The $361 million Hudson Heritage Federal Credit Union is suing CUMIS Insurance for declining to pay a claim after the Middletown, N.Y.-based credit union was victimized by an auto loan fraud ring.
In April, May and June of last year, three men joined the credit union and were approved for loans to buy high-end used cars such as BMW and Bentley.
After the car loans, totaling nearly $135,000, went into default, Hudson Heritage FCU discovered it had been defrauded.
Each of the borrowers and the sellers were allegedly connected in some way and altered car title documents to secure the car loans.
After the car loans defaulted, Hudson Heritage FCU realized the car title documents, from three different sellers, had the same New York address, according to the credit union’s lawsuit filed in April in U.S. District Court in New York City. The credit union also learned that the cars actually were own by other people, not the sellers.
The borrowers of the car loan fraud ring showed documents that they lived in the credit union’s Poughkeepsie service area. But they each had driver’s licenses with different addresses in Georgia, Brooklyn, N.Y. and New York City.
The credit union said it secured a bond insurance policy from CUMIS, a subsidiary of CUNA Mutual Group in Madison, Wis., which covered losses as a result of fabrication, forgery or alteration of a documents provided by a members to obtain a loan.
But when Hudson Heritage submitted its proof of claim loss, it was denied by CUMIS. The credit union, however, did not explain why the insurance company rejected the claim, according to court documents.
“CUNA Mutual Group’s goal and intent are to avoid such disputes whenever possible,” Wendy Serafin, a senior communications manager for CUNA Mutual Group, said. “In this specific case, it was not possible and we must let the legal process take its course. Therefore, we can’t comment regarding ongoing legal matters.”
In its lawsuit, Hudson Heritage is asking the court to declare that the credit union’s losses are covered by the CUMIS bond, plus interest and to compensate the credit union for other damages.
