DENVER – In a move that could delay resolution of the Centrix Financial bankruptcy case, several credit unions with multi-million dollar claims against the subprime auto lender succeeded last week in getting fraud charges filed against them by a Centrix insurer moved out of the bankruptcy court and into U.S. District Court.
The move will allow the charges brought by Lyndon Property against the Credit Union of Texas, Credit Union One, Velocity CU and 87 other credit unions to be heard before a jury, as the credit unions have requested.
Lyndon, which claims that the credit union and Centrix defrauded it by faulty underwriting and servicing of billions of dollars in subprime auto loans, is trying to keep the dispute in the bankruptcy court, where the main function is to satisfy creditors.
Lyndon claims it paid the credit unions $190 million in Default Protection Insurance based on poor and sometimes fraudulent underwriting by the credit unions and Centrix.
