HSBC Finance Corp. has agreed to pay $434,500 in a settlement with the Justice Department to resolve allegations that the lender violated the Servicemembers Civil Relief Act (SCRA). From 2008 to 2010, HSBC repossessed 75 cars owned by servicemembers without obtaining the necessary court orders, according to a DOJ press release.
During an investigation, the Justice Department discovered that HSBC conducted repossessions without court orders, “even when it had evidence in its own records suggesting that a borrower could be a protected servicemember,” according to the release.
HSBC sold its car lending operations, HSBC Auto Finance Inc. — which originated and serviced auto loans until 2010 — to Santander Consumer USA Inc.
“HSBC repossessed cars without taking into account their owners’ ongoing service to our country,” Principal Deputy Associate Attorney General Bill Baer said in the release. “This Settlement rights [that wrong, compensates the affected servicemembers, and honors our commitment to making sure military members are treated fairly at all times.”
The DOJ previously entered a settlement with SC in February 2015, which provided servicemembers with repo compensation for violations of the SCRA.
Most servicemembers compensated through this settlement also received partial compensation through the settlement with Santander, and this agreement requires HSBC to pay $5,500 to each of those servicemembers. Affected servicemembers who didn’t receive payments from the Santander settlement must be paid $11,000 by HSBC, according to the release. HSBC also must repair the credit of all affected servicemembers.
The SCRA protects servicemembers from a group of civil proceedings that could affect their legal rights while they are in military service. The act also requires a court review and approved repossession if the servicemember took out the loan and made a payment before entering military service. The court could delay repossession, or require the lender to refund prior payments before repossessing the vehicle.
The settlement will be subject to approval by the U.S. District Court of the Northern District of Illinois.
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