Posted by
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.
Posted by
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!”
Posted by
The Supreme Court is welcome to have its opinions. But it is not welcome to have its own facts. Fact-finding is at the core of the judicial enterprise, and once the Court starts simply making things up, it loses its legitimacy.
The Court took a dangerous step in that direction today with its opinion granting the President's order for a stay of the District Court's injunction of the President's removal of a member of the National Labor Relations Board and of the Merit Systems Protection Board.
Posted by
Brady Williamson, a remarkable person, has died at the age of 79. Brady's engagement with the field of bankruptcy law is diverse and of long standing, from arguing before the United States Supreme Court to chairing the National Bankruptcy Review Commission, where I first met and worked for him as a staff attorney. More recently, Brady had a range of professional roles in big bankruptcies, such as those involving the Commonwealth of Puerto Rico, Purdue Pharma, and in cases that implicated air and water quality.
Brady also had tremendous expertise in foundational constitutional law matters and a commitment to democracy, the rule of law, and fair elections at home and around the world. He recently worked with students on such matters from coast to coast, after teaching with some regularity over the years at the University of Wisconsin-Madison. The challenges and joys of university teaching was a topic of what turned out to be our last telephone conversation.
Brady's impact during his lifetime was broad and deep; it will be enduring. Deepest condolences to his loved ones.
Posted by
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.
Posted by
It often doesn't end well when law professors play at being legal historians. The Purdue Pharma Supreme Court appeal is a case in point.
A group of prominent bankruptcy law professors filed an amicus brief in support of the appellee, Purdue Pharma. Their brief takes direct aim at my amicus brief in support of the appellant, the United States Trustee. Specifically, the good professors challenge my claim that nonconsensual nondebtor releases were entirely unknown in Anglo-American law until the Johns Manville case in 1986. They write:
One amicus has argued that releases would have been “incomprehensible to the Framers” and “were entirely unknown in American bankruptcy” prior to 1986. Adam J. Levitin Amicus Br. 4-5. This is a puzzling claim that misses the mark by at least 367 years.
Third-party releases have been known and comprehended in bankruptcy law as means to achieve global resolution since at least 1619, when the Lord Chancellor used his injunctive powers to release third-party sureties from the non-debtor claims in exchange for compelled contributions to a bankruptcy composition. See Tiffin v. Hart (1618-19), in John Ritchie, Reports of Cases Decided by Francis Bacon 161 (London 1932). Similar to the releases at issue in the present, the injunction in Tiffin was directed at dissenting creditors to facilitate a resolution that had been approved by the majority. Ibid.; see also Finch v. Hicks (1620), in Ritchie, Reports, at 166-167 (enjoining creditors from pursuing actions at common law against non-debtor sureties of an insolvent individual).
So, according to Purdue's amici, I'm wrong on the history because I failed to account for a 1619 case. But there's a HUGE problem with their argument…
Posted by
Nicholas Brown has written the latest piece in a fascinating Reuters series documenting how the effects of slavery remain with us today. Brown's article, entitled "American Dreams," follows two families over 150 years. One family is the descendants of enslavers, and the other is the descendants of those who they enslaved. It is a case study of how slavery, the Jim Crow era, and racial discrimination put the two families on very different economic paths. It brings home the lingering effects of these shameful parts of U.S. history in ways that aggregate statistics about wealth disparity often do not. Credit Slips readers will be particularly interested in how bankruptcy helped the white family (and not because I am quoted there). We say that our blog's mission is to discuss credit, finance, and bankruptcy issues, and if you are here, you likely have those interests as well. I strongly recommend Brown's article.
Posted by
Anna Gelpern, Stephen Lubben and I have an article in The American Prospect entitled The Debt Limit Is Unconstitutional—but Not for the Reason You Think. Various commentators—and members of Congress—have suggested that the President “invoke the 14th Amendment” to declare the debt limit unconstitutional. They're right to argue that the debt limit is unconstitutional, but the constitutional problem isn't the 14th Amendment. Instead, it's Article I of the Constitution, namely Congress's power to enter into contracts. The tl;dr version is that Congress has a power to make binding commitments for the United States and the President is constitutionally obligated to perform those commitments. If the Treasury lacks the funds, then the President must borrow. No specific authorization is needed. Instead, it is implicit every time Congress appropriates funds to perform a binding commitment.
Relocating the constitutional problem with the debt limit isn't merely an academic exercise. It has two implications.
First, it changes the nature of the legal debate and puts the administration on much, much firmer legal footing. The 14th Amendment argument is weak because it simply is not a prohibition on defaulting. It's a prohibition on repudiation, and a default is not a repudiation. An Article I argument reframes the issue as being about the validity of the debt ceiling, rather than the ability to default. In other words, it goes to question of whether the House GOP has holdup power, rather than whether the administration is under some cryptic constitutional limitation that it must affirmatively "invoke."
Second, it means that the President not only can, but must disregard the debt limit in order to fulfill his own constitutional duty to "Take Care" that the laws are faithfully executed. In other words, breaching the debt limit is not merely an option, but a legal requirement if Treasury is short of funds. Once Congress has appropriated funds, the President must carry out the authorized spending.
Posted by
I have a new paper up on SSRN. It's called The New Usury: The Ability-to-Repay Revolution in Consumer Finance. It's a paper that's been percolating a while–some folks might remember seeing me present it (virtually) at the 2020 Consumer Law Scholars Conference, right as the pandemic was breaking out. Here's the abstract:
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 not to make 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 collectively terms these doctrinal developments 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. While 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 greatest functional consumer protection and business certainty.
Posted by
I have posted a short draft article about mass tort bankruptcy. If you would like to send me comments on the draft, that would be lovely, but please keep two caveats in mind. First, I must submit the revisions by February 9. Second, the article must not exceed 10,000 words. For every addition, some other thing must be subtracted. The required brevity means the article does not and cannot canvas the large volume of scholarship about the topic, let alone the mini-explosion in recent years.
For the Credit Slips audience I would like to particularly highlight Part I of the article, which contextualizes debates about current mass tort bankruptcy by reviewing two sets of sources from the 1990s and early 2000s. The first is the 1997 final report of the National Bankruptcy Review Commission. The second is scholarship, including two Federal Judicial Center books published in 2000 and 2005, of Professor Elizabeth Gibson, whose expertise lies at the intersection of civil procedure, federal courts, and bankruptcy. If you are working on or talking a lot about mass bankruptcy but have not reviewed these materials in a while (or ever), then I hope you will be incentivized to check those out for yourselves.