In his experience, Dr. Robert Manning said credit unions aren't as flexible as banks when it comes to negotiating debt with struggling consumers.

"Credit unions are living in a time warp, where they think their members should pay them first and stiff their bank creditors," Manning said. Those that stick to an all-or-nothing collections strategy not only "leave money on the table," he said, but they bully members into paying nothing at all.

"Most credit unions don't realize members are stiffing them because they know they can't get any more credit there," he said. "Maybe back in the old days, that could have worked, but now the average credit union member has multiple lines of credit and will do whatever it takes to keep food on the table."

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Although federal regulations require a total write-off in many situations, Manning said credit unions could still accept partial payments and funnel them through loan loss reserve accounts, preserving the member relationship.

Manning said he's now working full-time for his Responsible Debt Relief Institute, where his ability-to-repay algorithm and software has received more attention from commercial banks than credit unions.

The Filene Research Institute Fellow and Credit Card Nation author will contribute an opinion piece to the Credit Union Times' 2010 Economic Outlook, a digital special report available to subscribers only in the March 10 digital edition.

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