Banking and Finance Law Commons^™

The Bankruptcy Revolving Door, Belisa Pang

Articles

The American consumer bankruptcy system is a costly regime with profound societal implications. Between 2008 and 2023, consumers filed 13.8 million bankruptcy cases across the ninety-four federal bankruptcy districts in the United States, generating over $4 billion in court filing fees alone. When accounting for attorney fees, trustee expenses, creditor costs, and broader economic externalities—such as increased interest rates borne by other consumers—the total financial impact easily reaches tens of billions, if not hundreds of billions, of dollars.

Against that backdrop, this study uncovers a startling phenomenon: nearly 46% of the consumers who filed bankruptcy in 2023 were repeat filers, …

The Roots Of Credit Inequality, Andrea Freeman

Seattle University Law Review

Debt oppression began before the United States became a country. Settlers enslaved Africans and Indigenous people, treating them as property that they could buy and sell for their economic and personal benefit. When enslavement became illegal, new economic systems and laws that included sharecropping, Black Codes, and Jim Crow kept Black people in servitude. Laws that prohibited enslaved people from owning property or selling goods to white people evolved into restrictions on Black people’s occupations and market participation, both formal and informal. When Black entrepreneurs overcame these obstacles and built wealth within Black business enclaves, white people enforced their racist …

Debt Tokens, Andrea Tosato, Diane Lourdes Dick, Christopher K. Odinet

Faculty Scholarship

The worlds of crypto and bankruptcy have collided. Once-prominent, fast-growing, and even politically influential platforms for trading cryptocurrencies have imploded spectacularly. Gone are the glossy advertisements, celebrity endorsements, and proclamations that blockchain operates as a law unto itself. Instead, insolvent crypto businesses—including the crypto exchange giant FTX—find themselves in bankruptcy court, no different from any other failed enterprise. These bankruptcies reveal a startling reality: individual investors who placed their trust in these platforms have been stripped of their digital assets. In their stead, they hold hard-to-collect claims against these defunct platforms.

Amid the chill of the crypto winter, bankruptcy has …

Debt Tokens, Andrea Tosato, Diane Lourdes Dick, Christopher K. Odinet

Faculty Journal Articles and Book Chapters

The worlds of crypto and bankruptcy have collided. Once-prominent, fast growing, and even politically influential platforms for trading cryptocurrencies have imploded spectacularly. Gone are the glossy advertisements, celebrity endorsements, and proclamations that blockchain operates as a law unto itself. Instead, insolvent crypto businesses—including the crypto exchange giant FTX—find themselves in bankruptcy court, no different from any other failed enterprise. These bankruptcies reveal a startling reality: individual investors who placed their trust in these platforms have been stripped of their digital assets. In their stead, they hold hard-to-collect claims against these defunct platforms. Amid the chill of the crypto winter, bankruptcy …

Peranan Perusahaan Penjaminan Dalam Mengatasi Permasalahan Umkm Mengakses Kredit Di Sektor Perbankan (Setelah Berlakunya Undang-Undang Nomor 1 Tahun 2016 Tentang Penjaminan), Luh Putu Prema Shanti Putri Saraswati

"Dharmasisya” Jurnal Program Magister Hukum FHUI

Micro, Small and Medium Enterprises (MSME’s) have an important role in the development of the Indonesian economy. So far, MSME’s are still faced with various kinds of obstacles, one of which is that MSMEs still face problems related to limited access to funding to financial institutions. Limited access to funding to financial institutions is partly due to the limited assets owned by MSME’s to be used as collateral for bank loans. Guarantee is the activity of providing guarantees by the Guarantor for the fulfillment of Guaranteed financial obligations to the Recipient of the Guarantee. Guarantee Company is a legal entity …

Hak Cipta Sebagai Jaminan Pemberian Kredit Bank Dikaitkan Dengan Prinsip 5c (Character, Capacity, Capital, Collateral, Condition Of Economy), Tantowi Akbar

"Dharmasisya” Jurnal Program Magister Hukum FHUI

Banking institutions in Indonesia have the main function as collector and distributor of public funds as outlined in Article 3 of Banking Law Number 10 of 1998. In loans provided, banks are required to use the precautionary principle, known as the 5C Principle (Character, Capacity, Capital, Guarantee, and Condition of Economy). One form of collateral known in Indonesia is fiduciary collateral that can be encumbered for both movable and immovable objects either tangible or intangible that can not be encumbered for a Mortgage according to Article 1 number 2 of Fiduciary Guarantees Law Number 42 of 1999. Copyright is one …

#Fintok And Financial Regulation, Nikita Aggarwal, D. Bondy Valdovinos Kaye, Christopher K. Odinet

Faculty Scholarship

Social media platforms are becoming an increasingly important site for consumer finance. This phenomenon is referred to as “FinTok,” a reference to the “#fintok” hashtag that identifies financial content on TikTok, a popular social media platform. This Essay examines the new methodological possibilities for consumer financial regulation due to FinTok. It argues that FinTok content offers a novel and valuable source of data for identifying emerging fintech trends and associated consumer risks. As such, financial regulators should use FinTok content analysis—and social media content analysis more broadly—as an additional method for the supervision and regulation of consumer financial markets. The …

Predatory Fintech And The Politics Of Banking, Christopher K. Odinet

Faculty Scholarship

With American families living on the financial edge and seeking out high-cost loans even before COVID-19, the term financial technology or “fintech” has been used like an incantation aimed at remedying everything that’s wrong with America’s financial system. Scholars and supporters from both the public and private sector proclaim that innovations in financial technology will “bank the unbanked” and open new channels to affordable credit. This exuberance for all things tech in finance has led to a quiet yet aggressive deregulatory agenda, including, as of late, a federal assault via rulemaking on the ability of states to police the cost …

The Rise Of "Fringetech": Regulatory Risks In Earned-Wage Access, Nakita Q. Cuttino

Northwestern University Law Review

By many accounts, the financial technology, or FinTech, sector appears to have developed an innovative solution to assist low-income workers with income shortfalls between standard paydays by displacing fringe financial service providers, namely payday lenders. Earned wage access programs facilitate early transfers of earned-but-unpaid wages to low- income workers through mobile platforms, algorithmic technology, and GPS tracking. To many, earned wage access programs represent a win-win for employees and employers. These programs are believed to be cheaper and safer alternatives to payday loans. Preliminary research also suggests these programs improve labor-retention rates for employers and help reduce financial distress for …

O Tell Me The Truth About Bail-In: Theory And Practice, Marco Ventoruzzo, Giulio Sandrelli

The Journal of Business, Entrepreneurship & the Law

In this perspective, the purpose of this Article is to analyze the functioning of the European regulatory framework for the crisis of credit institutions in the light of its early applications, and with a special focus on the bail-in tool. We investigate how the new resolution mechanisms—rooted in the principle of private sector involvement in banking restructurings—have interplayed with (and tried to re-shape) legal and institutional contexts still characterized by an attitude to bail-out rescues and by non-harmonized national insolvency legislations.

The New Data Of Student Debt, Christopher K. Odinet

Faculty Scholarship

Where you go to college and what you choose to study has always been important, but, with the help of data science, it may now determine whether you get a student loan. Silicon Valley is increasingly setting its sights on student lending. Financial technology (“fintech”) firms such as SoFi, CommonBond, and Upstart are ever-expanding their online lending activities to help students finance or refinance educational expenses. These online companies are using a wide array of alternative, education-based data points—ranging from applicants’ chosen majors, assessment scores, the college or university they attend, job history, and cohort default rates—to determine creditworthiness. Fintech …

Domestic Asset Protection Trusts: Ushering In The Klackaba Era, Cheyenne Vankirk

Seattle University Law Review

The growth in the U.S. economy has allowed Americans to increase their savings--but how? A novel approach has emerged in seventeen states: domestic asset product trusts (DAPTs). DAPTs are self-settled spindthrift trusts that allow the settlor to retain a beneficial interest in the trust while removing it from the reach of future creditors. Through the lens of the favorable ruling in Klackaba v. Nelson, this Note addresses why DAPTs should be regarded as an effective method of protecting a settlor’s money and argue for more states to follow suit.

American Usury Law And The Military Lending Act, Paul Kantwill, Christopher L. Peterson

Utah Law Faculty Scholarship

In 2006 Congress adopted the Military Lending Act (“MLA”) to protect active duty military service members and their families from high-cost, predatory loans. The core provision of the statute is a usury limit capping interest rates at no more than 36 percent per annum. The United States Department of Defense finalized regulations implementing the MLA in 2007 and then later issued substantially revised regulations in 2015. The MLA is America’s first modern, national usury law that is applicable to all types of creditors and was adopted after the evolution of our national credit card market. After over a decade, the …

Fintech Lending: A Study Of Expectations Versus Market Outcomes, Vincent Dilorenzo

Faculty Publications

This article explores expectations and outcomes. It documents the expectations for the fintech lending industry, which has emerged in this decade, and compares such expectations to market outcomes. It presents an evidence-based analysis for policy making decisions. Part one of the article documents expectations—possible benefits and risks of fintech lending—through large-scale surveys and interviews of industry, consumer and government stakeholders. Part two of the article examines market outcomes—benefits and risks that have been realized or failed to materialize as documented by studies of substantial data sets of various types of fintech loans. The benefits and risks explored include increased access …

The Cfpb’S Endaround, Chris O'Brien

Catholic University Law Review

The financial crisis of 2008 led Congress to enact the Dodd-Frank Wall Street Reform and Consumer Protection Act and establish the Consumer Financial Protection Bureau (CFPB) to better protect consumers. Although Dodd-Frank and the CFPB introduced sweeping changes to many areas of financial lending, automobile dealers and financers were expressly excluded from oversight by the CFPB. Despite this express limitation on the CFPB’s authority, the Bureau nonetheless expanded its definition of “larger participants” to encompass automobile dealers and financiers. This action has resulted in duplicative regulatory oversight and increased costs to consumers, which in turn, imposes additional burdens on those …

Consumer Bitcredit And Fintech Lending, Christopher K. Odinet

Faculty Scholarship

The digital economy is changing everything, including how we borrow money. In the wake of the 2008 crisis, banks pulled back in their lending and, as a result, many consumers and small businesses found themselves unable to access credit. A wave of online firms called fintech lenders have filled the space left vacant by traditional financial institutions. These platforms are fast making antiques out of many mainstream lending practices, such as long paper applications and face-to-face meetings. Instead, through underwriting by automation — utilizing big data (including social media data) and machine learning — loan processing that once took days …

Making Innovation More Competitive: The Case Of Fintech, Rory Van Loo

Faculty Scholarship

Finance startups are offering automated advice, touchless payments, and other products that could bring great societal benefits, including lower prices and expanded access to credit. Yet unlike in other digital arenas in which American companies were global leaders, such as search engines and ride hailing, the U.S. has lagged in consumer finance. This Article posits that the current competition framework is holding back consumer financial innovation. It then identifies a contributor that has yet to be articulated: the organizational design of administrative agencies. Competition authority—including antitrust and the extension of business licenses—is spread across at least five regulators. Each is …

Postal Banking's Public Benefits, Mehrsa Baradaran

Scholarly Works

The basic idea of postal banking is to have a public bank that would offer a wide range of transaction services, including deposit-taking and small lending. Post offices could offer these services at a much lower cost than banks and the fringe banking industry because (1) they can use natural economies of scale and scope to lower the costs of the products; (2) their existing infrastructure significantly reduces overhead costs, and (3) they do not have profit-demanding shareholders and would be able to offer products at cost.

The Hausmann-Gorky Effect, Mitu Gulati, Ugo Panizza

Faculty Scholarship

For over a century, legal scholars have debated the question of what to do about the debts incurred by despotic governments; asking whether successor non-despotic governments should have to pay them. That debate has gone nowhere. This paper examines whether an Op Ed written by Harvard economist, Ricardo Hausmann, in May 2017, may have shown an alternative path to the goal of increasing the cost of borrowing for despotic governments. Hausmann, in his Op Ed, had sought to produce a pricing penalty on the entire Venezuelan debt stock by trying to shame JPMorgan into removing Venezuelan bonds from its emerging …

Regulating Debt Collection, Christopher K. Odinet, Roederick C. White

Faculty Scholarship

Debt collection. It often starts as a late night call carrying threats of being thrown in prison, ruin at the workplace, and trouble for the family unless you pay up. While the law actually prohibits some of these tactics, most consumers do not know their legal rights, which leave much to be desired, or fail to exercise them when faced with the harassing practices of some debt collectors. Moreover, the debt collection industry as a whole — both massive and sophisticated — lacks the incentives to self-police or internally punish bad actors. In July 2016 the Consumer Financial Protection Bureau …

The Financial Crisis And Credit Unavailability: Cause Or Effect?, Steven L. Schwarcz

Faculty Scholarship

Although the relationship between credit availability and financial decline leading to the global financial crisis was somewhat interactive, a loss of credit availability appears to have caused the financial crisis more than the reverse. The potential for credit unavailability to cause a financial crisis suggests at least three lessons: (i) because credit availability is dependent on financial markets as well as banks, regulation should protect the viability of both credit sources; (ii) diversifying sources of credit might increase financial stability if each credit source is robust and does not create a liquidity glut or inappropriately weaken central bank control; and …

Racial Credit Steering As A Discriminatory Credit Practice Under The Equal Credit Opportunity Act, Warren L. Dennis, Charles G. Field

Akron Law Review

This article will explore the possible application of the Equal Credit Opportunity Act with its multiple remedies and enforcement methods to racial credit steering practices as described above.

Buying Time In Spain: The Spanish Law Of Installment Sales, John M. Steadman

Georgia Journal of International & Comparative Law

No abstract provided.

The Export Trade Note: A New Instrument For International Trade, Eugene A. Ludwig, Michael J. Coursey

Georgia Journal of International & Comparative Law

No abstract provided.

Tax Rebates And The Cycle Of Payday Borrowing, Paige Marta Skiba

Vanderbilt Law School Faculty Publications

I examine whether receipt of a $300 tax rebate by payday borrowers affects their like- lihood of borrowing, loan size, or default behavior. Results from fixed-effects models show that the rebate decreases the probability of taking out a payday loan in the short run. These impacts are most apparent among credit-constrained, infrequent borrow- ers. Those who take out loans around the time of the rebate borrow amounts typical of their normal borrowing behavior but are more likely to default. Overall, however, the rebate's effects are small and short-lived, suggesting a muted response to this cash windfall in payday borrowing and …

Banking And The Social Contract, Mehrsa Baradaran

Scholarly Works

This article asserts that there exists today and has always existed an interdependent relationship between banks and the state. I refer to this connection and its mutual benefits and responsibilities as a social contract. When Alexander Hamilton responded to President Washington’s inquiry about the advisability of a national bank, he wrote that “such a Bank is not a mere matter of private property, but a political machine of the greatest importance to the State.” This social contract has existed since the inception of banking in the United States and has been reinforced over time, but it has recently become weakened …

The Impact Of The Equal Rights Amendment On Married Women's Financial Individual Rights , Anne K. Bingaman

Pepperdine Law Review

No abstract provided.

The Basel Iii Liquidity Coverage Ratio And Financial Stability, Andrew W. Hartlage

Michigan Law Review

Banks and other financial institutions may increase the amount of credit available in the financial system by borrowing for short terms and lending for long terms. Though this "maturity transformation" is a useful and productive function of banks, it gives rise to the possibility that even prudently managed banks could fail due to a lack of liquid assets. The financial crisis of 2007-2008 revealed the extent to which the U.S. financial system is exposed to the risk of a system-wide failure from insufficient liquidity. Financial regulators from economies around the world have responded to the crisis by proposing new, internationally …

Basel Iii And Credit Risk Measurement: Variations Among G20 Countries, Matt Schlickenmaier

San Diego International Law Journal

Most countries require banks to hold extra capital to protect against unforeseen financial calamities; banks with riskier loans must hold more capital than those with safer loans. Basel II, a set of international banking standards, allows banks to measure a loan’s risk in different ways: some banks make their own judgments; others use outside agencies. The recent mortgage crisis prompted banks to reevaluate these methods, in part due to banks having failed to perceive the high level of risk inherent in securitized mortgages. The international community’s response was Basel III, an updated version of its previous standards. This Comment will …

"The Subprime Crisis: Why One Bad Turn Leads To Another" At Pepperdine University School Of Law, Richard A. Epstein

The Journal of Business, Entrepreneurship & the Law

No abstract provided.