Violations for auto lenders and auto financing companies have federal regulatory oversight under the Federal Trade Commission and the Consumer Financial Protection Bureau.
But a recent settlement issued by the Department of Justice shows where the extent of the regulatory agencies ends.
Although several federal agencies have authority to take administrative action to enforce the Servicemembers Civil Relief Act (SCRA) against institutions they supervise, only the Department of Justice has the authority to file a civil action in court to enforce the SCRA.
That is what it pursued before announcing a $3 million settlement with Nissan Motor Acceptance Corp. regarding allegations that it repossessed 113 vehicles owned by SCRA-protected servicemembers without first obtaining the required court orders, and failing to refund up-front capitalized cost reduction (CCR) amounts to servicemembers who lawfully terminated their motor vehicle leases early after receiving military orders.
The settlement is the Justice Department’s 10th settlement with an auto finance provider since 2015 and exemplifies efforts to enforce the SCRA’s motor vehicle repossession and lease termination provisions, the department said in a press release.
“Men and women in uniform risk their lives to serve our country, and Congress enacted the Servicemembers Civil Relief Act to protect them when they serve our nation,” Assistant Attorney General Eric Dreiband of the Justice Department’s Civil Rights Division said in the release. “The U.S. Department of Justice will continue to enforce the act vigorously in order to protect servicemembers and to ensure that all covered industries comply fully with the law.”
U.S. Attorney Don Cochran, for the Middle District of Tennessee, added the department would aggressively hold institutions and businesses accountable who are required to comply with the act.
“The SCRA exists to offer protections to our military service members and to minimize undue financial burdens associated with deployments and other instances where our military servicemembers experience a profound and prolonged lifestyle change,” he said. “Our military deserves no less.”
Nissan Motor Acceptance Corp. is a Tennessee-based auto financing company that provides auto loans and leases for customers of Nissan and Infiniti. Individuals who lease vehicles from the company often contribute an up-front monetary amount at lease signing, in the form of a cash payment, credit for a trade-in vehicle, rebate, or other credit. A portion of this up-front amount can be applied to the first-month’s rent and certain up-front costs such as licensing and registration fees. The remainder, which is called the CCR amount, reduces the monthly payment the lessee must make over the term of the lease.
The release stated that an investigation into Nissan Motor Acceptance Corp. revealed that when servicemembers terminated their motor vehicle leases early pursuant to the SCRA, the company retained the entire CCR amount. The agreement requires Nissan Motor Acceptance Corp. to create a $2,937,971 settlement fund to compensate servicemembers whose rights were violated under the SCRA. Additionally, Nissan Motor Acceptance Corp. must pay $62,029 to the United States Treasury.
The agreement also requires Nissan Motor Acceptance Corp. to revise its policies and procedures to prevent future unlawful repossessions of servicemembers’ vehicles and ensure that servicemembers who terminate their auto leases early receive a full refund of all eligible pre-paid CCR amounts.