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Bankruptcy Reform Voted Today

The Credit Union National Association says current proposals for bankruptcy reform will drive up the cost of credit to consumers. The National Bankruptcy Review Commission will vote this morning on a package of recommendations to be delivered to Congress in October. CUNA says two troublesome proposals are 1. Before being able to collect unpaid credit card charges from consumers who have filed bankruptcy, card issuers would have to prove to a judge that they had no way of knowing the person was in financial trouble AND 2. Gamblers would be allowed to ignore debts from credit card cash advances taken within half a mile of a casino.

FULL STORY:

The Credit Union National Association is urging a “no” vote Friday on a proposal that would drive up the cost of credit for tens of millions of consumers.

“The proposal before the National Bankruptcy Review Commission would penalize consumers who pay their bills on time,” said CUNA President & CEO Daniel A. Mica. “On behalf of America’s 72 million credit union members, CUNA opposes any bankruptcy reform that blocks credit unions from fulfilling their mission of providing credit at an affordable cost.”

The nine-member Bankruptcy Review Commission is scheduled to vote Friday in Detroit on a package of recommendations that would make it harder for lenders to recover unpaid debts. The Commission was established as part of the 1994 bankruptcy bill, and its recommendations are due to Congress this October.

What’s wrong with the latest proposal? Mica points to a number of issues, such as these:

“Before being able to collect unpaid credit card charges from people who have filed bankruptcy, card issuers would have to prove to a judge that they had no way of knowing the person was in financial trouble.

“The proposal would allow gamblers to ignore debts from credit card cash advances taken within half a mile of a casino.

“CUNA advocates bankruptcy reform that would bring a better balance between creditor and debtor rights,” said Mica. “Unfortunately, the latest proposal tilts the scales back toward bankruptcy debtors — at the expense of the majority of consumers who use credit wisely.” CUNA will represent those consumers at the Bankruptcy Review Commission’s meeting, along with the Michigan Credit Union League and four Michigan credit unions.

Mica also called on credit unions to take the lead in educating consumers on wise use of credit. “Credit unions are not-for-profit cooperatives owned by 72 million consumers,” Mica explained. “Part of our mission is to help our owners better manage their money. We especially need to reach America’s youth before they’re caught by the lure of pre-approved credit solicitations.”

CUNA supports a “needs-based” Bankruptcy Code, where bankruptcy filers would repay some of their debt once they could afford it.

With its network of affiliated state credit union leagues, CUNA represents America’s 12,000 credit unions — which in turn are owned by 72 million consumers. Credit unions are not-for-profit cooperatives providing affordable financial services to people from all walks of life.

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