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In response to the COVID-19 pandemic, many lenders are being flexible when it comes to consumers’ making payments. The Consumer Financial Protection Bureau (“CFPB”) added some structure to those efforts by releasing a policy statement that outlines the responsibility of credit-reporting companies and furnishers during the COVID-19 pandemic.

The CFPB seeks to encourage lenders to continue to work with consumers affected by COVID-19 with various forms of payment flexibility, including allowing consumers to defer or skip payments, whether as required by the CARES Act or voluntarily. And the CFPB’s statement recognizes that many furnishers and credit reporting agencies are also experiencing hardships due to the pandemic, including staffing and resource constraints. Continue Reading Credit Reporting During the COVID-19 Pandemic: What You Need to Know

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Unprecedented times call for unprecedented solutions. This has never been more true than now as our world struggles through impactful changes to our lives, both at work and at play, as a direct result of the COVID-19 pandemic. As social distancing, stay-at-home orders, and sheltering-in-place have forced the closing of shopping centers and retail stores, bars and restaurants, movie theaters, and other venues, “business as usual” has largely, but hopefully only temporarily, ground to a halt.

While these shutdowns have not resulted in a wave of new chapter 11 filings (yet), as many lenders and their borrowers patiently take advantage of the relief that the CARES Act and similar legislation has implemented, these unforeseen closures have had predictable yet damaging effects on the ability of pending pre-COVID-19 retail and restaurant debtors already in bankruptcy to reorganize, sell, or liquidate through the chapter 11 process. Store closures have naturally prevented debtors from conducting liquidation sales, and market uncertainty and volatility has complicated, and even paralyzed, preformed restructuring plans. Continue Reading Bankruptcy on Ice – Retail Debtors Taking Steps to Freeze Chapter 11 Bankruptcy Proceedings Based on COVID-19 Issues

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On April 1, 2020, Ohio’s Governor issued Executive Order 2020-08D, a copy of which is linked here. Issued pursuant to the Governor’s implied police powers to address the economic impact of COVID-19, the Executive Order requests that commercial landlords and their lenders (including their servicers) take certain steps to provide relief to small business commercial tenants and commercial real estate borrowers.

SUMMARY OF EXECUTIVE ORDER 2020-08D

The Executive Order is framed as a “request” that commercial landlords and lenders take certain actions–not an order commanding that they do so. Further, the Executive Order does not suspend any federal or state law. Continue Reading Ohio Issues Executive Order Requesting Relief for Small Business Tenants and Commercial Real Estate Borrowers

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Buried in the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, which is expected to be passed by Congress and signed by the President today, are revisions to the Bankruptcy Code that are relevant to creditors dealing with distressed debtors. Most notably, the bill will impact the recently-enacted Small Business Reorganization Act of 2019 (the “SBRA”) by increasing the potential pool of qualified debtors.

The SBRA, which just went into effect in mid-February, adds to the Bankruptcy Code a subchapter V, which allows small business owners certain advantages to reorganize their debt. The current debt limit for eligibility for cases under the new subchapter V is $2,725,625. The CARES Act will increase the eligibility threshold to $7.5 million in total debt, but only for one year, at which time it will revert back to the present limit. Continue Reading How The CARES Act Will Impact Small Business Bankruptcies

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The business, economic and financial fallout from the COVID-19 pandemic cannot be understated. While our families, friends, and clients are adjusting to these difficult, uncertain and stressful times – protecting our families, friends and communities from the spread of the virus, working from home, avoiding public spaces, and social distancing – businesses large and small are suffering from shutdowns, closures, breaks in supply chains, and the loss of business and revenue.

At a time when distressed situations will undoubtedly increase, it is logical, and reassuring, that Bankruptcy Courts will remain open for business in order to provide relief for troubled companies. The procedures may differ as many Bankruptcy Courts have implemented changes in order to address concerns raised by the potential spread of the virus. In this vital way, the Courts will continue to function uninterrupted. Continue Reading Bankruptcy Courts Remain “Open For Business”

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We regularly work with financial institutions to navigate the challenges of implementing, maintaining, and using security procedures for commercial customers’ use of treasury management services. Security procedures are an integral part of the relationship between the financial institution and its commercial customers. Financial institutions offer (and frequently require) commercial customers to use the institution’s security procedures, which are agreed to be commercially reasonable, to originate payment orders (e.g., wire transfers and ACH Entries) from the customers’ accounts.

Issues often arise when one or more of a customer’s authorized users is not able to use his standard security procedures to access a financial institution’s physical or electronic payments systems to either originate or confirm a payment order. Due to the COVID-19 outbreak and concern over the implementation of preventative measures, including more companies asking or requiring employees to work remotely, financial institutions should consider which customers may need to update, amend or supplement the ways that its customers can make payments, whether this be through adding authorized users or implementing alternative methods to send payment orders. Continue Reading Considerations for Financial Institutions Regarding Security Procedures for a Remote Workforce

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In response to the recent COVID-19 outbreak, on March 6, 2020, the Federal Financial Institutions Examination Council (FFIEC) issued an Interagency Statement on Pandemic Planning on behalf of the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, National Credit Union Administration, Office of the Comptroller of the Currency, Consumer Financial Protection Bureau and the State Liaison Committee.

The Statement identifies actions that financial institutions should take to minimize the potential adverse effects of a pandemic and provides specific items that should be addressed in a financial institution’s business continuity plan (BCP).  Due to the wide variety of possible ramifications from a pandemic, BCPs should be updated to provide for a “preventative program, a documented strategy scaled to the stages of pandemic outbreak, a comprehensive framework to ensure the continuance of critical operations, a testing program, and an oversight program to ensure that the plan is reviewed and updated.” Continue Reading Federal Financial Institutions Examination Council Issues Statement on Pandemic Planning

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Like most companies, you are preparing for how COVID-19 might affect your operations. Equally as important:  the conversations you should be having with your borrowers that range across multiple industries and sectors.  How is COVID-19 likely to impact their business? Are they proactively analyzing and implementing protocols to reduce costs, and better ensure continuity of supply?

These conversations, if approached correctly, can provide an opportunity to learn more about your customer’s business, while simultaneously pinpointing concerns that might affect their livelihood. And this crisis presents an opportunity to provide guidance and support to your customers, beyond the typical lender/borrower relationship. Continue Reading Bankers: Are you having the right conversations with your customers around COVID-19?

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You are the local banker. An elderly husband and wife have been long-standing customers of your bank. They have a modest estate and have set up a living trust so they can avoid the costs of probate. If they both sign as co-trustees, can they add their daughter, who lives in another state, as a co-signer to the living trust account?

Another customer was named as the trustee for his parents’ irrevocable trust. He has a full-time job, but his wife has offered to help with the administrative tasks. Can he add his wife as a convenience signer to the trust account?   Continue Reading It’s the Trustee’s Burden: Can It Be Delegated?

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On Monday, November 18, 2019, the Office of the Comptroller of Currency (“OCC”) announced that it is seeking public comment on a proposed rule to clarify the “valid when made” doctrine in the wake of a decision from the United States Court of Appeals for the Second Circuit, Madden v. Midland Funding, that undermined and largely rejected it. The Notice of Proposed Rulemaking (“NPRM”) can be found here. This rulemaking could restore certainty regarding the legality and enforceability of loans that comprise a significant component of lending activity.

The “valid when made” doctrine is a longstanding rule that a loan’s interest rate remains legal and enforceable as long as it was legal when the loan was made, regardless of whether a third party ultimately ends up holding the loan. In Madden, the Second Circuit undermined, and largely rejected, the doctrine and thus called into question the legality and enforceability of a large swath of the consumer debt. The loans challenged in Madden were originated by banks and subsequently sold, assigned, or otherwise transferred to non-bank entities.  Continue Reading OCC Seeks Comment as Part of New Rulemaking to Clarify “Valid When Made” Doctrine