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News Now

Washington
Better debt management terms sought for borrowers
WASHINGTON (10/6/08)—The National Foundation of Credit Counselors (NFCC) has launched a call to action for the development of affordable debt management plans (DMPs) asking 10 major card issuers to join the effort. The highly regarded NFCC is the nation's oldest association of credit counseling agencies, and the Credit Union National Association (CUNA) is a member of its Advisory Council. The NFCC is asking all card issuers to act by March 31 to use a universal, two-tiered DMP, which would offer either a maximum monthly fixed payment of 2% or a hardship payment of 1.75% of a balance. The development could be important for credit unions and their members, according to Mike McLain, CUNA's assistant general counsel, senior compliance counsel, and NFCC representative. “As a general rule, credit unions will experience higher losses if their members file bankruptcy rather than complete an acceptable debt payment plan. The NFCC is proposing somewhat more reasonable limits for debt payment plans that should enable more CU members—and borrowers in general--to repay their debts through debt payment plans rather than resorting to bankruptcy,” McLain explained. According to NFCC, about 25% of the clients its 108 credit counseling agencies see would benefit from a DMP. However, without modification to DMP terms, the option will be unaffordable by at least a third of those.


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