Written by Bernadette Clair, Senior Regulatory Compliance Counsel
The Department of Justice recently announced a proposed consent order to resolve allegations against Santander Consumer USA Inc. (Santander) for violating the Servicemembers Civil Relief Act (SCRA). Santander allegedly initiated and completed 760 repossessions, without court orders, of motor vehicles owned by covered servicemembers, and allegedly attempted to collect fees arising from an additional 352 improper repossessions in connection with acquired loans. Santander has agreed to pay at least $9.35 million to resolve the lawsuit and must also repair the credit of all affected servicemembers.
The lawsuit is based on alleged violations of Section 532(a)(1) of the SCRA. Absent a waiver of rights by written agreement in accordance with Section 517, the SCRA requires a court order before vehicle repossession can occur if the servicemember took out the loan, and made a payment, before entering military service. From the statute:
“§ 532. Protection under installment contracts for purchase or lease
(a) Protection upon breach of contract
(1) Protection after entering military service After a servicemember enters military service, a contract by the servicemember for—
(A) the purchase of real or personal property (including a motor vehicle); or
(B) the lease or bailment of such property, may not be rescinded or terminated for a breach of terms of the contract occurring before or during that person’s military service, nor may the property be repossessed for such breach without a court order.
This section applies only to a contract for which a deposit or installment has been paid by the servicemember before the servicemember enters military service.” 50 U.S.C. App. § 532(a). (Emphasis added)
In addition to making compensation payments, the proposed consent order requires Santander to develop, and submit for approval, SCRA compliant policies and procedures for motor vehicle repossessions, policies and procedures for processing SCRA relief requests, and staff training materials. Refer to the complaint and consent order for complete details.
SCRA Resource Tip. The Department of Defense maintains a Defense Manpower Data Center database, designed to help verify if an individual is eligible for SCRA protections. The database is accessible here.
Have a great weekend everyone!