WASHINGTON — CUNA recently suggested to the U.S. Trustees that while credit unions cannot directly provide bankruptcy credit counseling services to their members filing for bankruptcy because of the potential conflict of interest, CUSOs should be considered.

Under the new bankruptcy system, debtors must complete approved credit counseling before filing for bankruptcy. “Even though credit unions under an interpretation from the U.S. Trustees office can't really perform that counseling function directly themselves we're suggesting to the Trustees themselves that nonprofit CUSOs be allowed to be formed in order to provide those kinds of services,” CUNA Deputy General Counsel and Senior Vice President for Regulatory Advocacy Mary Dunn explained.

CUNA's comment letter, delivered to the Executive Office of the U.S. Trustees, states, “We believe the formation of a nonprofit CUSO jointly owned by a number of credit unions may be a means to address the conflict of interest concerns of the Trustees Office. Under this situation, the employees of the CUSO, and not the credit unions, would be providing the bankruptcy counseling. This may eliminate the conflict in those situations in which the members have an outstanding loan with the credit union. Although we recognize that the Bankruptcy Act prohibits the board of directors of these Agencies from having either a direct or indirect benefit from the outcome of the counseling, we believe it is possible that a CUSO could be structured that complies with this requirement, and we would welcome the opportunity to discuss with the Trustees Office the possibility of a nonprofit CUSO qualifying as an Agency under the Bankruptcy Act.”