California Subprime Lender Settles DOJ Investigation Over Unlawful Auto Repossessions

A California-based auto lender has agreed to pay the Department of Justice $80,000 following allegations that the lender violated the Servicemembers Civil Relief Act, a law designed by the DOJ to ease financial burdens on servicemembers during periods of active military service.

California Auto Finance, based in Orange County, Calif., allegedly repossessed vehicles of two active duty servicemembers without first obtaining the required court orders, according to court documents filed March 6.

The subprime lender is looking to resolve the violations without admitting any liability and has agreed to pay $30,000 to compensate one servicemember whose car it unlawfully repossessed and will pay a civil penalty of $50,000 to the United States. The fine is “the highest amount ever recovered by the department for a single servicemember in an automobile repossession case,” the DOJ noted in a press release.

The DOJ began investigating the lender’s repossession activities in November 2016 after receiving a complaint from U.S. Army Private Andrea Starks, whose vehicle was repossessed without a court order on May 9, 2016, her first day of military training duty at Fort Leonard Wood, Mo.

After further investigation, the DOJ confirmed Stark’s vehicle was illegally repossessed. Starks reached a private settlement with California Auto Finance before the proposed consent order was filed.

Also, the DOJ discovered California Auto Finance’s operations did not have any written policies or procedures that addressed the SCRA’s protections against non-judicial auto repossessions. Further investigation revealed that California Auto Finance violated SCRA rights a second time by illegally repossessing the vehicle of U.S. Army Specialist Omar Martinez despite Martinez informing the lender that he would be entering the military.

California Auto Finance repossessed Martinez’s vehicle during his first month of military service. The repossession “severely” damaged Martinez’s credit, the filing notes. As a result, he was unable to purchase a new car. In addition to the fine, to compensate Martinez, the DOJ is ordering California Auto Finance to take steps to repair Martinez’s credit. Additionally, California Auto Finance is being ordered to take steps to improve its repossession practices.

“This case sends a message to financial institutions, large and small, that they must live up to their obligations to our servicemembers,” Assistant Attorney General Eric Dreiband said in the press release. “We will continue to vigorously pursue lenders who fail to take the simple steps necessary to determine, before repossessing a car, whether it belongs to a servicemember.”

The proposed consent order is still subject to approval by the United States District Court for the Central District of California.

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