A former senior executive has filed a lawsuit that accuses the$6.3 billion SanDiego County Credit Union with mismanaging its mortgageservicing and collectively costing some of its 253,000 membershundreds of thousands of dollars.

The allegations arose as part of former senior vice presidentScott Norris' complaint against the credit union for wrongfultermination which he filed in the Superior Court of California, SanDiego County on Oct 24.

In the 32-page complaint, Norris charges that the credit unionignored his warnings that it had been misapplying member paymentsor sometimes not applying the payments correctly to loan interestand principal.

According to the court, the credit union has not yet filed aresponse to the complaint and the court has not yet scheduledfurther activity.

A spokesman for the credit union said SDCCU “strongly denies theallegations and will defend itself vigorously” but declined furthercomment on the suit.

Norris charged in the complaint that the credit union's Symitarsystem core processing system had been incorrectly applying paymentfunds to late payments received by the credit union.

“The Symitar system was not returning late payments asinsufficient where the payments did not include the assessed latefee. Instead, the Symitar system was applying these late paymentfunds first to late charges and interest, and the remainder to theprincipal balance,” the complaint said.

“This resulted in members' principal balance not being reducedby the proper amount of the payment, and thereby charging themember interest on the higher principal balance amount,” Norris'complaint said.

He said that then resulted in members being charged interest onlate fees, since the late fees were essentially being “tacked on”to the principal balance.

“Plaintiff came to learn that Defendant was aware of thisproblem dating back to the year 2005, but had knowingly failed tocorrect the problem.” Norris charged.

He also alleged he had determined, at the credit union'srequest, that roughly 2,000 members had been impacted by the errorand that it could cost SDCCU $500,000 to issue refunds and correctthe problem.

When he reported the number of members impacted and the amountit would take to rectify the problem SDCCU CEO Teresa Hallecksaid, Norris alleged, “We're not going to do that.” He was laterfired, he said.

According to NCUA records, SDCCU had 17,675 real estate loansworth more than $2.7 billion outstanding as of the end ofSeptember.