Arkansas Federal Credit Union agreed to forgive $2.35 million of outstanding balances as part of a settlement settling claims that violated redemption laws.
The settlement benefits borrowers, co-borrowers and guarantors of Arkansas Federal Credit Union (AFCU) consumer auto loan loans for which the collateral was withdrawn by the AFCU between May 15, 2018 and July 23, 2021. The Class Members must have received a subsequent assignment of notices of sale, not have filed for bankruptcy since the redemption, not have paid the finance contract amount due, and not have been entered in judgment with respect to the finance contract.
AFCU is an Arkansas-based credit union that provides auto loans, mortgages, personal loans, checking accounts, and other services to its members. According to the AFCU website, the credit union has over 135,000 members and owners.
However, plaintiffs in a class action lawsuit allege that the AFCU violates federal law when it comes to taking back vehicles. In particular, AFCU allegedly fails to provide adequate redemption notices and post-sale notices to consumers. The communications sent by the AFCU did not comply with federal regulations, the plaintiffs allege.
Article 9 of the Uniform Commercial Code requires lenders to comply with certain regulations when taking back vehicles. This includes providing consumers with sufficient notice to ensure they understand their rights and options during the withdrawal process. AFCU allegedly does not comply with these requirements.
The AFCU has not admitted wrongdoing but has agreed to a class action settlement to resolve these allegations.
Under the terms of the Arkansas Federal Credit Union’s Foreclosure Settlement, the AFCU is forgiving $2.35 million in outstanding or missing balances owed to class action members. The credit union will require the credit bureaus to delete all related reports for these debts, and the AFCU will not provide any further adverse information about these accounts.
According to the Arkansas Federal Credit Union’s Repossessions website, there may be tax consequences from this forgiveness. The AFCU can issue a 1099-C tax report showing the waived credits as income. Class members are encouraged to speak with a tax professional to understand how these comparative advantages affect their taxes.
AFCU has also agreed to pay $200,000 to fund termination costs, administrative costs, attorneys’ fees, court costs and other awards.
The exclusion and objection period is November 15, 2022. The final approval hearing for the settlement is scheduled for November 17, 2022.
No claim form is required to benefit from the Arkansas Federal Credit Union redemption policy. Class members who do not opt out of the Settlement will automatically receive the Settlement Benefits described above.