a new vehicle. Another leasing add-on that buyers like is the ability to have a flexible ownership model where the leasee can switch to another leased vehicle during the leasing period. Leasees are willing to pay an additional 10 percent over the base leasing rate in order to have the ability to switch vehicles during the lease period or pause the contract. While they are willing to pay more for the ability to switch vehicles, will they? Research shows that individuals who participated in vehicle subscription services switched vehicles at a lower rate than anticipated. While the true cost of these additional leasing services remains unknown, it would appear that it is lower than initially forecasted. Will these types of lease add-ons cross the Atlantic and come to U.S. shores? That is also unknown, but if they are successful in Europe, we may see them here sooner rather than later. --- Alexander L. Turner

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 June and July 2023.

U.S. House Committee on Small Business

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