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News Now

CU System
Utah bill to redefine how CUs collect debt in default
RIVERDALE, Utah (2/24/11)--A bill pending in the Utah Senate could determine if America First CU in Riverdale, Utah, will be able to collect tens of millions of dollars of unpaid debt in default it is owed by a Utah developer. Utah State Sen. Curt Bramble (R-16) introduced a bill--SB218--that if passed would overturn a Utah Supreme Court ruling and redefine how lenders can collect debts in default (The Salt Lake Tribune Feb. 22). Bramble told the newspaper he is revising the bill and could have a committee hearing as early as this week. At issue is a $36.4 million loan provided by the $5 billion-asset credit union to Anderson Development--one of the most prominent developers in the state--in 2007 to buy and develop 320 acres of land. As part of the deal, Gerald Anderson and Michael Hutchings--the two principals in Anderson Development--personally guaranteed payment, acting as co-signers of the loan, the paper said. When Anderson Development defaulted on the loan, America First filed a notice of default. However, instead of going through foreclosure and liquidating the land, the credit union tried to collect the $19 million balance from the guarantors--Anderson and Hutchings, the paper said. Hutchings is a former state judge. America First has been entwined in litigation with the two since 2009, the paper added. According to Scott Simpson, president of the Utah Association of Credit Unions, the credit union would not only have the loss associated with the specific loan but more important for financial institutions--specifically credit unions--is the bill's effect on the notion of a payment guarantee in the future. It would mean that a company could enter an agreement under a legal requirement and sign a payment guarantee, then be able to get out of the contract if the loan went into default. "The intrigue here is the bill only applies to credit union policy." Passage of the bill would be "very bad public policy," Simpson told News Now. "Not just credit unions are opposed to it. Banks and title-lending institutions are opposed as well," he concluded.


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