In January 2014, however, TCN began failing to repay SFCU for delinquent loans, according to the complaint.

Five months later, on May 30, 2014, the two entities signed a second direct loan agreement. But TCN hid something, SFCU alleged.

“In those negotiations, TCN never informed SFCU it was insolvent, a necessary piece of information for SFCU to consider in determining whether to continue the relationship,” the complaint said. “Rather, TCN assured SFCU that, while it had had some recent financial difficulties, it had a plan to resume sufficient cash flow to cover obligations.”

Those difficulties apparently surfaced again in October 2014, when TCN began failing to repay loans that customers canceled, SFCU claimed. The May 2014 agreement required TCN to make SFCU whole for those loans too, SFCU said.

In total, the bill is now $12 million and rising, SFCU said.

SFCU said TCN is the credit union's largest book of business. In all, the $441 million credit union holds approximately $35 million in loans for approximately 10,000 TCN customers, the complaint said.

SFCU also claimed TCN representatives told customers they didn't have to repay the loans and that their loans were canceled.

“This results in TCN keeping the money it has been paid under the (subsequently canceled) loan, SFCU being out the same amount, and the consumer being reported as either having a loan or having a loan past due because SFCU was not notified by TCN of the loan's cancelation,” according to the complaint.

The big fireworks began in September of this year, when TCN allegedly told SFCU it was selling its online portal, which gives students access to learning modules. According to SFCU, the portal is TCN's “sole remaining asset of value.”

The buyers are two companies allegedly run by the person who also runs TCN, and the move is an attempt by TCN to dodge its liabilities, according to the complaint. The price for the portal, which might already be sold, was $1.25 million, it said.

But that wasn't all that ticked off SFCU.

“Perhaps most disturbing, in conjunction with advising SFCU of the sale of the portal, these individuals advised SFCU that access to the portal for those consumers with SFCU-financed loans would be terminated or severely impacted unless SFCU agreed to pay approximately $70,000 per month to the consortium,” the complaint said.

The three companies allegedly imposed a Sept. 28 deadline for the payment, which SFCU called “ransom.”

“Terminating access to the portal for SFCU borrowers would have serious consequences,” the credit union said in the complaint. “Approximately 10,000 TCN students, who paid in full – through SFCU financing – for their modules would no longer be able to access those courses through the portal. TCN consumers without access to the portal and unable to continue their education would undoubtedly cease to pay on their loans with SFCU.”

SFCU isn't the only credit union with an iron in the fire, either. An undisclosed number of smaller credit unions participated in approximately 40% of SFCU's loans to TCN students.

According to SFCU, the blow could be fatal for the smaller credit unions.

TCN CEO Gary Eyler disputed the allegations.

“There has been a misunderstanding by Southeast Financial Credit Union (SFCU) regarding a proposal that was designed to help their members complete a program they purchased,” he told CU Times in a statement. “Our only goal has been to help their members, our customers. With regards to the proposal, there was no profit built into it nor did any representative from our company give them an ultimatum. There has always been room for discussion.”

He continued, “It's important to note that we are actively working with SFCU, and this matter has already been taken off the court's calendar by a mutual stipulation agreement. We will be meeting with SFCU soon to resolve any remaining issues. As for our customers, including SFCU members, they have continued to receive access to their programs, and there has not been any disruption of service.”

Eyler added SFCU has benefited from the program by gaining 20,000 new members and earning more than $40 million in interest income during the relationship.

In a statement to CU Times, SFCU provided more details on the status of its case against TCN.

“All portions of Southeast Financial Credit Union's case against The College Network (TCN) remain active and on the court's calendar.” SFCU spokesperson Lisa Reitmeyer said. “Southeast Financial intends to actively prosecute this case in order to protect its members, its business, its participants and loan holders. On October 1, 2015, the parties entered into an Agreed Order which will keep any of the Defendants from restricting access to the Portal until a further ruling by the Court. The hearing on a final injunction is set for December 8. The December 8 hearing is one small part of the overall ongoing suit, which consists of the Complaint against TCN, the Motion for an Injunction, and a motion for a Receivership. The parties have been ordered to submit to an expedited discovery schedule with regard to the Injunction. Southeast Financial plans to fight tirelessly to stop the proposed tortious and fraudulent conduct by TCN.”