WARREN, Mich. – A state court on Tuesday awarded $360,000 to a Michigan First CU, which had accused a local auto dealership of falsifying documents to secure loans for subprime customers who then defaulted.
The award is half the amount that Michigan First sought in actual damages, accusing Al Lang Ford of committing fraud and breach of warranty regarding 48 auto loans mostly made in late 2003.
The credit union charged that 219 of the more than 500 loans made by Michigan First with the dealer, 34%, went into default, a much higher rate than its other loan programs.
The Lathrup Village credit union accused the auto dealer of using various techniques to pump up down payments and using "phony in-house rebates." The credit union also alleged the dealer inflated the borrower's income in several instances.
Lawyers for the auto dealer said the credit union failed to properly screen borrowers before approving the loans. They claimed that a contract between Michigan First and Aimbridge Indirect Lending controls the loans, by requiring the credit union to legally object to fraud on loan applications within 15 days.
The credit union had asked for $720,000 in damages, but the auto dealer successfully argued that they recovered some of the funds by selling the repossessed cars.
