Feb­ru­ary 2023 Con­sumer Law Update

Here are some sto­ries we found inter­est­ing last month.

Updated Ari­zona Bank­ruptcy Exemptions

Decem­ber 5, 2022, Ari­zona increased the state’s home­stead exemp­tion from $250,000 to $400,000, the exemp­tion in bank accounts from $300 to $5,000, both the vehi­cle and house­hold goods exemp­tions from $6,000 to $15,000, and the gar­nish­ment pro­tec­tion to 90% of dis­pos­able wages or 60 times the high­est min­i­mum wage in the state, whichever is greater.

Also, the home­stead amount will be indexed for infla­tion each year, start­ing Jan­u­ary 1, 2024.

Con­sumers bor­row­ing at a record rate (Jan­u­ary 9, 2023)

• Out­stand­ing con­sumer credit — which includes mostly credit cards, auto loans and stu­dent loans — grew at a sea­son­ally adjusted annual rate of 7.1%, accord­ing to the report. Revolv­ing credit, which includes mostly credit cards, grew by 16.9%.

  It’s the largest jump in revolv­ing credit seen in three months and the fifth-​largest monthly increase in Fed record-​keeping that goes back nearly 55 years.

• Source: CNN

New Stu­dent Loan Income-​Driven Repay­ment Pro­posal — (Jan­u­ary 10, 2023)

• Pres­i­dent Biden has released details about the Depart­ment of Edu­ca­tion’s new rules regard­ing Income-​Driven Repay­ment Plans 
  • The new REPAYE plan will be more afford­able than the four exist­ing income-​based plans (PAYE, IBR, IDR, 
    1. New pro­posed REPAYE rates(5% of dis­cre­tionary income for under­grad­u­ate loans, 10% for grad­u­ate loans)
    2. Applies to under­grad­u­ates and graduates
    3. Small loans get shorter time periods
       • loans less than $12,000 can be paid with 10 years of pay­ments not 20
    4. Does not apply to Par­ent PLUS loans 
       • PLUS loans only qual­ify for income-​contingent repayment 
         • requires up to 20% of dis­pos­able income for 25 years.
  • What is “dis­cre­tionary income”?
    • Income After deduct­ing expenses 
      • rent
      • food
      • basic needs
    • New REPAYE pro­gram defines “dis­cre­tionary income” as Income in excess of 225% of the poverty line 
      • 225% of the fed­eral poverty guideline 
        • $20,400 (indi­vid­ual) = $30,000
        • $41,600 (for a fam­ily of four) = $62,400
      • If you make less than this, your pay­ments are $0
      • If you’re mak­ing $15/​hour, you won’t need to make any payments. 
  • Inter­est will not grow if min­i­mum pay­ments are made REPAYE Plan
    • Inter­est will not grow as long as required monthly pay­ments  are made every month 
      • even if required pay­ment = $0
• Roughly 8.5 mil­lion fed­eral stu­dent loan bor­row­ers are enrolled in exist­ing plans, 
  • rep­re­sent­ing about a third of all bor­row­ers in repayment.
• Not clear when plan will be up and running.
• Bor­row­ers who rank among the bot­tom 30 per­cent of earn­ers (or fam­i­lies with earn­ings less than $29,000 on aver­age) would qual­ify for pay­ments that are 83 per­cent lower per dol­lar bor­rowed over their life­times, on aver­age, accord­ing to the Edu­ca­tion Depart­ment, while those in the top 30 per­cent of earn­ers (fam­i­lies with earn­ings exceed­ing $90,000) would see only a 5 per­cent reduction.
• Sources:
  • NY Times — Jan­u­ary 10, 2023
  • NCLC — Jan­u­ary 10, 2023, Prob­lems with IDR pro­grams, April 1, 2022

Wells Fargo Get­ting Out Of the Mort­gage Busi­ness (Jan­u­ary 11, 2023)

• Wells Fargo has been a neme­sis to bor­row­ers for decades
• These changes are being dri­ven by tech­nol­ogy and in who makes mort­gages these days: 
  • Non-​Bank lenders wrote almost 1/​3 of all mort­gages in 2021
  • Non-​Bank lenders wrote almost 2/​3 of all mort­gages in 2022 
• Source: (Mar­ket­place — National Pub­lic Radio — Jan­u­ary 11, 2023)

Legal Tech News

Technology:DoNotPay’s ‘Robot Lawyer’ Is Gear­ing Up for Its First U.S. Court Case (Jan­u­ary 7, 2023)

• An AI-​based app that helps do-​it-​yourselfers con­test speed­ing tick­ets is about to go to court for the first time.
• May also use AI-​synthesized voice to read AI-​spawned text in a remote trial setting