DOJ Obtains $907,000 Settlement for Auto Lender’s Repossession of Active Duty Servicemembers’ Vehicles

Auto Finance  •  Debt Collection  •  DOJ  •  Military Service Members  •  SCRA

On September 18, 2017, the Department of Justice (“DOJ”) announced that it had entered into a $907,000 settlement with an auto loan lender and servicer (“Defendant”).  In its co​mplaint,​ filed the same day in the United States District Court for the Northern District of Texas, the DOJ alleged that the Defendant had violated the Servicemembers Civil Relief Act (“SCRA”), 50 U.S.C. § 3901, et seq. by failing to obtain court orders prior to repossessing vehicles owned by covered active duty servicemembers.

This settlement arises from the investigation of another auto loan servicer, which had purchased loans from the Defendant, and which had settled claims with the DOJ in 2015 concerning similar allegations.  That settlement was previously covered by Enforcement Watch here.  The DOJ alleged that investigation into the files of that other servicer led to the discovery of the alleged violations at issue here, which are claimed to have taken place when the Defendant was servicing auto loans between 2007 and 2010.  The DOJ also alleged that while the Department of Defense provides lenders and servicers with an automated database to check whether servicemembers are SCRA-protected, the Defendant did not properly use the database.  For example, the DOJ alleged that the lender failed to check the database weeks or months before the repossession date and misapplied the definition of a protected servicemember​ by ignoring servicemembers in the reserve forces who had been ordered to report for duty.

The Defendant did not admit liability in agreeing to the settlement.  However, it agreed to pay allegedly affected servicemembers a total of $907,000 in compensation and to delete negative trade lines on their credit reports with the major credit reporting agencies.  The Defendant also represented that, while it no longer engages in auto loan lending or servicing, it would alert the DOJ at least 60 days prior to reentering the business, and that it would implement training policies and other procedures to ensure compliance with SCRA.

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