Alaska USA Federal Credit Union Auto Loan Markups Class Action

Consumers want to receive the best interest rates available to them. The complaint for this class action, however, alleges that Alaska USA Federal Credit Union (AFCU) and its Board of Directors allow auto dealers to mark up the interest rates on its auto loans. The complaint claims that this violates the Washington Consumer Protection Act (WCPA) and the rules and regulations of the National Credit Union Administration (NCUA).

The complaint cites an auto loan made to plaintiff Tad O. Wahlen, which it claims was marked up by .95%, resulting in Wahlen’s having to pay around $1,500 extra for his vehicle.

The complaint quotes a February 2011 Open Letter to all Federal Credit Unions from the NCUA chairman as saying that director must always keep their attention on the best interests of their members. “Credit unions are not-for-profit cooperatives designed to provide financial services to their member-owners.”

Because of this, “a credit union’s primary purpose is not to seek the biggest possible profit or return on assets (ROA); nor is it appropriate to seek asset growth just for the sake of growth.” Instead, [t]he primary purpose of a credit union is to provide quality, low cost financial services that the members need.” Also, it says, FCUs must also treat all members equally.

However, the complaint claims that, under an Alaska USA Federal Credit Union Dealer Agreement with a number of auto dealerships, dealers may add to AFCU’s auto loan interest rates, creating an extra profit at the expense of its members.

According to the complaint, the annual percentage rate (APR) offered for financing its members’ auto purchases is known as the Buy Rate. If the auto dealer increases this rate, this is known as the Sell Rate, or Contract Rate. The difference between the two figures is called the Dealer Reserve.

AFCU’s costs are covered by the Buy Rate, the complaint says, so the Dealer Reserve is pure profit. The complaint claims, “On information and belief, ACFU’s contractual agreements with auto dealers also contain a provision which allows ACFU to split the additional profit generated by Dealer Reserve where AFCU retains 30 percent of the Dealer Reserve, with the remaining 70 percent paid to the dealer.”

This results in some members receiving “unequal and discriminatory treatment” when they take out auto loans, “in violation of the defendant directors’ fiduciary duties” to treat all members equally and without favoring any over others.

The class for this action is all AFCU members living in Washington state who financed a vehicle through AFCU, and where the Buy Rate offered by AFCU was increased by the auto dealer.

Article Type: Lawsuit
Topic: Loans

Most Recent Case Event

Alaska USA Federal Credit Union Auto Loan Markups Complaint

May 20, 2020

Consumers want to receive the best interest rates available to them. The complaint for this class action, however, alleges that Alaska USA Federal Credit Union (AFCU) and its Board of Directors allow auto dealers to mark up the interest rates on its auto loans. The complaint claims that this violates the Washington Consumer Protection Act (WCPA) and the rules and regulations of the National Credit Union Administration (NCUA).

Alaska USA Federal Credit Union Auto Loan Markups Complaint

Case Event History

Alaska USA Federal Credit Union Auto Loan Markups Complaint

May 20, 2020

Consumers want to receive the best interest rates available to them. The complaint for this class action, however, alleges that Alaska USA Federal Credit Union (AFCU) and its Board of Directors allow auto dealers to mark up the interest rates on its auto loans. The complaint claims that this violates the Washington Consumer Protection Act (WCPA) and the rules and regulations of the National Credit Union Administration (NCUA).

Alaska USA Federal Credit Union Auto Loan Markups Complaint
Tags: Breach of Fiduciary Duty, Excessive Interest Rate, Loan-Related Unfair Practices