The National Indian Gaming Commission (“NIGC”) issued guidance this week for tribes and tribal lenders who submit loan documents to the NIGC for a so-called “declination letter.” Bulletin No. 2021-4, “Submission of Loan Documents and Financing Documents for Review,” summarizes criteria the agency has developed in the last decade for determining whether loan documents constitute “management” contracts, which under federal law must be approved by the NIGC Chairman or they are void. The Bulletin states that while the Office of General Counsel will continue to review loan documents and issue opinions as to whether the documents provide the lender with the ability to manage the gaming operation, contracts that “adhere to the principles and analyses” outlined in the Bulletin would likely receive an opinion letter that the contract does not need to be submitted for approval as a management contract.[1]
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Seven Commandments for the Financially Distressed Company
Most restructuring professionals will tell you that there is no “typical” restructuring. That is absolutely true. Every financially distressed business is different and the character and direction of its restructuring will be highly dependent upon, among others, its capital structure, its liquidity profile, and the level of support it can build for its reorganization among key stakeholder bodies. Nevertheless, there are some important similarities in the way that any company should initially address a distressed situation. We discuss below a variety of key tasks, or “commandments,” that we recommend any company should undertake as soon as it anticipates possible financial distress.
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LSTA Publishes Term SOFR Concept Document
On August 25, the LSTA published its Term SOFR Concept Document (the “Term SOFR Concept Document”)[1]—the latest addition to its suite of SOFR-based Concept Documents.
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Debt-Collection Reforms Draw Congressional Focus Post-COVID
In April 2021, House Financial Services Committee Chair Maxine Waters (D-Calif.) introduced H.R. 2547, the “Comprehensive Debt Collection Improvement Act.” This article examines the bill’s proposed reforms, takes a closer…
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ARRC Formally Recommends Term SOFR
As expected, on July 28, 2021, the Alternative Reference Rates Committee (ARRC) formally recommended the CME’s SOFR Term Rate. The SOFR Term Rate is known in advance of the related interest period and provides an indicative, forward-looking measurement of SOFR based on market expectations implied from leading derivatives markets. In this respect, the SOFR Term Rate functions in a manner similar to today’s LIBOR rates. In contrast, the Daily Simple SOFR or Daily Compounded SOFR used for interest periods beyond overnight can only be determined in arrears. The SOFR Term Rate thus facilitates in a significant way the transition away from the current LIBOR markets.
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Latest Milestone in LIBOR Replacement Passed
This past Monday, July 26, marked passage of the most recent major milestone in the replacement of LIBOR as the benchmark USD interest rate. Following the recommendation of the CFTC’s Market Risk Advisory Committee (MRAC) Interest Rate Benchmark Reform Subcommittee, on July 26, 2021 interdealer brokers replaced trading in LIBOR linear swaps with SOFR linear swaps. This switch is a precursor to the recommendation of SOFR term rates. The switch does not apply to trades between dealers and their non-dealer customers.
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Federal Agencies Request Comments on Risk Management Guidance for Third-Party Relationships
On July 13, the Federal Reserve, FDIC, and OCC proposed risk management guidance to help banking organizations manage risks related to third-party relationships, including relationships with vendors, FinTech companies, affiliates, and the banking organizations’ holding companies. The proposal is based on existing but disparate third-party risk management guidance from the three prudential regulators, and is intended to promote consistency across the banking agencies. If finalized, it will replace the guidance that each agency has released independently.
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CFPB Takes Action Against FinTech Company for Originating Unauthorized Loans
On July 12, the CFPB issued a consent order against a FinTech company for facilitating point of sale financing activities without authorization from consumers. The consent order requires the company to pay up to approximately $9 million in redress to impacted consumers and a $2.5 million civil money penalty.
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FHFA Releases Policy Statement On Fair Lending
On July 1, the Federal Housing Finance Agency (FHFA) released a Policy Statement on its commitment to comprehensive fair lending oversight of Fannie Mae, Freddie Mac, and the Federal Home Loan Banks (collectively, “regulated entities”). The FHFA addressed its position on: (i) monitoring and information gathering; (ii) supervisory examinations; and (iii) administrative enforcement related to the Equal Credit Opportunity Act, the Fair Housing Act, and the Federal Housing Enterprises Financial Safety and Soundness Act. The FHFA added that the statement operates as a “foundation for future interpretations by the agency and its regulated entities.” Comments on the policy statement are due 60 days after publication in the Federal Register.
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CFPB Blogs About Buy Now Pay Later
On July 6, the CFPB posted a blog titled, “Should you buy now and pay later?” describing how buy now pay later (BNPL) deferred payment options work, and the benefits and risks that come with BNPL. Generally, if a consumer selects the BNPL option at an online checkout, “the purchase is . . . split into a payment schedule – typically four fixed payments made bi-weekly or monthly until the balance is paid in full.” The CFPB points out that transaction approval takes minutes, with no interest, finance charges, or hard credit inquiries.
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