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Auto dealers petition court on CU deal with regulator
MADISON, Wis. (12/3/08)--The Wisconsin Automobile and Truck Dealers Association has filed a court petition to overturn an agreement a credit union had with the state regulator that allowed 18 months for the credit union to divest its auto sales business. The petition was filed Nov. 12 in Dane County Circuit Court and names as defendants the Wisconsin Office of Credit Unions (OCU); the state Credit Union Review Board; Racine, Wis.-based Educators CU (ECU); and ECU Financial Services (The Journal Times Dec. 2). The credit union owns Educators Auto & Lease, which is a division of ECU Financial Services. It provides used-car sales, new- and used-car leases, and new-car referral services (News Now Nov. 4). At issue is the OCU's decision to settle a dispute brought by the association against Educators CU's auto dealership by offering the 18-month grace period to divest the business. The newest petition asks for a court judgment that the agency did not have the authority to offer ECU the deal. Wisconsin Department of Justice spokesman Bill Cosh told the newspaper that the attorney general's office will defend the other agency in court. The situation was sparked by a complaint from an unknown local auto dealer about Educators CU's auto sales. The dealers association filed a complaint saying the credit union charter does not allow credit unions to offer auto sales service (News Now Nov. 4). OCU initially ruled that the state's credit union law allows credit unions to own only auto leasing services,--not retail car sales. The credit union appealed that ruling. Educators CU told News Now in November, when the deal to divest was made, that it had 18 months to have the law clarified or to divest the business to a third-party. A credit union spokesman told the local newspaper last week that the credit union will pursue both getting the law changes and divestiture. The court case centers on the question: if auto dealers can offer financing along with a vehicle, can a financial institutions sell cars along with the financing? The $900 million asset credit union's prices for cars averaged $3,000 to $5,000 below sticker price, said the article.
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