On September 27, the U.S. Department of Justice (“DOJ”) announced that it had entered into a $760,000 settlement with two affiliated auto finance companies stemming from allegations that the companies 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. The DOJ simultaneously filed a complaint against the companies in the U.S. District Court for the Central District of California.
This settlement arises from a complaint against the companies received by the Consumer Financial Protection Bureau, which was forwarded to the DOJ. The DOJ’s investigation revealed at least 70 alleged instances in which the companies repossessed vehicles owned by servicemembers protected by the SCRA. The DOJ also alleged that the companies failed to institute policies and procedures necessary to ensure compliance with the SCRA in repossessing vehicles. For example, the companies allegedly did not have policies in place to require checking an automated database accessible to lenders to confirm whether servicemembers are SCRA-protected.
The companies did not admit liability in agreeing to the settlement. However, they agreed to pay allegedly affected servicemembers a total of $700,000 in compensation, or $10,000 per alleged incident, to delete negative trade lines on servicemembers’ credit reports with the major credit reporting agencies, to pay a civil penalty of $60,788 to the United States, and to update their SCRA training and policies and procedures. The companies also agreed to allow the DOJ to search their repossession records, and to pay additional compensation if any additional violations are discovered.