NCUA Sues CUSO Servicing MBLs For Failed Nevada CU
LAS VEGAS – NCUA filed suit Monday against North Star Business Services LLC, claiming the CUSO refuses to give up servicing rights it had over member business loans made by the Ensign FCU, the one-time $135 million credit union that failed in 2009, one of several large Nevada credit union.
As part of the normal process of liquidating failed credit unions NCUA typically repudiates–or voids–contracts a failed credit union may have with top executives or with vendors and other third party service providers. But North Star Business, a CUSO partially owned by Ensign that is servicing 18 of the failed credit union’s MBLs, has ignored the repudiation order, according to the suit.
NCUA claims the repudiation took effect immediately after it took over and began liquidating Ensign, the credit union for the Mormon Church in three Navada counties, but the MBL CUSO has directed that borrowers to continue sending their loan payments to them and collecting on the loans. “Defendants have converted monies paid on the Accounts for their own personal use without the authorization and/or knowledge of (NCUA) and in contravention of (NCUA’s) legal rights, by refusing to forward the entire amount of payments received on the Accounts to the Liquidating Agent (NCUA),” reads the suit.
Lawyers for the CUSO did not respond to a phone call seeking comment.
Ensign, which will cost the National CU Share Insurance Fund an estimated $30 million, was one of four large Nevada credit unions to fail in the fall of 2009, along with Clearstar Financial CU, Cumorah CU and Community One FCU.