LOS ANGELES-Some of the biggest credit union participants in the failed Centrix Financial subprime auto loan program filed suit in state court against Lyndon Property Insurance recently claiming the insurer has stopped paying millions of dollars in claims on defaulted subprime auto loans.
The credit unions, which include Credit Union of Texas, Credit Union One, Financial 21 Community CU and several other of the biggest Centrix players, claim that Lyndon wrongfully discontinued paying them under default protection policies they had with the insurer.
Lyndon has sued the same credit unions in federal court claiming it doesn't have to pay the claims because the credit unions ignored underwriting standards and colluded with Centrix to trick Lyndon into paying the clams.
Lyndon had originally brought suit against more than 80 Centrix credit unions but settled with about 50 of them in which both the credit unions and Lyndon dropped their claims.
The suit is the latest outbreak of the failure of Centrix, which filed for bankruptcy in September 2005, causing tens of millions of dollars of losses to more than 400 credit unions.
