I need some advice regarding a mortgage escrow account?

I paid off my mortgage with my credit union here in MO. I had about $1500 in an escrow account that I was expecting to receive via check in the mail. The credit union requires all members that have active loans carry a savings account with a balance of at least $1. I also have a car loan with this credit union.

Instead of receiving my escrow refund check in the mail I found out that they deposited the $1500 into my savings account with the credit union and then disbursed about $600 of it as they pleased. They applied the money to my automobile loan.

The credit union has a policy that all loans are cross collateral for one another so they find a way to intermingle accounts. BUT… I don't believe they have a right to do what they please with MY escrow money. I have been in the mortgage industry for 14 years and can't say I've seen this done before. It is pretty standard for the lender to refund the escrow money with a check within a 30 day period.

Can anyone tell me if my credit union is legally able to do what they did? Do I have any recourse if they are in the wrong? If they are guilty of conversion here there would be thousands of other people like me that have a case.

Thanks in advance.

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