CUNA Regulatory Comment Call
July 27, 2006
Application and Criteria to Serve as Financial Counselors and Instructors under the New Bankruptcy Law
The Executive Office for United States Trustees (Trustees Office) has issued an interim final rule that outlines the application procedures and standards to be used by the Trustees Office for approval of nonprofit budget and credit counseling agencies (Agencies) and approval of providers of a personal financial management instructor courses (Providers). Under the new bankruptcy law that was passed last year, individual debtors are required to consult with an approved Agency within 180 days of filing for bankruptcy. The debtors are then required to consult with an approved Provider after filing for bankruptcy, but before receiving a discharge of their debts.
Based on previous conversations between CUNA and the Trustees Office, it appears that a credit union may only be approved as an Agency and provide counseling (for purposes of satisfying the requirements of the bankruptcy law) to debtors who do not have debts with the credit union that is acting as the Agency. This restriction does not affect financial counseling that credit unions currently provide other than such services could not be used to comply with the requirement under the new bankruptcy law. There is no such restriction for credit unions who want to become an approved Provider, and credit unions may act as Providers if they meet the required criteria.
Written comments must be submitted by September 5, 2006. Please submit your comments to CUNA by August 28, 2006.
Please feel free to fax your responses to CUNA at 202-638-7052; e-mail them to Senior Vice President and Deputy General Counsel Mary Dunn at firstname.lastname@example.org and to Senior Assistant General Counsel Jeff Bloch at email@example.com; or mail them to Mary and Jeff in c/o CUNAs Regulatory Advocacy Department, 601 Pennsylvania Avenue, NW, South Building, Suite 600, Washington, DC 20004-2601. You may also contact us at 800-356-9655, ext. 6032, if you have questions or would like a copy of the interim final rule. You may also access a copy of the rule at the following address:
Under the new bankruptcy law that was passed last year, individual debtors are now required to consult with approved Agencies for purposes of receiving credit counseling within 180 days before filing for bankruptcy. Debtors are also required to participate in a personal financial management instructional course with an approved Provider before being granted a discharge of their debts.
The Trustees Office is responsible for approving the Agencies and the Providers, based on their qualifications and the services that they will provide. Those seeking approval as Agencies and Providers must file an application, which is available on the Trustees Office website at http://www.usdoj.gov/ust.
BRIEF DESCRIPTION OF THE INTERIM FINAL RULE
Based on previous conversations between CUNA and the Trustees Office, it appears that credit unions may only be approved as an Agency for purposes of providing counseling to debtors who have debts with entities other than the credit union who is acting as the Agency. This restriction does not affect financial counseling that credit unions currently provide. The only impact would be that such services could not be used to comply with the requirement under the new bankruptcy law that the debtor receive counseling from an Agency before receiving a discharge of the debts.
There is no such restriction for credit unions who want to become an approved Provider. Under the interim final rule, before being approved by the Trustees Office, a Provider must:
- Be in compliance with all applicable laws and regulations in each area in which the Provider conducts courses.
- Employ trained personnel with adequate experience and training, which means they must have one of the certifications below, or its equivalent:
- A state teachers certificate in any subject.
- Certified as a Certified Financial Planner.
- Certification or accreditation as a credit counselor or financial counselor by a recognized independent organization.
- Certification by the American Association of Family and Consumer Sciences.
- Registered as a Registered Financial Consultant.
- Certified as a Certified Public Accountant.
- Provide instruction on the following topics:
- Budget development.
- Setting short and long-term financial goals.
- Calculating gross monthly and net monthly income.
- Identifying expenses as fixed, variable, or periodic.
- Money management, including keeping adequate records, distinguishing between wants and needs, maintaining insurance coverage, and saving for emergencies.
- Wise use of credit, including information about credit, loans, debt warning signs, and checking credit ratings.
- Consumer information, such as where to get assistance and the applicable consumer protection laws and regulations.
- Incorporate the following procedures:
- Require the debtor to provide identification and to sign in and out of the class.
- Conduct the course for a minimum of two hours, which may be conducted in the classroom, by way of a toll-free telephone number or by the Internet, as long as certain criteria are met.
- Require debtors to complete a course evaluation.
- Prepare and retain records on the effectiveness of the course, which must be available for review by the Trustees Office, as well as provide other information requested by the Trustees Office.
- Charge a reasonable fee and provide services without regard to the ability to pay the fee, as well as have the ability to provide the required certifications.
To be considered for approval, the Provider must compete and submit the Application for Approval as a Provider of a Personal Financial Management Instructional Course. The Provider must submit a new application 45 to 60 days before the expiration of the initial sixth month probationary period and the expiration of each annual period before being approved for an additional annual period. The Provider is responsible for updating and amending the information on the application.
The Provider will be notified if the initial application is denied, along with the reasons for the denial, and will also be notified in the future if it is being removed from the approved list. The Provider will then have twenty days to request a review of this decision by the Director of the Trustees Office, which must include the reasons for disagreeing with the denial or removal from the list, along with any supporting documentation. The Director may request any additional information and must then issue a decision within 45 days after receiving the request for review, unless this time period is extended. The Director has the option to delegate this review function to a reviewing official.
QUESTIONS TO CONSIDER REGARDING THE INTERIM FINAL RULE
- Should CUNA advocate that credit unions be permitted to be approved as an Agency for purposes of providing counseling to debtors within 180 days of filing for bankruptcy, even if they do have debts with the credit union who is acting as the Agency? The Trustees Office believes there would be a conflict of interest in this situation in that credit unions could use this opportunity to push for reaffirmation of their debts. Do you believe this is a valid concern?
- Do you believe that many credit unions will qualify or seek to qualify as Providers? The criteria for Agencies is similar. Do you believe that many credit unions will qualify or seek to qualify as Agencies if the Trustees Office were to permit a credit union to act as an Agency to debtors who have debts with that credit union?
- Other comments?
Eric Richard General Counsel (202) 508-6742 firstname.lastname@example.org |
Mary Mitchell Dunn SVP & Deputy General Counsel (202) 508-6736 email@example.com
Jeffrey Bloch Assistant General Counsel (202) 508-6732 firstname.lastname@example.org
Lilly Thomas Assistant General Counsel (202) 508-6733 email@example.com
Catherine Orr Senior Regulatory Counsel (202) 508-6743 firstname.lastname@example.org