VIENNA, Va. - Navy FCU President/CEO Brian McDonnell, who has been active in the bankruptcy reform process for years, says consumer groups are acting more like anti-consumer groups by opposing bankruptcy reform legislation that allows credit union members to voluntarily reaffirm their credit union debts. "Generally, I find myself siding with consumer groups more than credit card companies when it comes to consumer protection. In the case of credit union reaffirmation, they are dead wrong," said McDonnell.
The Consumer Federation of America, the U.S. Public Interest Research Group and Consumers Union are among the consumer groups against the current bankruptcy legislation. These groups are often on the same side of the fence with credit union groups on consumer financial issues. McDonnell said he was particularly concerned about Frank Torres, legislative counsel for Consumers Union, coming out against the reaffirmation provision, saying credit unions don't deserve special treatment. "If we lose this reaffirmation provision, our losses will actually increase if the bankruptcy legislation is passed. There is not enough to offset potential losses we will have if we're not permitted to reaffirm. We run into numerous cases of younger members who are encouraged to declare bankruptcy, mostly from lawyers, in newspapers ads, who shouldn't be declaring," said McDonnell. He said these young members will be hurt the most if they can't reaffirm their credit union debts. "If they do declare bankruptcy and don't reaffirm they can no longer get our credit union services. So instead of getting 9% on a car loan from us they'll be paying 24% from someone else. That's the point we're trying to make. If you really look into this thing, you're going to be hurting consumers," said McDonnell. Navy FCU and many other CUs, said McDonnell, provide free financial counseling to members who declare bankruptcy, and reaffirm their credit union debt. McDonnell, who is on the board of CFA, isn't happy with that group's position on the legislation. "I don't think they realize the implications of what they're saying," said McDonnell. Why should CUs get the reaffirmation carveout in McDonnell's view? "Credit unions are not-for-profit and consequently, other members must bear the cost of bankruptcy. The annual average is estimated to be as high as $550 for every American family. Other financial institutions do not absorb the cost of bankruptcy; they pass it along to their customers in the form of higher fees and interest rates," said McDonnell. "Bankruptcy legislation that excludes the credit union reaffirmation provision will do great damage to credit unions' ability to serve the 80 million consumers who belong to credit unions. It simply sends consumers the wrong message about voluntary credit union reaffirmation." -pgentile@cutimes.com
