Judge Approves $2.6 Million CU Settlement In Centrix Class Action
KANSAS CITY, Mo. – A federal judge last week approved a $2.6 million class action settlement against Kansas Teachers Community CU in which borrowers claim loans they obtained through the credit union’s participation in the Centrix Financial indirect loan program violated the state’s Uniform Commercial Code and Merchandising Practices Act, resulting in the repossession of their vehicles.
Under the terms of the settlement, borrowers will receive a cash payment averaging approximately $9,315 – or $1.75 million – plus a write-off of any deficiency or account balances remaining on their vehicle loans, averaging about $8,968, a total of $880,000 in debt to be forgiven by the $65 million Pittsburg, Kan., credit union.
The borrowers also will be entitled to correction of their credit report by removal of any negative reporting by the credit union with respect to the vehicle loan. They will receive the benefit of an IRS Private Letter Ruling, which the credit union will seek in order to minimize the tax burdens of the deficiency write-off portion of the settlement.
The class action is one of several suits brought against credit unions participating in the Centrix program, which at one time provided indirect vehicle loans to more than 450 credit unions. Two other credit unions are being sued in Missouri over their Centrix loans, Dallas-based Credit Union of Texas and Meadows CU in Illinois.
Denver-based Centrix filed for bankruptcy in 2005 amid growing delinquencies on its subprime loans, eventually costing credit unions tens of millions of dollars in losses.