Dealing with collection issues can be one of the most difficult issues a credit unions faces, because it involves a breach of trust with the member based on their financial agreement with the credit union, and often results in both the member and the credit union taking a loss on a previously mutually beneficial lending agreement.

The Fair Debt Collections Practices Act governs collection activities. When collecting their own debts and using their own name, credit unions are not required to follow the FDCPA. The FDCPA does apply to credit unions that regularly collect debts for other unrelated institutions, and/or perform collections under reciprocal service agreements.

When the credit union is subject to the FDCPA it must not: Contact third parties, except to obtain information on the debtor's location; Contact the debtor at an unusual time or place, no calls between the hours of 9 pm and 8 am; Abuse or harass the debtor; Publish a list of members who refuse to pay their debts; Threaten to communicate false credit information; Engage in unfair practices; and Bring any debt collection action other than permitted by the FDCPA.

When one credit union merges into another, each loan from the merging credit union that is delinquent or in default on the effective date of the merger is covered by the FDCPA and the surviving credit union must follow the FDCPA provisions concerning the delinquent debt they acquire.

When the credit union acts as a debt collector it must: Provide the appropriate debt collection warning notice; Notify the member, in writing of the amount of the debt, the name of the creditor, and the credit union's duty to verify the debt if it is disputed; Cease further communication with the member when the credit union receives a written request; and Must apply payments in accordance with the member's instructions.

Bankruptcy In 2010 more than 1.5 million personal bankruptcies were filed, the largest number since Congress reformed the bankruptcy system in 2005.

Bankruptcy The Bankruptcy Code is contained in Title Eleven of the United States Code. The Code includes guidance on: Bankruptcy provisions; Case administration requirements; debtors and creditors bankruptcy estate requirements; and Provisions for the five different types of bankruptcy: Chapters 7, 9, 11, 12 and 13.

Bankruptcy Chapter 7 Bankruptcy - Liquidation of the debtor's assets and a payment of the proceeds to creditors. Chapter 13 Bankruptcy - Debtors rearrange their financial affairs, repay all or a portion of their debts to put themselves back on their financial feet. Chapter 11 Bankruptcy - Business reorganization where the debtor acts as the trustee and is responsible for running the business and proposing a plan to pay creditors.

Thank you for joining me for this review of InfoSight’s Bankruptcy and Collections Channel - Stay Tuned… Shawn Wolbert, CIA, CUCE Director CU System Relations 101 S. Washington Square, Suite 900 Lansing, MI (800) Ext. 486 (734) Mobile Follow me on Twitter – Shawn Go2CUGuru