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WASHINGTON-Emphasizing the willingness to push bankruptcy reform through Congress that credit union lobbyists have been talking about, a bankruptcy reform bill was introduced in the House on the eve of a Senate Judiciary hearing on the legislation. House Judiciary Chairman Jim Sensenbrenner (R-Wis.) introduced H.R. 685 with 55 cosponsors Feb. 9, according to committee press staffer Terry Shawn. It was identical to Senator Charles Grassley’s (R-Iowa) S. 256, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. CUNA President and CEO Dan Mica noted that bankruptcy reform “has gotten off to a very fast track” already this year. “We are grateful for the action of the chairman, who has been a steadfast advocate for much needed improvements and updates to this law,” the former lawmaker said. “With legislation now in the Senate and House, we intend to work this issue assiduously in the coming weeks.” He added that CUNA will use its Governmental Affairs Conference to generate credit union support for the bills. NAFCU Senior Legislative Representative Murray Chanow predicted, “I would expect a hearing [in the House] very shortly on the bill.” He said the House, as well as the Senate, hope to hold the hearing and markup of the bill within a month, then move to conference. In written testimony for the Feb. 10 Senate Judiciary hearing on Grassley’s bill, Shoreline Credit Union CEO Ken Beine told the Senate Judiciary Committee of his credit union’s experiences with bankruptcies and why reform was necessary. Beine, appearing before the committee for the second time-the first was in 2001-on behalf of CUNA, told lawmakers that Shoreline had a member who took over her daughter’s debt on a car loan from the credit union only to file for Chapter 7 bankruptcy protection prior to even making the first payment. Another simply turned over several automobiles he was financing after promising to “never cause Shoreline a loss.” The credit union lost $11,000, which stung only more when the debtor drove up to the hearing in a newly leased vehicle and Shoreline learned this was his third bankruptcy filing. “What this member did borders on fraud,” Beine stated in his written testimony. “People should not be able to use the bankruptcy code as a tool to avoid inconvenient obligations by transferring their debts to fellow consumers-my members-your constituents. This is wrong. This is abuse.” On the other hand, he recognized that some people legitimately need help. “Credit unions recognize that many people legitimately need the option to declare bankruptcy,” Beine said. “What concerns us, however, are the cases of abuse by those who file Chapter 7 and totally walk away from their debt, event though they clearly have the ability to repay all or part of that debt.” The credit union CEO’s testimony told how a couple recently came to Shoreline to clear up several poor financial decisions. “They were clearly living beyond their means,” he said. They tried to start a business in a recession and were unable to pay their debts so they sold a motor home and a boat. The unsecured debt still came to $25,000, which the credit union offered to put on a second mortgage at 7% for 30 years. That move helped them get on their way to recovery, according to Beine. Some borrowers do need bankruptcy protection for a fresh start, but should be able to reaffirm their debts with credit unions so they still have access to affordable financial services, his testimony read. Bankruptcies particularly impact credit unions because the costs are distributed among the membership, he emphasized. CUNA supports means testing, financial education, and voluntary reaffirmations for credit union members in a bankruptcy reform bill. “Any sensible bankruptcy reform should include education requirements to give debtor the tools they need to make wise decisions about filing for bankruptcy and to succeed financially after bankruptcy,” Beine testified. “In anticipation of this, CUNA plans to develop face-to-face and/or online courses to fulfill this aspect of the legislation.” He noted that when Shoreline members are considering bankruptcy, the credit union immediately leaps into action, informing them of the downside of filing, and letting them know the credit union will help them through financial difficulty. According to a CUNA survey, 70% of credit unions counsel financially troubled members, while a similar percentage also refer members to a third party counseling service. Others tentatively slated to testify included International Realty & Investments, Inc. President Malcom Bennett; United Steel Workers of America, AFLCIO District 1 Director Dave McCall; East Bank and Trust Company President and CEO R. Michael Stewart Menzies, Sr.; retired attorney from the San Francisco District Attorney’s office of Family Support Bureau Philip Strauss, on behalf of the National Child Support Enforcement Association; Maria Vullo, a partner with the New York firm Paul, Weiss, Rifkind, Wharton & Garrison LLP; Harvard Leo Gottlieb Professor of Law Elizabeth Warren; and Georgetown University Law Center Visiting Professor Todd J. Zywicki. NAFCU Director of Legislative and Political Affairs Brad Thaler reported, “There may be one or two hearings is what we’re hearing before the Judiciary Committee takes the markup and moves the legislation.” While NAFCU was not asked to testify in person, it did submit written testimony for the record. “NAFCU supports meaningful reform of the bankruptcy code that brings about both responsible lending as well as responsible spending,” the federal credit union trade association wrote. “NAFCU believes that the conference report reached last session was a well balanced approach and went a long way toward making appropriate and long-needed reforms to the bankruptcy system.” Credit union lobbyists seem upbeat about bankruptcy reform’s chances for this Congress. According to CUNA Vice President of Legislative Affairs and Senior Legislative Counsel Gary Kohn, “There is a commitment to put it on the Senate floor as one of the earliest items this year.” NAFCU Senior Legislative Representative Murray Chanow said, “They’re going to try to move it fast because they know their time is limited with so many pieces of legislation.” He pointed out the Senate Judiciary Committee already has the class action legislation on its plate and the full Senate will be debating tax and Social Security reforms. No one is quite sure of Senator Charles Schumer’s (D-N.Y.) plans regarding his abortion clinic violence amendment that has been a major sticking point over the last few years, the lobbyists said. [email protected]

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