Financed car thru Credit Union

I have a loan thru a Credit Union. My dad is the main person and the account and there are two loans under this account. We first go my car under this account Loan#1 - He was the main buyer and I am the co-buyer. He then 4yrs later got him a car under the same account # but different loan #2. My dilemma is I have made all of my payments on my car. My dad defaulted on his loan#2. I called to re-finance my car under my own loan and they told me I was behind one payment. I explained to them I was not behind all of my payments have been made on time. What they did was when I made my October payment (which clearly had the account# and loan# that the payment should have been applied to on it) they took it upon themselves to apply the payment to my dad's loan #2 which was 3months behind instead of my loan #1 since mine was current. Therefore, they are saying my November payment went towards my October payment and I am now deliquent on my November payment. Which I have just been made aware of on 12/4/06. Can they do this? They have affected my credit and it will show 2 late payments on this loan, in which I have not truly been late they decided to put the money elsewhere.

Please help

You can try to resolve it but if they will not budge then file in small claims court. They may argue your loan docs allow them to offset one loan against another but make them prove it if so.