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Category: Consumer Protection Law
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Experience:  I am a civil litigation attorney representing individuals and businesses.
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My credit union sold my car loan and are now trying to claim

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My credit union sold my car loan and are now trying to claim the difference and the price of the insurance in one lump sum. I was covered by insurance the whole time, but the bank was not notified when I switched to USAA. I made all my payments on time and would have paid off the loan with no problems if they had just contacted me and let me know there was a problem. All this trouble seems like an unjust penalty for simply forgetting to notify the bank I purchased new insurance.
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Customer: replied 3 years ago.
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Wendy
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Dear Customer,

Thank you for choosing Just Answer, I apologize for the lengthy delay in getting a response to your question. Unfortunately, there is not an easy solution to your situation. Nearly all vehicle loans require that insurance be maintained on the vehicle, and that the bank be listed as a lien holder with the insurance company. If the borrower fails to get insurance, or to keep the bank informed of the policy or policy changes, the actions taken by your credit union are the end result.

Your relationship with the bank is based on contract, you will need to check your loan documents carefully. I would point you specifically to the portions of your loan documents regarding "Proof of Insurance" and "Notice" (or similar sections). This will tell you exactly what your rights and obligations are with regard to this issue (meaning how you were supposed to tell the bank of any changes in insurance, and when).

Unfortunately, the bank is entitled to notice exactly as it is required under the terms of the contract - this is designed to ensure that the bank's appropriate departments receive notice, as opposed to a general notice or a letter regarding one issue being sent to another department or another part of the file.

With regards XXXXX XXXXX civil claim, absent some extenuating circumstance (to be very direct, a service member stationed overseas, not in combat, is not one of these circumstances), there is no basis for recovery against the bank - unless your loan documents do not have any provision allowing the bank to take out this insurance.

You may be able to negotiate a reduction in payments with the bank - most creditors are looking for a short term repayment plan, or preferably a lump sum, in exchange for a reduction in the overall debt. Given the circumstances, the bank may be willing to negotiate, but it has no obligation to do so.

Regarding your credit - this will affect your credit. However, there are two separate things, one is your "credit score" which is a number designed by credit reporting services to give an indication of your ability to pay off a debt, and the other (more important) factor is your "credit worthiness" which a smaller lender will look at to determine your debts/assets/income and likelihood of paying off a loan. You can work on improving both of these by paying down debt and building savings.

I hope this is helpful, I do wish that I had information that was more supportive of your position but I do want to give you an accurate statement of the law on this issue. If you have any questions please let me know.
CalAttorney2, Lawyer
Satisfied Customers: 10238
Experience: I am a civil litigation attorney representing individuals and businesses.
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