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If Mark Zuckerberg is to be believed, the Metaverse is the next step in our digital evolution, a  virtual reality space where users can interact with a computer-generated environment and socialize among user-created avatars.

And it’s already here.

The Metaverse is a new virtual frontier that combines many aspects of the virtual world we already know: social media, Zoom, online gaming, augmented reality, virtual reality, blockchain, and cryptocurrencies. The Metaverse allows its users to interact with each other in ways that mimics real-world interaction. Users can virtually surf, race, go to a bar, or engage in combat – the possibilities are endless.

Now, you can even buy land in this virtual frontier.

Just as in the real world, you can finance your virtual property with a virtual mortgage. In this virtual world, can virtual mortgages be foreclosed and how can loans be enforced? This new paradigm implicates both loan enforcement and bankruptcy.

Let us break down a few of the basics.…

Continue Reading Mining the Metaverse: Prospecting the Virtual Real Estate Boom and Implications For Lenders

The Fourth Circuit recently found that the imposition of convenience fees can run afoul of consumer protection statutes—including the Fair Debt Collection Practices Act.

Convenience fees are commonly charged by financial institutions in exchange for allowing a consumer to easily make payments online or via telephone as opposed to making payments by mail.

The case is Alexander v. Carrington Mortgage Services, LLC, and the three-judge panel for the Fourth Circuit unanimously held that a mortgage servicer violated Maryland’s consumer protection statute when it charged consumers a $5 fee to make mortgage payments online or by phone.…

Continue Reading Convenience Fees Face Increased Scrutiny After Fourth Circuit Holds That Online Payments May Violate Consumer Protection Statutes

Debt Buyers Get Some FDCPA Relief from Supreme Court: Case Offers Insights But Leaves Some Questions Unanswered

In May 2019, the Consumer Financial Protection Bureau (CFPB) proposed new rules to amend and expand Regulation F, to further regulate the debt collection industry and those connected to it. It was meant to supplement the federal Fair Debt Collection Practices Act (FDCPA).

These rules are now final and scheduled to go into effect on November 30, 2021.…

Continue Reading No Time to Waste: New Federal Rules Regulating Debt Collection Practices (Regulation F) Take Effect November 30, 2021

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2020 was a bad year… okay, it was a really, really bad year. CMBS borrowers, in particular, found themselves in default and often-times upside down on their CMBS loans. While 2021 has started to show signs of life, even showing a gentle decline in special servicing and delinquency rates, a closer look reveals that certain sectors remain in distress.

As forbearance periods expire, state moratoriums on commercial evictions and foreclosures end, and businesses exhaust federal PPP and other stimulus aid, more foreclosures and other loan enforcement solutions are inevitable. (The status of moratoriums on commercial foreclosures/eviction are as follows: Illinois—expired; Michigan—expired; Texas—expired; New York—expired May 1, 2021; California—county-specific; Ohio—expired; and Indiana—expired.) While the world remains hopeful for a more “normal” 2021, the impacts on CMBS borrowers will likely continue in a state of flux for some time.…

Continue Reading Workouts Never Go Out of Style: What To Expect in the CMBS Market During the Second Half of 2021, and Beyond

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In a much anticipated decision, the U.S. Supreme Court yesterday provided clarity on the definition of an automatic telephone dialing system (“ATDS”) under the Telephone Consumer Protection Act (“TCPA”) of 1991, 47 U.S.C. § 227. Those in the Financial Services industry have been eagerly awaiting the guidance that the Court’s ruling would provide. And provide guidance it did.

In a rare unanimous opinion, the Court rejected a broad definition of an ATDS previously applied by the Second, Sixth and Ninth Circuits in favor of a much more narrow one. Indeed, the Court found that, in order to qualify as an ATDS under the TCPA, a device must “have the capacity either to store a telephone number using a random or sequential generator or to produce a telephone number using a random or sequential number generator.” Facebook, Inc. v. Duguid, No. 19-511, April 1, 2021, slip op. at 1.
Continue Reading Phonelines Are Buzzing: The Supreme Court Has Finally Provided Clarity Regarding the TCPA’s Definition of Automatic Telephone Dialing Systems

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On December 27, 2020, the Consolidated Appropriation Act of 2021 (the “CAA“) was enacted to provide additional coronavirus stimulus relief for businesses challenged by the ongoing Covid-19 Pandemic. In doing so, the CAA includes several targeted, but temporary, changes to the Bankruptcy Code (the “Code”) which will have implications for lenders, landlords, vendors and other creditors. Absent further legislation, these changes will sunset on December 27, 2022, but will continue thereafter to affect cases filed prior to that date.

  1. PPP Loans Still Aren’t For Everyone: CAA Attempts to Clarify Debtors’ Eligibility

The CARES Act, passed at the outset of the Covid-19 pandemic, did not make clear whether bankrupt debtors were eligible for the Paycheck Protection Program (“PPP“) loans it provided. The Small Business Administration (“SBA”), the agency charged with implementing the PPP loan program, previously promulgated regulations disqualifying all bankrupt debtors from the program, and it sought to enforce that regulation in the Bankruptcy Courts. Litigation ensued over debtor eligibility for PPP loans, but no clear consensus emerged. …
Continue Reading Bankruptcy’s New Normal – The Consolidated Appropriations Act Distances from the Bankruptcy Code to Provide Further Covid Relief

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Cannabis companies nationwide are facing yet another statutory obstacle that can have serious (and potential ruinous) consequences for the emerging industry if not appropriately addressed—the Telephone Consumer Protection Act (“TCPA”). There is a recent uptick in class-action lawsuits filed against cannabis companies across the country premised on alleged violations of the TCPA including lawsuits in Michigan and California. These complaints allege cannabis companies sent unsolicited marketing text messages or placed automated phone calls to individuals without their consent. Cannabis dispensaries and other cannabis-related businesses should add TCPA compliance protocols to their checklist of regulatory requirements to be satisfied in this quickly emerging industry.

The TCPA

Enacted in 1991, the TCPA heavily regulates the ability to send phone, text, or facsimile messages through automatic telephone dialing systems. Non-compliance with the statute can be costly, as companies found to have violated the TCPA can be liable for $500 per call or text sent in violation of the Act, and up to $1,500 for willful or knowing violations. Damages are also not capped under the TCPA, so even a small number of texts or calls sent to a large number of recipients can lead to hefty damage awards. The ability to recover significant damages results in most TCPA claims being brought as class-actions. As a result, it is imperative that cannabis businesses that communicate with customers via text or by phone understand the rules governing the TCPA to avoid or at least minimize their liability exposure. …
Continue Reading Why Cannabis Companies Need to Care About the TCPA

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In our latest installment of our series “Bankruptcy On Ice”, we tackle temporary suspension of bankruptcy proceedings in response to the closure of “non-essential businesses” and other critical protective measures being imposed to fight the spread of COVID-19. Last week, key decisions in the Pier 1 and Modell’s Sporting Goods bankruptcy cases extended temporary freezes and limited suspensions of proceedings as most states slowly begin to reopen.

Before we get to that, it is important to note that despite the entry of suspension orders freezing certain proceedings in a number of retail and restaurant bankruptcy cases, bankruptcy courts remain open for business across the country. They have not shut down, deadlines have not been extended ad infinitum, and interested parties must stay alert that all critical deadlines are met. And even in these bankruptcy cases now on ice, the courts have emphasized that their doors remain open to parties seeking relief due to exigent circumstances.
Continue Reading Bankruptcy On Ice III – The Freeze Extends Temporary Suspensions of Chapter 11 Cases

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The Paycheck Protection Program (PPP) is one of two business loan programs created under the Coronavirus Aid, Relief and Economic Security (CARES) Act to assist companies by extending potentially forgivable credit to small business employers. The PPP is designed to help cover employee-related expenses and help employers avoid layoffs. The prospect of forgivable debt, coupled with relatively favorable terms, have put PPP loans in high demand and many businesses, including some which had already sought chapter 11 bankruptcy protection, have sought PPP loans.

The CARES Act contains no bar to the granting of PPP loans to bankrupt companies. That said, section 7(a)(6) of the Small Business Act requires qualifying small business loans to be “of such sound value or so secured as reasonably to ensure repayment.” As a result, the U.S. Small Business Administration (SBA) took the initial position that a PPP loan must meet the same requirements, and a loan cannot meet this standard if the borrower is a debtor in a bankruptcy case.  …
Continue Reading Are Debtors Eligible to Receive PPP Loans? Bankrupt Companies and the SBA Wage War Over Critical CARES Act Program Eligibility

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This article was originally published on Law360. 

The COVID-19 pandemic has caused, and continues to cause, massive humanitarian and economic upheaval with no clear end in sight. Borrowers are already scrambling to increase liquidity from their banks. Some will continue to operate openly, honestly, and in the best interests of the company and its stakeholders. Others will not.

Notwithstanding that lenders and governments are attempting to mitigate the crisis’s effects,[1] loan defaults are anticipated to be increasing, and accordingly, so will loan enforcement lawsuits.

In lawsuits stemming from the COVID-19 crisis, where the default was caused by more than just a lack of money—fraud, mismanagement, neglect, waste, misconduct—litigants, and the courts, may increasingly turn to equity receivers to help protect collateral and manage struggling businesses.
Continue Reading Illinois Courts May Increasingly Embrace Equity Receiverships