Bankruptcy Bill Headed To President's Desk
WASHINGTON-A decade-long odyssey ended last week when the House overwhelmingly voted passage of the bankruptcy reform bill.
This is the second time the credit union-backed bill has been passed by Congress but it died in 2000 when then-President Clinton refused to sign it into law. This time, President Bush has promised to sign the bill.
"To say that this is long overdue would be an understatement," said John McKechnie, chief lobbyist for CUNA, who has spent many a late-night working to persuade Congress to pass the bill. "This is a testament to all of our members who continued to urge us to work for the bill. No matter what other issues were on our agenda, credit union CEOs and volunteers kept telling us they wanted bankruptcy abuses stopped."
Passage of the bill comes as the number of people filing for bankruptcy has skyrocketed to about 1.6 million in each of the last two years. About 250,000 of them are credit union members, forcing credit unions to charge-off million of dollars in bankruptcy-related losses. In fact, half of all credit union charge-offs are related to bankruptcy.
But more importantly, say credit union executives, are the number of debtors who abuse the system by filing for bankruptcy numerous times, by shielding assets, and using the bankruptcy code as a financial planning tool. "Those CEOs can see very visible the cases where abuses happen," said McKechnie.
The bill would enact into law a means-based bankruptcy system, preventing those debtors who have some financial means to repay debts form filing a Chapter 7 to erase all debts, and relegating them instead to a Chapter 13 financial reorganization.
Those with insufficient assets or income could still file a Chapter 7. Those with income above the state's median income who can pay at least $6,000 over five years-$100 a month-would be forced into Chapter 13, where a judge would then order a repayment plan.
Credit union representatives say the mean-based system will help credit unions collect as much as much as 10% on debts owed by bankruptcy filers, an estimated $60 million a year in increased collections for credit unions.
The bill also includes two other main credit union priorities, mandatory financial education for all bankruptcy filers, and the continued ability of credit unions and their members to enter into reaffirmation, or voluntary repayment, agreements during bankruptcy.
The new law is scheduled to take effect six months after the President signs it.
The credit union lobby has been in the forefront of the effort to pass bankruptcy reform, joining with the banks, auto finance companies and retailers into one of the most powerful lobbies in Washington. Those groups were deeply involved in efforts to devise a means-based system in the early 1990s, then worked together as the bill made its was through the past five congresses.
Visa Allows Pulse Logo
PURCHASE, N.Y.-Visa USA said Tuesday it has amended its rules to allow Pulse EFT Association's trademark to remain on Visa-branded debit cards. Visa had questioned whether the Pulse EFT mark could remain on Visa cards after Pulse was acquired by Morgan Stanley's Discover Financial Services, issuer of the Discover card, a Visa competitor. MasterCard International is looking into whether the Pulse logo can also appear on MasterCards.
The issue with the card associations arose because Discover is considering creating its own signature-based debit card brand that will compete directly with Visa and MasterCard. Visa rules prohibit a competing, signature-based debit brand from occupying the same debit card. In making the announcement, Visa said it had to carefully weigh the interests of its financial institution members that carry the Pulse PIN-debit trademark.
More than 4,100 financial institutions, including 1,700 credit unions, are Pulse members.
The Credit Union Journal's On Deadline coverage is sponsored by Liberty. For info: www.libertysite.com.