Centrix Reassures CUs on Subprime Auto Loan Payments

DENVER – Flatiron Financial Services, the former Centrix Financial, tried yesterday to reassure more than 130 credit union participants in its subprime auto loan program that millions of dollars in payments will continue to keep flowing as the once high-flying broker tries to reorganize itself under bankruptcy. “Credit unions have continued to receive the proceeds of insurance claims regularly from Everest Insurance. We continue to facilitate the claims fully and claims continue to get paid,” said Kevin Barry, the former director of servicing for Centrix and now the CEO of Flatiron Financial. Barry acknowledged the concerns about whether the insurer will continue to pay default protection insurance claims, in light of last week’s public plea by NCUA to the insurer. “The trepidation, I think, is understandable,” Barry told The Credit Union Journal yesterday of the potential halt in coverage, while Everest presses its civil fraud case against Centrix founder and former CEO, Robert Sutton. Barry said Sutton continues to serve on the Flatiron board but no longer has a day-to-day role in the company he created. Credit union executives around the country continue to hold their breath as they wait to see whether Everest is no longer legally bound to cover credit union claims, as Sutton claims in one of several suits pending in the Centrix case. “I think there would be great concern if Everest were to decide there was no coverage,” said Christian Onsager, a Denver lawyer representing credit union giants Easter Financial Florida CU and Landmark CU. Barry acknowledged the high default rate of subprime loans credit unions bought through Centrix, an average as high as 38%, but said most of the remaining $1.3 billion portfolio is seasoned beyond 30 months, so the defaults are expected to fall. “The worst is in the rearview mirror,” he said.