…[H]ere, the Court held that the credit union’s loan officer had misled the debtor upon inception of the loan by representing that there was life insurance on the loan.

The debtor and his wife had been members of People’s Credit Union for fifty years. They had taken out numerous loans throughout the years, and on each occasion received credit life insurance. The last loan taken out by John Braswell was accompanied with a certificate of insurance, however, none of the loan documentation indicated the loan was insured.

The loan officer taking the application specifically stated to Mr. Braswell, “Here is your certificate of insurance.”

Mr. Braswell expired about one year after the loan was granted, and his wife submitted a claim on the insurance certificate. The credit union denied her claim, contending that the now deceased member was not entitled to the insurance due to his age at the time of the application.

The Court found that the credit union had misled the member into believing that he was entitled to the credit life insurance when the loan officer had not gone over the exclusionary provisions to alert the borrower that he would not be eligible under the CUNA policy.

The Court ruled that the credit union could not collect the balance owing on this loan. Estate of John Braswell vs. People’s Credit Union (Case No. 90-251).

Author: Charles R. Harroun, Attorney at Law