CUs play key role in bankruptcy reform

Barring any unforeseen Congressional or Presidential land mines, the very lengthy struggle by credit unions to put some common sense and a lot more fairness for CUs into the nation's bankruptcy laws is about to pay off. Once again the proposed legislation passed both the House and Senate by substantial margins as it did last session, but this time the President is expected to sign it. At that point, credit union lobbyists should be able to breathe a well-deserved sigh of relief. The new law is expected to contain the three main credit union backed-provisions: means testing, mandatory financial counselling, and voluntary reaffirmations for credit union members. Take special note of the words after reaffirmation: "for credit union members." What a coup for credit unions to get that language in and despite fierce opposition, keep it in. Knowing the ways of Washington lawmaking, this deserves special kudos to credit union lobbyists. It also "reaffirms" that in the eyes of lawmakers, CUs are different. The road to success was not without unusual twists and turns. Credit unions found themselves on the same side of this issue with the banking industry, traditional adversaries, and in opposing camps with traditional credit union allies, like the Consumer Federation of America and Consumers Union. They saw the changes pushed for by credit unions as anti-consumer and called the proposed legislation one-sided and unfair to the majority of people. It is hard to imagine how any person or group that has even the most basic understanding of credit unions could ever accuse credit unions of advocating anything even remotely unfair to consumers a.k.a. credit union members. Future relationships between these two groups and credit unions may never be the same. Their rhetoric and that of other opponents to meaningful bankruptcy reform, tried to make the case that only the little guy would get hurt if the bill passed. The only real winners, they said, would be the wealthy but especially the issuers of credit cards, admittedly major players in the increase in bankruptcies. This logic was fueled by press reports that seemed consistently unable to focus on anything but the credit card debt angle, not the growing number of flagrant abusers. They seemed unwilling to separate people with legitimate dire personal circumstances for whom bankruptcy laws were created, from those individuals who took advantage of its loopholes. The fact that the credit union-backed bill will continue to help and protect those in need and deserving of help and protection, was somehow overlooked. Based on most news articles on bankruptcy reform that I read, if the hapless consumer went on a credit card spending spree and racked up so much debt that bankruptcy was the only out, the feeling seemed to be that he or she ought to be able to walk completely away from that debt. Shame on the credit card companies for making seemingly unlimited credit available and for overly aggressive marketing tactics. Whatever happened to personal responsibility for one's actions? The major role that credit unions played in moving the legislation along for the past several years and their ability to keep their three main provisions intact in the bill has largely gone unnoticed by the press. In reviewing dozens of recent major articles from the Wall Street Journal and major dailies to the financial trade press on the bankruptcy issue, there was scant mention of credit unions. Maybe that's a good thing. After all, mission accomplished on behalf of credit unions is much more important than receiving high-profile accolades in the press. By the way, the one mention of the role of credit unions in getting bankruptcy reform passed into law I did notice in the Wall Street Journal was fairly significant. Credit unions were listed in a chart entitled, "A Stake in Bankruptcy." It highlighted another favorite press angle, namely, PAC money contributions to bankruptcy reform supporters. The chart was explained as a listing of "soft money, PAC and individual contributions by members of the Coalition for Responsible Bankruptcy Laws." Contributions were broken down by those made to Democrats and to Republicans and in total. The 12 organizations listed included Visa USA and Mastercard International of course. Also major banking trade groups and automobile manufacturers. The American Bankers Association (ABA) headed the list with a total contribution of $1.709 million. Who was in second place? None other than CUNA weighing in for credit unions at $1.642 million. It is obvious that credit unions were very involved in achieving bankruptcy reform, using every means at their disposal from PAC contributions to down and dirty lobbying efforts. Credit union lobbyists also played a major role in shepherding the eventual law through the complicated and sometimes messy legislative process. Speaking of which, credit union lobbyists also played an important role in preventing the bill from getting derailed in the Senate by nearly 100 proposed amendments, most non-germane and many very controversial or deal breakers. Senate rules allow amendments to a bill that have absolutely no relevance to that bill. Once the President signs the bill into law, there will be little time for celebrating. The work of the credit union groups must make a major shift in emphasis to educating credit unions so that they in turn can educate their members about the new law. Providing the tools to make bankruptcy reform work like its supporters intended will probably be as daunting a task as getting the bill passed. Credit unions and their members need to be shown how this law is fair to all credit union members, not just those who file for bankruptcy. And credit union organizations should try and mend fences with consumer groups by demonstrating that the law is not anti-consumer and was actually worthy of their support. Finally, it could be concluded that the key role played by credit unions in the success of bankruptcy reform is still more tangible evidence that credit unions have become a force to be reckoned with. This in turn should be good news for all consumers. Comments? Call 1-800-345-9936, Ext. 15, or Fax 561-683-8514, or E-mail mwelch@cutimes.com.