Shadow Banks Back in the Forefront of Lending

“Shadow” banks have made a comeback and now surpass regulated banks as the leading source of credit for businesses and consumers, The Washington Post reports. Considered the catalyst for the real estate market collapse in 2008, the shadow system uses money from investors in lieu of depositors and heavily relies on hedge funds, investment banks and private equity funds. Loans from these sources are popular with consumers because of lower credit stipulations, faster approval and more flexible terms than loans from a traditional bank; however, they make the general economy more susceptible to busts.

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U.S. Supreme Court Issues Decision Regarding Application of CAFA

The U.S. Supreme Court on Tuesday handed down a 5-4 decision in the case of Home Depot v. Jackson regarding application of the Class Action Fairness Act (CAFA) and an alleged scam by the company in cooperation with Citibank, and Carolina Water Systems Inc. (CWSI) over questionable credit lines used to push water purification systems. One customer who purchased the system, George W. Jackson, was sued by Citibank for unpaid debt. Jackson then filed a counterclaim against Citibank asserting class-action consumer-protection claims, further naming Home Depot and CWSI as respondents. Citibank then tried to remove the case to federal court citing the CAFA, when the lower courts and the Fourth Circuit held that a party named in a counterclaim is not a “defendant” that is entitled to remove the case under the law. Justice Thomas joined with Justices Ginsburg, Breyer, Sotomayor and Kagan to form the majority in affirming the Fourth Circuit judgment.

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Creditors Practice Forum – Sept. 18

This year's Creditors Practice Forum is set for Wednesday, Sept. 18 at the Tennessee Bar Center in Nashville. Registration is open, so reserve your spot today.

Look for additional details regarding speakers and session topics in an upcoming Connect.

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CFPB Proposes New Rules Under FDCPA

Earlier this month, the Consumer Financial Protection Bureau (CFPB) issued a Notice of Proposed Rulemaking to implement the Fair Debt Collection Practices Act, according to a press release by the CFPB. The proposed rule seeks to clarify how collectors can communicate with consumers. Specifically, the rule addresses how collectors can use newer technologies to communicate, such as voicemails, emails and text messages. Additional clarity on the number of call attempts and telephone conversations allowed are outlined. CFPB invites the public to submit written comments on the proposed rule. Read the proposed rule here.

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Warren, AOC Send Letter and Release Video Questioning Mnuchin’s Role in Sears Bankruptcy

Presidential candidate Sen. Elizabeth Warren and Rep. Alexandria Ocasio-Cortez (AOC) wrote a letter to Treasury Secretary Steven Mnuchin and released a video last week detailing a series of questions for Mnuchin regarding his advisory role to former Sears CEO Eddie Lampert during the downfall and eventual bankruptcy of the company, The Washington Post reports. Mnuchin was college roommates with Lampert and served on the boards of both Sears and Lampert’s hedge fund, ESL Investments. Mnuchin, Lampert and other board members have been named in a lawsuit filed last month by Sears’ unsecured creditors on behalf of Sears. The suit accuses them of transferring billions of dollars from the company, as it closed stores and cut staff, in order to benefit Lampert, his hedge fund, his real estate investment firm and other insiders. After Sears filed for bankruptcy, its two pension plans were handed over to the Pension Benefit Guaranty Corp. (PBGC), overseen by Mnuchin and two other secretaries. Warren and AOC inquire into the ethical obligations and current status of Mnuchin’s recusal requirements from PBGC’s actions related to Sears. Watch the video and read the full story here.  

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Zillow Class-Action Suit Regarding RESPA Violations to Proceed

The class-action lawsuit filed against Zillow regarding its “co-marketing” program and whether it violated federal anti-kickback laws will proceed as planned, The Washington Post reports. The suit, filed in September 2017, alleges that the company ran afoul of the Real Estate Settlement Procedures Act (RESPA) by allowing lenders share advertising fees with real estate agents — up to 90 percent initially — effectually allowing the lenders to receive leads on active buyers. The Consumer Financial Protection Bureau (CFPB) in 2017 notified Zillow that it was being investigated regarding the alleged violations, to which the company attempted to negotiate with the bureau; however, the case was dropped when the Trump Administration appointed its new CFPB director. Judge John C. Coughenour of the U.S. District Court in Seattle denied Zillow’s motion to dismiss saying: “the court can draw a reasonable inference that Zillow designed the co-marketing program to allow agents to provide referrals to lenders in violation of RESPA.” A trial date has not been set.

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Volunteers Needed for a Saturday Clinic in Nashville

The Legal Aid Society and Metro Nashville Public Schools are hosting their monthly clinic this Saturday from 9 a.m. to noon at the MNPS Office of English Learners, which is located at 615 Fessey Park Road, Nashville, TN, 37204. All lawyers are invited to help at this advice-only clinic. To volunteer or for more information please contact Jorge Salles Diaz at, 615-780-7131.
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Mid East Tennessee Community Credit Union Placed Into Conservatorship

The Mid East Tennessee Community Credit Union (METCCU) on Tuesday was placed into conservatorship by the National Credit Union Administration (NCUA), the Credit Union Times reports. While NCUA did not cite a specific reason for the conservatorship, METCCU maintains a delinquency rate of around 4 percent, dwarfing the rate of similar unions that hover around 1.1 percent. The organization, incepted in 2008, services 1,855 members in Meigs, Rhea, and McMinn counties.

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U.S. Deficit Provides Boon for Bond Investments

America’s ballooning deficit may have a slight silver lining — an uptick in safe asset investments, Bloomberg reports. Industry leaders point to the fact that consumers flock to less risky, low-yield investments such as treasury bonds in volatile markets that are backed by government liabilities, which have traditionally performed well in the U.S. Though the returns on treasuries are often meager, America raises a net positive while other some developed nations recently produced negative yields.

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CFPB to Address Collection Practices Through Email, Texts

The Consumer Financial Protection Bureau (CFPB) says it plans to issue new debt collection rules in coming weeks and intends to address the use of text and emails by collectors, The Washington Post reports. According to CFPB Director Kathy Kraninger, the organization will “modernize the legal regime for debt collection” by reducing “unwarranted” regulatory burdens, a move that detractors argue will add additional avenues for harassment. If approved, this will be the first revision of the Fair Debt Collection Practices Act in more than 40 years.

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AT&T Sacrificing Subscribers to Focus on Debt

AT&T is losing wireless and TV subscribers as it focuses on shrinking the company’s debt after the Time Warner takeover, the Los Angeles Times reports. While the company lost 627,000 TV and 204,000 wireless customers, overall debt was reduced by six percent. It is yet to be seen if the risky strategy will pay off, with a drop in subscribers affecting the company’s dividends and buyback power, however, the company is also exploring other avenues such as selling investments and property to abate the debt.

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TBA Legislative Update: Flow Motion

Last week the pace of the legislative session accelerated to lightning speed after the House initiated the much anticipated, and equally dreaded, “flow motion” on the floor, a move that suspends the parliamentary rules that the legislature typically observes during session. Bills are moving from committee to the floor on the same day. Now that the vast majority of committees are closed, the legislature will transition into passing the annual budget and tying up loose ends on major policy initiatives with hefty price tags. Only the Senate Judiciary Committee and Finance, Ways and Means Committees remain open. House Majority Leader William Lamberth, R-Portland announced plans for the House to take up the state’s $38 billion budget next week, with the goal of tying up all loose ends the following week.
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5 New Job Postings on TBA’s Joblink

See who is hiring in Tennessee. Recent job postings this month offer opportunities in litigation, real estate, health law and more. See full listings or post positions in your firm on TBA’s Joblink.
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TBA Convention Kicks Off TOMORROW!

The big week is finally upon us: The Tennessee Bar Association’s Annual Convention begins tomorrow, June 12. This year’s Convention is chock-full of even better programming, exhibits and fun than last year! Look forward to:

  • Free Access to 9 Hours of CLE, including the Bench Bar Program, co-sponsored by the Tennessee Judicial Conference
  • Opening welcome reception
  • Bench Bar Luncheon (featuring keynote speaker, Ken Starr)
  • Law School and General Breakfasts
  • Lawyers Luncheon (featuring special honor for Sen. Lamar Alexander)
  • Thursday night joint reception sponsored with TLAW and TABL
  • Thursday night Dinner/Dance Party featuring My So-Called Band
  • Friday night TBALL/YLD Party
  • Access to activities and programming designed for well-being including massages, contemplative space and more.
  • Access to TBA's sponsorship hall to meet with exhibitors, participate in our special TBA Wellness Corner and win prizes.
• QUESTIONS: Just email to get help.
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Help4TNDay Kicks Off Saturday

Tennessee lawyers are invited to participate in Help4TNDay activities throughout the month of April. Events will bring attention to the ongoing need for free and low-cost legal services and highlight the groups that provide these services to disadvantaged Tennesseans. Opportunities include volunteering to help clients in need through Tennessee Free Legal Answers (TFLA) or at a local legal clinic. The events kick-off this Saturday with a statewide virtual legal clinic, where attorneys across the state will answer questions on TFLA from noon to 2 p.m. Simultaneously, the TBA will host an on-site TFLA Clinic and Luncheon in Nashville. To participate in the TBA event, contact Liz Todaro. Help4TNDay is a joint effort by the Tennessee Supreme Court Access to Justice Commission, the Administrative Office of the Courts, Tennessee Alliance for Legal Services and the Tennessee Bar Association. 
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PG&E Creditors Propose $35 Billion Bankruptcy Exit Plan

Pacific Investment Management Co., Elliott Management Corp., and Davidson Kempner Capital Management have been in private discussions with California lawmakers and stakeholders over a $35 billion plan that would allow PG&E Corp. to emerge from bankruptcy within a year, Bloomberg reports. These creditors represent an ad hoc committee of PG&E’s senior unsecured noteholders. Included in their proposal is establishing a $14 billion cash trust to pay claims related to the 2017 and 2018 wildfires. Additionally, the creditors are recommending that California legislators establish a $13 billion statewide wildfire fund to be financed by California utilities, including PG&E, statewide bonds and other state funding sources. Contributions totaling $8 billion would allow the company to recapitalize and refinance its debtor-in-possession loans and other maturities. Creditors would provide around $18.5 billion in funds and the proposal claims to be neutral for consumers and their respective electricity rates. PG&E would be exiting bankruptcy by March 2020 under this proposal. 

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Purdue Pharma, Oklahoma Reach Settlement, Praised by AG Slatery

Oklahoma has reached a landmark settlement with Purdue Pharma regarding its role in the opioid crisis, The Washington Post reports. This is the first such settlement in the more than 1,600 lawsuits faced by the drug maker, including the case in Tennessee where Knox County Circuit Court Judge Kristi M. Davis struck down Purdue’s motion for dismissal. Tennessee Attorney General Herbert Slatery released a statement praising the action and reaffirmed the state’s commitment to holding Purdue and other manufacturers accountable for possible violations of the Tennessee Consumer Protection Act. In the Oklahoma settlement, Purdue will pay $102.5 million to establish a new foundation for addiction treatment and research, provide $20 million worth of treatment drugs and cover about $60 million in litigation costs.
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Registration Now Open for TBA Convention in Nashville, June 12-15

The TBA's annual Convention returns to downtown Nashville this summer! Mark your calendars for June 12-15 and prepare for four days of CLE, networking, entertainment and more at the Renaissance Hotel, 611 Commerce Street. Registration is officially open, with early bird rates available until April 30.
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Next Thursday: Business Law Forum

Register now for the TBA Business Law Forum 2019.
This program will help business lawyers learn and refresh their knowledge about issues that may arise when drafting an LLC operating agreement. Topics will include an overview of the two extant Tennessee LLC acts and a comparison of those acts with the Delaware LLC Act; other distinctions of Tennessee law that impact the operating agreement; drafting key provisions, including distribution and allocation, employee and member compensation, and exit rights; and ethical considerations for lawyers drafting LLC operating agreements.
When: Thursday, May 9. Registration begins at 9 a.m.
Where: Tennessee Bar Center, 221 Fourth Ave. N., Nashville

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Federal Judge: DOE Changes to Loan Forgiveness Program 'Arbitrary, Capricious'

In a case filed by the American Bar Association, a judge ruled Friday that the U.S. Department of Education improperly changed the terms of the Public Service Loan Forgiveness Program (PSLF) for some men and women who have dedicated their careers to public service. In his opinion, U.S. District Judge Timothy J. Kelly said changes to the eligibility requirements made several years after the program began were “arbitrary and capricious.” Kelly ruled in favor of three individual plaintiffs who worked several years in public service and were initially approved for loan forgiveness, only to be notified years later that the approval was retroactively denied by the Department of Education based on new rules.
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Court Seeking Comments on Proposed Rule 46A

The Tennessee Supreme Court is considering the adoption of Tennessee Supreme Court Rule 46A, which would govern the electronic service of papers that are e-filed, and it is seeking comments from the legal community and the public on the proposed rule. The deadline for submitting written comments is March 22. Comments should be e-mailed to or mailed to: James M. Hivner, Clerk, Tennessee Appellate Courts, 100 Supreme Court Building, 401 7th Avenue North, Nashville, TN 37219-1407.
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Gov. Lee Provides Avenue for Public Feedback on Legislation

Gov. Bill Lee has taken an additional step in his commitment to “an open and transparent government,” creating a webpage for the public to view and provide feedback on legislation that has been submitted to him for consideration. Lee maintains that involving Tennesseans into the process more directly will increase accountability in how laws are made. The site will be updated regularly, as bills pass the Legislature and land on his desk.

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TBA to Introduce Legal Document Generation

The TBA will soon launch a new subscription-based product for Tennessee lawyers — automated legal forms. The initiative will use HotDocs, a custom documentation generator that creates form templates and speeds up the preparation process based on client and case data. In order to provide this valuable resource to our members, we hope to obtain your comments and ideas on forms you deem beneficial for replication. With across-the-board participation, we can comprise a substantive, comprehensive database where subscribers will have access to forms submitted by all TBA sections. Please send suggestions and comments to TBA Membership Director Mindy Fulks.

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TBA Legislative Agenda – Service of Process

Sen. John Stevens, R-Huntingdon, and Rep. Johnny Garrett, R-Goodlettsville, introduced a bill drafted by the TBA’s Creditors Practice Section, and supported by the TBA. SB 456/HB 393 allows for process to be valid if a private process server does not include a mailing or physical address on the service return. The TBA Governmental Affairs team is working with legislators to pass this bill and have it signed into law by Gov. Bill Lee.
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Southeastern States Continue to Lead in Bankruptcy Filings

Data compiled for the American Bankruptcy Institute shows that Alabama, Tennessee and Georgia again led the nation in the per capita rate of bankruptcy filings for last year, the Times Free Press Reports. While bankruptcy filings decreased nationwide, the city of Chattanooga saw an increase for the second consecutive year, specifically a 1.8 percent increase with 6,011 total cases filed. One Chattanooga bankruptcy attorney attributes the increase to wages not increasing enough to keep up with the rising cost of living. The article notes that 59 percent of the filings in Tennessee were Chapter 13 petitions. Despite average job growth in Tennessee over the past year, the state’s bankruptcy filings were twice the nation’s per capita rate. 

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