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Despite all the credit union industry time, talent, political capital, and money put into getting the latest in a long line of bankruptcy reform bills passed, the measure still died. The Senate adjourned for the final time this year last Wednesday night without ever considering the stripped down version passed by the House just five days earlier. After the House action, what was missing from the bill was the controversial Schummer amendment which dragged the totally unrelated and highly-charged abortion debate into the bankruptcy bill. Without that it never had a chance in the Senate. What a sad commentary on how laws are made in this country. New York Senator Schummer should be ashamed of himself for not letting bankruptcy reform stand on its own merits. To me he has become the latest in a long line of poster children for a system of lawmaking that cares more about partisanship, special interests, and favorite causes than trying to craft laws that really do help and protect American citizens. If ever an abortion bill is proposed, perhaps credit unions should tack on to it bankruptcy reform provisions. That makes just as much sense as certain elements in Congress ensuring defeat of bankruptcy reform by tacking on to it the debate between pro-lifers and pro-choice. Like no sense at all! After several years of coming within an eyelash of passing, the obvious question has become, will bankruptcy reform in any shape or form ever pass? When its death became official, leaders from CUNA and NAFCU immediately expressed guarded optimism much like dyed in the wool sports fans: “Wait till next year.” Don’t be so sure. Throughout the process, everyone in credit union land agreed that there were bankruptcy abuses. Something needed to be done to rein in deadbeats, especially those who elected to simply walk away from their debts despite an ability to handle some payback. But there was far from unanimous agreement among credit unions regarding what percentage of those filing for bankruptcy were out-of-control spenders versus those who saw bankruptcy as the only way out from consequences caused by a failed marriage, a catastrophic illness, loss of a job, etc. It is this latter group for whom bankruptcy protection was created in the first place as reform opponents were quick to point out. Although the credit union trades worked hard to present a united CU front, it wasn’t entirely so. Credit Union Times has published dozens of news stories and printed a number of letters to the editor that illustrated that even in credit union land there were some doubting Thomas’ regarding both the issue and the high priority given to it. To be fair, many, maybe even most, credit union leaders agreed with reform proponents that something had to be done to stop the rush to bankruptcy by those for whom the option of bankruptcy was never intended. It’s not fair to credit union members who pay their bills, they said. This group fully supported the CU trade groups making bankruptcy reform the number one credit union legislative priority. Credit unions needed to have the legal means to deal with those deadbeats who were causing harm to the CU. Right up to the bitter end the bill under consideration contained what credit union interests felt was crucial for them to support it, namely, means testing, financial education, and voluntary reaffirmations. Other credit union folks didn’t agree and said so in the strongest possible terms. They pointed out that overall delinquencies and charge-offs are low and that evidence that this is the number one credit union problem is scarce. Some said further that those declaring bankruptcy in their credit unions were in fact that group mentioned above that found themselves in dire financial straights through no fault of their own. Furthermore, they said, certainly there are other credit union specific legislative priorities that would benefit all credit unions more. So who’s right? From my perspective as a close observer of the frenzied credit union activity surrounding bankruptcy reform, it appears that yes there are definitely abusers who need to be brought up short. They need to repay their debts. Yet, from the day the first shot was fired in this battle, it seemed to me that credit unions were expending too much political capital and resources in a fight that had many other players involved who had more to gain than CUs. Like credit card issuers that offer everyone and their dog easy credit going in but hammer the card holder with high interest rates and late fees going out. Would not clamping down on them in and of itself go a long way towards curbing bankruptcy abusers? As the dust from still another disappointing defeat settles, it might be time for CU leadership to step back and evaluate whether betting the farm on bankruptcy was really the smartest thing for credit union interests to do in the overall scheme of things. Credit unions were so confident that this was the year for passage that they backed themselves into a corner. That corner represented making bankruptcy the absolute most important issue facing credit unions. But was it really? That’s the question that has to be asked of credit unions before those representing them decide once again to pull out all the stops when the next Congress convenes. Finally, it should also be said that credit unions and those who represent them, especially CUNA and NAFCU, fought a brilliant and valiant fight, one that showed the tremendous influence and power of the credit union industry and the moxie of its leadership team. The credit union industry clearly has the wherewithal to field a championship team in any future fights for credit union interests whatever the next number one priority turns out to be. Comments? Call 1-800-345-9936, Ext. 15, or Fax 561-683-8514, or E-mail [email protected]

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Peter Westerman

Credit Union Times

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