Business

State Lawmakers to Consider Transparency Measures for Business Tax Incentives

State lawmakers are reconsidering state laws that keep information on business tax credits confidential, the Tennessean reports. Proponents of transparency will introduce a bill that would require companies seeking incentives to release tax information along with business grant details, an approach that advocates contend is essential for formulating good economic development policy. Gov. Bill Lee after a budget hearing last Friday for the Department of Economic and Community Development, referring to the release of tax information for these companies, said: "Under the right circumstances things would be made public, but until it's the right timing … If it may not allow a job creating deal to come to Tennessee, then we certainly would be smart about that so that we bring jobs here." Details of the legislation will be made public by the bill filing deadline on Feb. 7.

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Ballad Health Provides New Details Regarding NICU Plans in East Tennessee

Ballad Health has issued a new response to the Tennessee Department of Health regarding questions about its proposed changes for the neonatal intensive care unit (NICU) in two east Tennessee hospitals, the Johnson City Press reports. In its response, Ballad provided specific details and statistics requested by former Health Commissioner John Dreyzehner. Under the proposed plan, newborns requiring Level III NICU services will be transported to Niswonger Children’s Hospital in Johnson City instead of current Level III hospital Holston Valley Medical Center, which will be downgraded to a Level I provider.

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Pilot Flying J Execs Sentenced to Probation

Four former Pilot Flying J sales executives who pleaded guilty to fraud charges will receive probation for their crimes, The Knoxville News Sentinel reports. Senior U.S. District Court Judge Curtis L. Collier on Wednesday ordered that Kevin Clark, Michael Scott Fenwick, Chris Andrews and Katy Bibee serve probation in lieu of jail time because of their cooperation with law enforcement and the fact the defendants suffered from “the shame, the embarrassment, the loss of jobs” that come with their conviction. Former Pilot Flying J President Mark Hazelwood so far has received the harshest punishment in the case, after Collier ordered him to serve more than 12 years in prison.

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Walgreens Assumes Operations of Fred's Pharmacies

Memphis-based discount retailer Fred’s has completed its multimillion-dollar deal with Walgreens, which will assume operations of pharmacies in 179 Fred’s stores, The Memphis Business Journal reports. Fred’s received $156.1 million in cash proceeds and an additional $20.6 million for its pharmacy inventory in the agreement, announced last September. According to a Jan. 24 filing with the SEC, “the company continues to use the proceeds received in the transaction to pay down the company’s existing indebtedness or for general corporate purposes.”

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Legal Startup Atrium Raises $65 Million

Justin Kan’s one-year-old legal firm and tech startup Atrium has announced that it has raised $65 million in an investment round led by Andreessen Horowitz, Forbes reports.  Over the past year, Atrium has served as the law firm for some of tech’s fastest-growing companies while providing technology to automate filings. It has also helped 250 clients raise a combined $500 million, including scooter company Bird, Alto and Sift Science. Atrium specializes in helping startups with startup financings, commercial contracts, blockchain and outside counsel.

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Director of Consumer Financial Protection Bureau Comes Under Fire After Closing Payday Lending Investigations

Mick Mulvany, director of the Consumer Financial Protection Bureau, has recently closed investigations of payday lending companies in Kansas and South Carolina, causing concerns that the Trump administration is taking a lax approach to regulations on this polemic industry.
 
The CFPB, formed in 2011 amidst the aftermath of the Great Recession, is tasked with making sure banks, lenders, and other financial companies treat citizens fairly. In a memo released by Mulvany, he announced a new direction for the bureau stating "We don't just work for the government, we work for the people. And that means everyone: those who use credit cards, and those who provide those cards; those who take loans, and those who make them; those who buy cars, and those who sell them. All of those people are part of what makes this country great. And all of them deserve to be treated fairly by their government. There is a reason that Lady Justice wears a blindfold and carries a balance, along with her sword."
 
The move has been met with consternation from critics who believe Mulvaney may have a conflict of interest due to receiving campaign contributions from a number of payday loan companies. Payday lenders gave $31,700 in 2015-16 federal campaign cycle contributions to Mulvaney, ranking him ninth among all congressional recipients from the sector, according to data analyzed by the Center for Responsive Politics. When asked whether the contributions influenced his position on the rule and could pose a conflict of interest, Mulvaney said, "I don't think so, because I am not in elected office anymore."
 
Tennessee, who is among 25 states the US have already passed serious legislation to regulate the functioning of payday loans, has most predatory lenders in the U.S. according to a recent report. The same report found people without 4-year college degrees, home renters, African-Americans, and those earning less than $40,000 a year are most likely to use a payday loan.
 
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The Consumer Financial Protection Bureau Targeting Affiliated Businesses

The Consumer Financial Protection Bureau (CFPB) recently took action against Meridian Title Corporation (Meridian) for violation of a long-standing provision of the Real Estate Settlement Procedure Act (RESPA). CFPB has been delegated with the enforcement of RESPA.  
 
According to the release, Meridian is a real estate settlement agent and a title insurance agency located in South Bend, Indiana, which was found to have steered “consumers to a title insurer owned in part by several of [Meridian’s] executives without making disclosures about the business affiliation.” 
 
When directed to its affiliated provider, the settlement agent/title agent “was able to keep extra money beyond the commission it would normally have been entitled to collect based on an understanding with the affiliated provider, to add to its bottom line,” according to Director Richard Cordray.
 
Receiving “anything of value” pursuant to a referral agreement has long been a violation of RESPA, but if the referring entity meets the definition of an “affiliated business,” then the referring entity must “generally disclose its relationship to the consumer.” Theoretically, this permits the consumer to exercise independent judgment regarding whether to use that provider. The penalty for Meridian’s failure to disclosure resulted in an order that required the regional company to pay $1.25 million to 7,000 “harmed consumers” and an order to desist from such conduct in the future.
 
Unfortunately, many affiliated providers of services for title agencies and lenders have become lax and brush off this continuing obligatory disclosure to the consumer.
 
This action is noteworthy because the CFPB has identified and taken action against a relatively minor player in the title industry. This should reinforce the importance of compliance by every title agency and lender. Lenders who enjoy affiliated business arrangements with title insurance providers are apt to trivialize this RESPA requirement when dealing with the consumer, especially when the lender views the provider as a business partner through its relationship as a member in the provider’s limited liability company.
 
As with many consumer protection regulations, the consumer often fails to appreciate the value of choosing services through a provider that does not share in the financial interest of the lender. This is especially true when an owners title policy is issued simultaneously with a loan policy. The interest of the consumer and lender are not necessarily the same.
 
Paul "Kelley" Hinsley is an eastern delegate and past chair of the executive council for the Tennessee Bar Association's Real Estate Section. Hinsley holds degrees from the University of Tennessee at Knoxville and the University of Tennessee College of Law.

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