Credit Union Leader Backs Reform Legislation
Barbara Clore, president of $22 million-as-set Associated Industries Credit Union in Deer Park, Tex., was in town recently to support a bankruptcy reform bill now before the House Banking Committee. The bill would encourage debtors to pay off their debts instead of defaulting. Ms. Clore told Medill News Service reporter Elyssa Getreu why she thinks the existing laws should be changed.
Elyssa Getreu: Why change the law?
Barbara Clore: There is obvious evidence that what we had in the past is not working. I am not against bankruptcy. I think there are legitimate reasons for declaring bankruptcy. But I think that with the present law too many abuses are getting through.
In 1985, credit unions had about $75 million in total loan losses due to bankruptcy. Since then, our loan portfolios have doubled and bankruptcy losses have increased eight times, to $600 million.
EG: What would an ideal bankruptcy bill do?
BC: The ideal bankruptcy bill would allow bankruptcy for real people with real problems who need a fresh start, and it would completely eliminate al abuse.
EG: What kinds of abuse?
BC: A good example is the credit union that repossessed a member's vehicle after he defaulted on his loan payment - which it has every legal right to do.
But the minute they repossessed the vehicle, the member declared Chapter 13 and said he was going to recognize the payment plan. So the credit union was forced to return the vehicle.
The member then did not provide insurance, nor did he ever make the first payment to the trustee. So the credit union filed a motion to lift the stay.
That member allowed the dismissal to take effect, and the credit union repossessed the vehicle a second time. Then, once again, the member filed Chapter 13.
Ultimately, the court found that the credit union was entitled to the vehicle and the member had to dismiss the Chapter 13. But this happened over the course of a year, and the condition of the car had greatly deteriorated.
In another case a member was at odds with the credit union because he wanted to keep two expensive cars - a Jaguar and a Lotus - and he kept them. By setting up that plan with the Jaguar and the Lotus, the disposable income he had to pay off other creditors was greatly reduced.
EG: If the bill is passed, how would it affect you?
BC: Hopefully, it will eliminate some of the flagrant abuses. That's what we're most interested in. We'd like to go back to the scenario where we can feel comfortable about who we grant credit to, and be able to give the good consumer good service without questioning each time we look at a loan application whether or not the individual may declare bankruptcy.
