On average nearly half of all loan losses at federally insured credit unions in 2000 were due to bankruptcy. Most credit unions have lower operating margins than other types of lenders. Typically, credit unions pay higher rates on savings and charge lower rates on loans than other financial institutions. Because of these smaller margins, credit unions are more heavily impacted than other financial institutions by escalating bankruptcy costs. A natural reaction for some institutions is to increase interest rates, but that is not what credit unions do.
Credit unions keep interest rates as low as possible for the benefit of their members.
Credit unions also do much to promote financial responsibility among their members. Because credit union members pool their resources for the mutual benefit of all members, they have traditionally relied heavily on member education and individual counseling to encourage and promote financial responsibility. Because of the rising number of personal bankruptcy filings, the credit union community believes that legislative action is necessary to improve the current bankruptcy system. The product is a genuine effort to improve the nation's bankruptcy laws and procedures. The survey revealed three issues that rose to the forefront of credit union's agenda regarding bankruptcy reform.