Wednesday, May 22, 2019

Credit union sues Puerto Rico retirement system for nonpayment

By on March 15, 2019

(CB file)

Vegabajeña Co-op seeks over $500,000 owed from system-backed loan program

SAN JUAN – Puerto Rico savings and loan association Cooperativa de Ahorro y Credito Vegabajeña has sued the island’s Employees Retirement System (ERS) to enforce its statutory liens over 37 claims it has against the entity resulting from defaulted loans given to employees.

In its lawsuit, filed Thursday, Cooperativa Vegabajeña seeks an order directing the ERS to release $525,422.93 to the financial institution, reflected in its 37 proofs of claims “as due and owing and as previously approved and certified by ERS.”

Vegabajeña said its status as a secured creditor arises from a law enacted in 2011 that allowed credit unions to grant individual loan agreements to commonwealth employees who participated in the ERS. Its enactment sought to stimulate local economies by creating favorable conditions for lenders and borrowers to enter into agreements, and allowed many cooperatives to participate in the loan program it established.

“Each Cooperativa loan agreement at issue in this adversary complaint was entered into after 2011 and before the 2017 filing of Title III,” the document reads, referring to the bankruptcy-like statute of the federally enacted Puerto Rico Oversight, Management and Economic Stability Act (Promesa).

After the 2011 loan program bagan, ERS agreed that individual salary contributions to the system would be used as collateral for the individual loan agreements. Before the ERS filing of the Title III bankruptcy case, 37 of the individual ERS participants who obtained loans under the 2011 law with Vegabajeña defaulted on their loans, and were notified as in arrears.

However, the ERS has not repaid the co-op, which proceeded to submit the claims as part of the system’s bankruptcy process.

“On each of the 37 claims filed by Cooperativa in the Title III proceeding, ERS approved and certified the pledges made by the 37 individual borrowers and agreed that these individuals could pledge a specified portion of their ERS contributions to Cooperativa and that ERS would honor these pledges while the funds were held by ERS,” the suit reads.

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