One of the former managers of North Star Business Services LLC has said charges in a suit recently filed by the NCUA for alleged fraudulent payment collection are false.
Mark Moody, one of the managers of the defunct NSBS, told Credit Union Times his side of the story behind a Nov. 8 suit brought by the NCUA alleging that NSBS continued to collect payments on 18 commercial loans owned by Ensign Federal Credit Union, which did business with the CUSO and was liquidated in November 2009 by the regulator.
Moody said the day after Ensign shut down, the NCUA contacted NSBS and told it to continue to service and collect payments on the loans in question. In February, he said he received another letter from the NCUA saying the CUSO's services were no longer needed. Moody said he then contacted an attorney and in March sent a letter to the NCUA seeking a payment of $115,500 from the agency for management and administrative fees.
"There are funds that are being held," Moody said of the nearly $46,000 the NCUA is seeking. He said the funds will continue to be held until he receives the $115,500 payment from the regulator.
"I received a letter from [the NCUA's] attorney in April, which I complied with. I provided all loan files and all payments were to be sent to the NCUA," Moody said.
To NCUA's claims that NSBS threatened to charge service fees if borrowers did not continue to make payments after Ensign closed, Moody said that is false.
"It wasn't like we were strong arming. We sent a letter to our clients to continue making payments. All of this got resolved at the end of April, the first of May."
According to the NCUA complaint, which was the liquidating agent of Ensign, the agency was authorized to disaffirm and repudiate any contracts or arrangements on 18 commercial loans to which the credit union was a party. The regulator shut down the Henderson, Nev.-based Ensign Nov.13, 2009, because of its declining financial conditions. The NCUA authorized EDS Credit Union in Plano, Texas, to purchase and assume Ensign's member share accounts. EDS changed its name to InTouch Credit Union.
On the same day of Ensign's closure, the NCUA said it sent notice to NSBS's principals Moody and David L. Osburn to disaffirm and repudiate the servicing arrangement on loans owned by Ensign. It is not known if NSBS responded to the notice. However, on March 24, 2010, the NCUA said NSBS sent a request to borrowers to continue making payments on the loans and threatened them with servicing fees if they did not comply, according to the complaint.
The NCUA responded by sending a cease and desist order to NSBS demanding that it stop interfering with its obligations and responsibilities related to assets owned by Ensign. Still, the CUSO continued to receive payments from borrowers, refused to provide the NCUA with all documents related to the accounts and refused to turn over funds it had collected, the NCUA said.
"The NSBS is not entitled to withhold a servicing fee from the funds it is retaining, because the liquidating agent disaffirmed and repudiated the arrangement NSBS had to service the accounts effective Nov. 13, 2009," the NCUA wrote in its complaint.
As of Oct. 1, 2010, the NCUA said it believes at least $45,911 was wrongfully retained by NSBS.