Arkansas Federal Credit Union Wrongfully Seizes $2.35 Million Class Action Lawsuit and More News

Published by
Peter Kavinsky

The Arkansas Federal Credit Union has agreed to forgive $2.35 million in outstanding balances as part of the settlement of claims related to violations of repossession laws.

The settlement benefits borrowers, co-borrowers and guarantors of consumer auto loans from the Arkansas Federal Credit Union (AFCU) for which AFCU seized collateral between May 15, 2018 and July 23, 2021. Sale notices were not required to announce themselves bankrupt upon repossession, should not have settled the amount of the financial agreement due, and no judgment shall be made against them in respect of the financial agreement.

AFCU is an Arkansas-based credit union that offers auto loans, home loans, personal loans, checking accounts, and other services to its members. According to the AFCU website, the credit union boasts over 135,000 member owners.

However, the plaintiffs in the class-action lawsuit allege that AFCU violates federal laws in seizing vehicles. In particular, AFCU allegedly does not send sufficient repossession and post-sale notices to consumers. The notices sent by the AFCU did not comply with federal regulations, the plaintiffs allege.

Article 9 The Uniform Commercial Code reportedly requires lenders to follow certain rules when repossessing vehicles. This includes sending sufficient notices to consumers to make sure they understand their rights and options in the process of taking ownership. AFCU allegedly does not comply with these requirements.

The AFCU has not admitted any wrongdoing but has agreed to a class action lawsuit to resolve these allegations.

Under the terms of the Arkansas Federal Credit Union’s repossession agreement, AFCU will forgive $2.35 million of outstanding or missing balances owed to class members. The Credit Union will require credit reporting agencies to remove any relevant reporting of these debts, and AFCU will not provide further adverse information about these accounts.

According to the Arkansas Federal Credit Union website, there may be tax implications as a result of this forgiveness. The AFCU may issue a 1099-C tax return that lists forgiven balances as income. Group members are encouraged to speak with a tax professional to understand how these settlement benefits will affect their taxes.

AFCU also agreed to pay $200,000 to fund notification costs, administrative expenses, attorneys’ fees, court costs and other fees.

Deadline for Exception and Objection is November 15, 2022. The Final Settlement Approval Hearing is scheduled for November 17, 2022.

A claim form is not required to benefit from the Arkansas Federal Credit Union decision to repossess title. Class members who do not exclude themselves from the settlement agreement automatically receive the settlement benefits described above.

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