MIAMI – Dade County FCU last week filed suit in federal court to get CUMIS Insurance Society to pay $2 million to cover losses the credit union incurred after a credit card collections agent cooked the account records to mask delinquencies so he could continue to collection commissions.
Over a 10-year period the agent, identified as Jorge Garcia, would clear the number of delinquent days on the credit union’s system to “zero” for delinquencies that were 60 days and over, effectively “tricking” the processing system into not reporting the Visa credit card loans as delinquent until they were too far gone to be collected on, according to the suit, filed in U.S. District Court for the Southern District of Florida.
CUMIS, a wholly owned unit of CUNA Mutual Group, says the claim is not covered under the Faithful Performance Coverage because it says the credit union had no written policy on collections, meaning the agent was not violating a credit union policy, according to the suit.
It is also unclear that the losses were due to the agent’s misdeeds, CUMIS ruled. “Clearly, a significant amount of the accounts in the Credit Union’s claim would have been uncollectable in whole or in part even in the absence of Mr. Garcia’s conduct,” wrote the senior claim adjustor for CUMIS to Dade County FCU in denying the claim. By its own admission, unsecured credit card debt “is the last thing anybody ever pays up,” according to CUMIS.
A CUMIS official said Friday the claim was denied because the company believes it does not fall within the Faithful Performance coverage under the Bond.
A credit union official declined to comment Friday.
