Banking and Finance Law Commons^™

Credit On Wheels: The Law And Business Of Auto-Title Lending, Jim Hawkins

Washington and Lee Law Review

Despite the fact that they are used by millions of Americans, auto-title loans have received little attention in the legal literature about consumer credit. Friends and foes of title lending make confident statements about their net welfare effects, but we still lack empirical data on many of the central policy questions that title lending raises. This Article offers new evidence about the title lending transaction, paying special attention to the risks borrowers face when they use their vehicles as collateral for the loan. I gathered this evidence by obtaining new reports from state regulators about the title lending industry, examining …

Loan Sharks, Interest-Rate Caps, And Deregulation, Robert Mayer

Washington and Lee Law Review

The specter of the loan shark is often conjured by advocates of price deregulation in the market for payday loans. If binding price caps are imposed, the argument goes, loan sharks will be spawned. This is the loan-shark thesis. This Article tests that thesis against the historical record of payday lending in the United States since the origins of the quick-cash business around the Civil War. Two different types of creditors have been derided as “loan sharks” since the epithet was first coined. One used threats of violence to collect its debts but the other did not. The former has …

“Warning: Predatory Lender”—A Proposal For Candid Predatory Small Loan Ordinances, Christopher L. Peterson

Washington and Lee Law Review

Over a hundred different local governments around the country have adopted ordinances restricting small, high-cost loans. This trend reflects the solid majority of the American public that opposes the legality of triple-digit interest rate loans and the long historical tradition of treating payday and car-title lending as a serious civil offense or even a crime. Nevertheless, perhaps owing to limits on municipal power, local payday lending law has generated relatively little scholarship or commentary. This paper describes the existing local law governing small, high-cost consumer loans and proposes a more emphatic ordinance that better reflects the policy judgment of many …

Credit And Human Welfare: Lessons From Microcredit In Developing Nations, Alan M. White

Washington and Lee Law Review

Deregulation of usury laws, in the United States and in developing nations, has permitted various forms of small loans to be made to the poor and the working class, sometimes at very high prices. In the case of credit, more is not always better. A human development approach to evaluating the welfare impacts of credit products for the poor asks these questions: does a credit product or program increase income or consumption, achieve savings through investment in capital goods, or smooth consumption and avert crises, all at a reasonable cost? Or does the credit on balance redistribute income away from …

Structured Notes Fiasco In The Courts: A Study Of Relevant Judgments In Taiwan Between 2009 And 2010, Christopher Chao-Hung Chen

Research Collection Yong Pung How School Of Law

The purpose of this article is to analyse relevant judicial decisions in Taiwan regarding structured notes sold to retail investors. Regarding pre-sale disputes, one issue was that investors failed to read contractual documents properly before signing contracts, so there was a question whether they could later claim a bank’s violation of its duty to explain. This article favours the view that an investor’s signature may exempt a bank’s duty, provided that investors are made aware of relevant warnings. In addition, for suitability assessment, relevant judgments show that customers were too easily classified as active investors based on a simple questionnaire. …

Product Suitability, Due Diligence And Management Responsibility: The New Regime Of Regulation 18b Of The Financial Advisers Regulations, Kee Yang Low

Research Collection Yong Pung How School Of Law

In response to the structured products crisis of 2008, many changes were made to the Singapore regulatory landscape over the past three years. More recently, in July 2011, the Financial Advisers Regulations (Cap 110, Rg 2, 2004 Rev Ed) was amended and an important new provision – reg 18B – was added. Regulation 18B requires a financial adviser and its senior management to conduct a comprehensive due diligence exercise before selling a new product. This comment considers reg 18B’s overall scheme, its interpretational difficulties, the demands of the diligence requirements, its interrelation with s 27 of the Financial Advisers Act …

Refund Fraud? Real-Time Solution!, Richard Thompson Ainsworth

Faculty Scholarship

When seven million dependents vanished from the tax rolls in 1986 the IRS recovered three billion dollars in revenue. A simple enforcement measure was applied. Taxpayers were required to list the social security number (SSN) for any dependent they claimed on their tax return. Costing next to nothing to implement, the benefits of this enforcement action continue to this day.

A similar enforcement measure could be employed against refund fraud. Even though the solution is not as simple as that adopted in 1986, it is similar. The effort is worth making. The revenue loss is much larger. As before, the …

Seeking True Financial Reform: Ending The Debt-Equity Distinction, Joseph B. Allen

William & Mary Business Law Review

This Note identifies the failure of Congress to address tax incentives for leverage as a principal cause of the recent financial crisis and a fundamental flaw of recent financial reform legislation. Specifically, the Internal Revenue Code provides substantially disparate tax treatment for debt and equity financing by allowing firms to deduct interest payments on indebtedness, but not providing an equivalent deduction for equity funding. This “debt-equity distinction” artificially reduces the cost of capital for debt financing relative to equity financing and encourages firms to over-employ leverage in their capital structure. This in turn increases financial distress costs and externalities to …

Insider Trading, Informed Trading, And Market Making: Liquidity Of Securities Markets In The Zero-Sum Game, Stanislav Dolgopolov

William & Mary Business Law Review

This Article reexamines the nexus of relationships among informed transactions, information asymmetry, and liquidity of securities markets in the context of public policy debates about insider trading and its regulation.The Article analyzes this nexus, with the emphasis on recent empirical studies and developments in the securities industry, from a variety of perspectives and considers the validity of the alleged link between insider trading—as opposed to other forms of informed trading—and market liquidity as a justification for the existence of regulation.

Hawala's Charm: What Banks Can Learn From Informal Funds Transfer Systems, Arya Hariharan

William & Mary Business Law Review

Hawala networks, or Informal Funds Transfer Systems (IFTS), are age-old means of conducting cross-border financial transactions. They thrive in regions where there is inadequate or nonexistent financial infrastructure due to poverty, daunting geography, or endemic conflict. Such regions are home to poor and underserved communities hungry for and in desperate need of financial services. IFTS provide access to these relatively ignored markets through the use of specific transactional mechanisms, payment modalities, and clearing and settlement options. With these innovative and flexible techniques, IFTS have successfully tapped into the exponentially growing global remittance market. Hawala networks are also used by NGOs …

A Critique Of Congressional Proposals To Permit Modification Of Home Mortgages In Chapter 13 Bankruptcy, Mark S. Scarberry

Pepperdine Law Review

Proposed amendments to the Bankruptcy Code permitting strip down of under secured home mortgages to the court-determined value of the homes and other modifications of home mortgages in Chapter 13 would substantially alter the risk characteristics of home mortgages, with likely substantial effects on future mortgage interest rates and future mortgage availability. Thus, the future societal cost of such a change in the law likely would be large. This article explains and supports that thesis, primarily on the ground that the proposed changes would leave mortgage holders with all of the future downside risk in the real property market while …

Confronting The Mortgage Meltdown: A Brief For The Federalization Of State Mortgage Foreclosure Law, Grant S. Nelson

Pepperdine Law Review

This Article argues for federal preemption of state procedures governing the foreclosure of mortgages and security interests in rents. While it also suggests that federal action limiting or prohibiting state anti-deficiency legislation may be appropriate, it leaves this issue to future consideration. Thus, its major focus is to advocate the congressional adoption of both Uniform Nonjudicial Foreclosure Act (UNFA) and Uniform Assignment of Rents Act (UARA) to make them available to all lenders nationwide. However, the federal government has a special stake in greater uniformity for its own account. This is especially the case as to mortgages on real estate. …

Preventing A Return Engagement: Eliminating The Mortgage Purchasers' Status As A Holder-In-Due-Course: Properly Aligning Incentives Among The Parties, Alex M. Johnson Jr.

Pepperdine Law Review

No abstract provided.

The Value(S) Of Foreclosure Law Reform, Melissa B. Jacoby

Pepperdine Law Review

This symposium contribution examines the starkly different values reflected in traditional legal literature on foreclosure law reform in the U.S. as compared to some more recent entries in the wake of the rise of subprime lending and high rates of residential mortgage default. I highlight economist Dean Baker’s “right to rent” proposal, which would give former homeowners leasehold rights at market rates, to illustrate a more progressive set of housing policy considerations and to challenge the assumption that ownership is essential or optimal to promoting various housing objectives.

Bringing Manufactured Housing Into The Real Estate Finance System, Ann M. Burkhart

Pepperdine Law Review

Eight percent of the United States population - more than 23 million people - live in manufactured homes (also called mobile homes). In some years, more than 30% of the new homes sold have been manufactured. Moreover, manufactured housing is the most important form of unsubsidized affordable housing in this country. Up to two-thirds of the new affordable homes built each year have been manufactured. However, the manufactured housing industry currently is struggling to survive a meltdown in its sales and finance markets. A tremendous obstacle to the industry’s recovery is that most manufactured homes are characterized as personal property, …

Reconsidering The Separation Of Banking And Commerce, Mehrsa Baradaran

Scholarly Works

This Article examines the long-held belief that banking and commerce need to be kept separate to ensure a stable banking system. Specifically, the Article criticizes the Bank Holding Company Act (“BHCA”), which prohibits nonbanking entities from owning banks. The recent banking collapse has caused and exacerbated several problematic trends in U.S. banking, especially the conglomeration of banking entities and the homogenization of assets. The inflexible and outdated provisions of the BHCA are a major cause of these trends. Since the enactment of the BHCA, the landscape of U.S. banking has changed dramatically, but the strict separation of banking and commerce …

Exile Without Process: The New York City Housing Authority's Unconstitutional Trespass Notice Program, Lauren J. Zimmerman

Cardozo Law Review

No abstract provided.

Transfer Pricing: Data Dumps And Comparability — Studies From The U.S., U.K., Canada, And Australia, Richard Thompson Ainsworth, Andrew B. Shact

Faculty Scholarship

Comparability is the heart of transfer pricing. The OECD, U.K., Canadian, Australian, and U.S. transfer pricing rules all echo one another on how critically important the comparability analysis is. Performing this analysis and proving comparability, however, is a demanding exercise.

What makes proving comparability so difficult is that the analysis is two sided. Both controlled and uncontrolled transactions must be thoroughly analyzed. Just as much effort needs to be applied to determine the functions, contract terms, risks and the economic conditions for the unrelated party comparables as is spent on analyzing the related parties (taxpayers).

But there is more to …

The Quest For Financial Regulatory Reform: Will A Uniform Fiduciary Standard Guide The Way?, Bonnie M. Treichel

The Journal of Business, Entrepreneurship & the Law

No abstract provided.

Rural Banking: Designing An Effective Legal Framework For Microfinance, Ian Davis

The Journal of Business, Entrepreneurship & the Law

Approximately 1.2 billion people live in extreme poverty, surviving on less than $1 per day. In emerging markets, commercial banks generally serve only ten to twenty percent of the population, excluding eighty to ninety percent of the population from the formal financial sector. Many in this "un-banked" population could benefit from access to financial services. In most developing countries, rural financial markets are based partially on a foundation of law and partially on a non-legal foundation of extra-legal (and sometimes illegal) activities. These legal and non-legal foundations directly influence the operation of rural financial institutions. This comment will discuss the …