Fraud Friday: Former Loan Officer Used Fraudulent Payoff Letter to Sell Secured Vehicles 

June 26, 2026

Bob Coleman
Founder & Publisher

Fraud Friday: Former Loan Officer Used Fraudulent Payoff Letter to Sell Secured Vehicles 

Collateral conversion occurs when a borrower sells pledged collateral without the lender’s consent and fails to satisfy the secured debt. In this case, federal prosecutors say a lending officer used a fraudulent payoff letter to dispose of her collateral securing two vehicle loans, then failed to disclose the transactions in a subsequent bankruptcy filing.

Kylie Jo Bench, 27, a former loan officer at Dubuque Community Credit Union’s Burlington, Iowa branch, pleaded guilty to bankruptcy fraud and aggravated identity theft in U.S. District Court for the Southern District of Iowa.

According to court records, Bench refinanced two vehicle loans through the credit union after joining the institution in 2022. The loans were secured by a Ford vehicle and a Dodge vehicle.

Federal prosecutors said that in August 2022, Bench sold both vehicles to a Cedar Rapids dealership without informing the credit union. To complete the sales, she provided the dealership with a payoff letter stating the loans had been paid in full.

The payoff letter was created on fraudulent credit union letterhead and contained the forged signature of a credit union executive. The loans remained outstanding at the time of the sales, and the credit union’s security interests had not been released.

In March 2023, Bench filed for Chapter 7 bankruptcy protection.

According to the plea agreement, she failed to disclose the vehicle transfers in her bankruptcy filing and falsely stated that she had not transferred property for the benefit of an insider. Prosecutors alleged the vehicle sales benefited an individual who was jointly obligated on the loans.

The undisclosed vehicle transactions formed the basis of the bankruptcy fraud charge.

The use of the credit union executive’s identity in the fraudulent payoff documentation formed the basis of the aggravated identity theft charge.

Bench pleaded guilty to both charges.

Sentencing has not yet been scheduled.