A former senior executive has filed a lawsuit that accuses the $6.3 billion San Diego County Credit Union with mismanaging its mortgage servicing and collectively costing some of its 253,000 members hundreds of thousands of dollars.
The allegations arose as part of former senior vice president Scott Norris' complaint against the credit union for wrongful termination which he filed in the Superior Court of California, San Diego County on Oct 24.
In the 32-page complaint, Norris charges that the credit union ignored his warnings that it had been misapplying member payments or sometimes not applying the payments correctly to loan interest and principal.
According to the court, the credit union has not yet filed a response to the complaint and the court has not yet scheduled further activity.
A spokesman for the credit union said SDCCU “strongly denies the allegations and will defend itself vigorously” but declined further comment on the suit.
Norris charged in the complaint that the credit union’s Symitar system core processing system had been incorrectly applying payment funds to late payments received by the credit union.
“The Symitar system was not returning late payments as insufficient where the payments did not include the assessed late fee. Instead, the Symitar system was applying these late payment funds first to late charges and interest, and the remainder to the principal balance,” the complaint said.
“This resulted in members' principal balance not being reduced by the proper amount of the payment, and thereby charging the member interest on the higher principal balance amount,” Norris’ complaint said.
He said that then resulted in members being charged interest on late fees, since the late fees were essentially being "tacked on" to the principal balance.
“Plaintiff came to learn that Defendant was aware of this problem dating back to the year 2005, but had knowingly failed to correct the problem.” Norris charged.
He also alleged he had determined, at the credit union's request, that roughly 2,000 members had been impacted by the error and that it could cost SDCCU $500,000 to issue refunds and correct the problem.
When he reported the number of members impacted and the amount it would take to rectify the problem SDCCU CEO Teresa Halleck said, Norris alleged, “We're not going to do that.” He was later fired, he said.
According to NCUA records, SDCCU had 17,675 real estate loans worth more than $2.7 billion outstanding as of the end of September.