Category: Credit Policy & Regulation

  • It’s All Debt to Me

    Posted by

    Melissa Jacoby

    It’s All Debt to Me, by Professor Kate Elengold, is a newly available article sure to be of interest to many Credit Slips readers. Check out the abstract and read the paper by clicking on this link, but in the meantime, an observation from the article’s conclusion, coupled with the article’s graphic of a set of triangles, frames what to expect:

    This Article has identified, explained, and explored the way that varied laws and doctrine come together to create the “law of individual debt.” In so doing, it has offered both scaffolding and mapping to understand, holistically, how the law treats debtors and creditors across two axes: public/private and voluntary/involuntary. It asks and answers the question: why are four-similarly situated debtors, each carrying $15,000 of debt that they cannot repay, treated so differently under the law?

  • Joe Smith’s Life in Banking

    Posted by

    Melissa Jacoby

    Joe Smith has been (among other things!) the general counsel of a regional bank, Commissioner of Banks for North Carolina; and the official independent settlement monitor of the National Mortgage Settlement.  And Joe has some reflections on these experiences that I recommend reading. One easy way to get started is with his 2026 essay published by The North Carolina Banking Institute.

  • Professor A. Mechele Dickerson on The Daily Show

    Posted by

    Melissa Jacoby

    Screenshot of Dickerson

    Gather around and check out University of Texas Professor Dickerson’s interview on The Daily Show, a substantive conversation with Jon Stewart about her new book, The Middle-Class New Deal.  Stewart decrees the book “fabulous!”

  • Sharing Risk

    Posted by

    Bob Lawless

    Credit Slips readers will want to check out a brand-new book from Pat McCoy, the Liberty Mutual Insurance Professor at Boston College Law School (and a past guest blogger here). Sharing Risk offers both a diagnosis and prescription for the financial precarity of American households. Because over half of Americans do not make enough to meet basic needs, they often turn to borrowing to make ends meet. McCoy proposes expended risk-sharing arrangements about income security, housing, health insurance, and college education. McCoy's proposals seek to enable American families to flourish and secured their economic well-being.

    The book is available directly from the University of California Press. McCoy also passed along that she is now blogging at a new substack. 

  • When Can the US President Forgive a Sovereign Debt?

    Posted by

    Mitu Gulati

    Let us assume that the US has made a loan to a foreign sovereign for some combination of political and benevolent reasons. For example, to support some friendly nation after they get hit by a severe hurricane or to help out a military ally with arms after they have been suffered an unprovoked attack by another nation.

    Congress has the "power of the purse", so loans have to be approved by it. But does Congress also retain the power, at some later date, to decide on whether some portion of this debt can be forgiven? Or can the Executive Branch make the decision here? At first cut, under the "power of the purse" rubric, my thought was that surely Congressional approval would have to be obtained. But a fascinating new paper by David Del Terzo, appropriately titled "When Can the President Issue Foreign Debt Relief"  suggests that the answer is more complicated.

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  • The New Usury: The Ability-to-Repay Revolution in Consumer Finance

    Posted by

    Adam Levitin

    I have a new article out in the George Washington Law Review, entitled The New Usury: The Ability-to-Repay Revolution in Consumer Finance. The abstract is below:

    American consumer credit regulation is in the midst of a doctrinal revolution. Usury laws, for centuries the mainstay of consumer credit regulation, have been repealed, preempted, or otherwise undermined. At the same time, changes in the structure of the consumer credit marketplace have weakened the traditional alignment of lender and borrower interests. As a result, lenders cannot be relied upon to avoid making excessively risky loans out of their own self-interest.

    Two new doctrinal approaches have emerged piecemeal to fill the regulatory gap created by the erosion of usury laws and lenders’ self-interested restraint: a revived unconscionability doctrine and ability-to-repay requirements. Some courts have held loan contracts unconscionable based on excessive price terms, even if the loan does not violate the applicable usury law. Separately, for many types of credit products, lenders are now required to evaluate the borrower’s repayment capacity and to lend only within such capacity. The nature of these ability-to-repay requirements varies considerably, however, by product and jurisdiction. This Article terms these doctrinal developments collectively as the “New Usury.”

    The New Usury represents a shift from traditional usury law’s bright-line rules to fuzzier standards like unconscionability and ability-to-repay. Although there are benefits to this approach, it has developed in a fragmented and haphazard manner. Drawing on the lessons from the New Usury, this Article calls for a more comprehensive and coherent approach to consumer credit price regulation through a federal ability-to-repay requirement for all consumer credit products coupled with product-specific regulatory safe harbors, a combination that offers the best balance of functional consumer protection and business certainty.

     

  • The Consumer Debt Default Judgments Act

    Posted by

    Melissa Jacoby

    MapConsumer debt has been a difficult topic for uniform state law movements, but here's one more attempt recently approved by the Uniform Law Commission and the American Bar Association, and introduced in Colorado last week.  You can access the materials here. Meanwhile, here is ULC's summary:

    Numerous studies report that default judgments are entered in more than half of all debt collection actions. The purpose of this Act is to provide consumer debtors and courts with the information necessary to evaluate debt collection actions. The Act provides consumer debtors with access to information needed to understand claims being asserted against them and identify available defenses; advises consumers of the adverse effects of failing to raise defenses or seek the voluntary settlement of claims; and makes consumers aware of assistance that may be available from legal aid organizations. The Act also seeks to provide a uniform framework in which courts can fairly, efficiently, and promptly evaluate the merits of requests for default judgments while balancing the interests of all parties and the courts.

    Would welcome Credit Slips posters and readers chiming in on this act in the comments, especially if you were involved in the drafting process and/or if will be weighing in on this act with their state legislatures.

    And for previous recent coverage of other uniform acts being urged on state legislatures, see here and here.

  • Catching Up on the Digital Asset Amendments to the Uniform Commercial Code

    Posted by

    Melissa Jacoby

    It has been a while since I last posted resources on amendments to the Uniform Commercial Code that would govern transactions in digital assets, including security interests. The take-up of these amendments, including a new Article 12, has not been as swift and sweeping as some might have hoped. To put it mildly, some in the cryptocurrency world have lobbied hard against enactment based on what seems to be a misinterpretation (to help set things straight, I recommend reading and listening to professors Juliet Moringiello and Carla Reyes). Currently, 11 states have enacted the amendments. Article 12

     

     

     

     

     

     

     

     

     

    Thorny choice of law issues flowing from non-uniform enactment inevitably will land in bankruptcy courthouses, as so many legal quandaries do. For example, choice of law will affect whether or not a lender has a perfected security interest in the debtor's interest in cryptocurrency, an issue that can arise in a wide variety of bankruptcies. Here is a collection of Uniform Law Commission resources in case you need them.

  • New Resource on Uniform Commercial Code Reform for Digital Assets including Crytocurrency

    Posted by

    Melissa Jacoby

    Earlier this fall I linked to a variety of resources, including webinars, on amendments to the Uniform Commercial Code to account for various types of digital assets. The scope includes but is not limited to commercial transactions involving cryptocurrency.

    To add to these resources, a version of the amendments that includes official comments is now available.  

    Because there will not be a uniform effective date, and some states have gotten an early start by implementing prior drafts of the amendments (see prior post), these could swiftly become relevant to transactions and disputes, including those that land in bankruptcy court. 

  • New Book Alert: Delinquent

    Posted by

    Melissa Jacoby

    Cover ImageThe University of California Press has published Delinquent: Inside America's Debt Machine by Elena Botella. 

    Botella used to be "a Senior Business Manager at Capital One, where she ran the company’s Secured Card credit card and taught credit risk management. Her writing has appeared in The New Republic, Slate, American Banker, and The Nation."

    Here's the description from the publisher between the dotted lines below: 

    ——————

    A consumer credit industry insider-turned-outsider explains how banks lure Americans deep into debt, and how to break the cycle.

    Delinquent takes readers on a journey from Capital One’s headquarters to street corners in Detroit, kitchen tables in Sacramento, and other places where debt affects people's everyday lives. Uncovering the true costs of consumer credit to American families in addition to the benefits, investigative journalist Elena Botella—formerly an industry insider who helped set credit policy at Capital One—reveals the underhanded and often predatory ways that banks induce American borrowers into debt they can’t pay back.

    Combining Botella’s insights from the banking industry, quantitative data, and research findings as well as personal stories from interviews with indebted families around the country, Delinquent provides a relatable and humane entry into understanding debt. Botella exposes the ways that bank marketing, product design, and customer management strategies exploit our common weaknesses and fantasies in how we think about money, and she also demonstrates why competition between banks has failed to make life better for Americans in debt. Delinquent asks: How can we make credit available to those who need it, responsibly and without causing harm? Looking to the future, Botella presents a thorough and incisive plan for reckoning with and reforming the industry.

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    Looking forward to reading this book! Also expecting to see more from the University of California Press of direct interest to Credit Slips readers in the years ahead.