California Auto Finance SCRA Case: $30,000 for One Repossession

What happened

The United States sued California Auto Finance on March 28, 2018 in the Central District of California, Southern Division, and on June 14, 2018 amended the complaint to add 3rd Generation, Inc., which, the amended complaint says on information and belief, does business as California Auto Finance from the same address in Orange, California. It describes a privately held indirect auto lender specializing in subprime loans whose website called it "one of the top sub-prime lenders in California and other southwestern states" (amended complaint paragraphs 5 to 9).

The case began with a recruit. On September 10, 2015 she bought a used 2006 Chevrolet HHR from a dealership in Glendale, Arizona, put $1,000 down, financed $7,572.07 at 24 percent, and made her first payment on October 19, 2015. She enlisted on April 13, 2016 with orders to report to Fort Leonard Wood, Missouri on May 9, and sent the lender a copy of the orders on April 15. On May 9, 2016, the day she began active service as an Army private, the lender repossessed the car without a court order from her grandmother's home in Cedar Rapids, Iowa, and it was sold at public auction on or about May 25. She contacted the Justice Department on November 17, 2016, and the Department notified the lender of its investigation on December 16, 2016 (paragraphs 10 to 17).

The amended complaint says the defendants granted SCRA repossession protection only to servicemembers who provided deployment orders, although Section 3952 requires no notice or orders of any kind, and had no policies to verify a borrower's military status before repossessing (paragraphs 22 to 24).

A second repossession turned up in the list the defendants produced of their repossessions from December 16, 2011 to December 7, 2018 (consent order paragraph 18). The United States alleges in the order that an Army specialist financed a used 2005 Acura RSX at 22.95 percent on October 11, 2014, told the lender several weeks before leaving that he was entering the military and could not communicate during training, entered the Army on August 30, 2016, and lost the car to a repossession without a court order on September 7, 2016. It adds that the repossession severely damaged his credit, that he could not buy another car and relied on rideshares and taxis at Fort Benning, seven miles from the town and most stores, and that he deployed to Afghanistan from March to November 2018 (paragraph 19). The defendants deny both accounts (paragraph 21). The court entered the order on March 12, 2019 for a five-year term.

The law behind this: 50 U.S.C. § 3952

Protection under installment contracts for purchase or lease: read the statute , or read § 3952 in plain English, with its enforcement record .

Servicemembers who are going through basic training or another kind of military service should not have to worry that their cars will be repossessed with no court supervision during their time of service to our country.

We have a legal and moral duty to safeguard the rights of our men and women in uniform.

Who was covered

Two servicemembers: the private whose complaint started the investigation and the specialist. The order recorded that the private had already reached a separate private settlement with the defendants, and it set the $30,000 for the specialist (consent order paragraphs 22 and 23). If the defendants found more repossessions that broke the SCRA, they had to tell the United States and compensate those accounts under the order's terms (paragraph 28). The order counted as protected a servicemember who made a deposit or at least one installment payment before entering military service (footnote 1).

What the settlement paid

• $30,000 to the specialist. Once the United States told the defendants it had his signed release, they had ten days to send the check to its counsel, who was then to deliver it to him (consent order paragraphs 22, 25 and 26). DOJ's March 6, 2019 release called it the highest amount the Department had ever recovered for a single servicemember in an automobile repossession case.
• Within 15 days of entry, requests to the three major credit bureaus and any others the defendants reported to that they delete the trade lines for the identified accounts. The defendants could not pursue any deficiency, had to indemnify against third parties who did, and had to return deficiency payments already made; the order also barred any set-off for debts the recipients supposedly owed (paragraphs 27, 30 and 31).
• A $50,000 civil penalty to the Treasury within ten days (paragraph 33).
• SCRA policies within 30 days: a DMDC check of every borrower at three points, within two business days before any referral or repossession, within two days after the vehicle is taken, and within two business days before it is disposed of; an offer within 72 hours to return any vehicle found to belong to a protected servicemember, with the repossession charges reversed; and, where the lender started the waiver process, at least 30 days' notice before the planned repossession on a notice following the order's Exhibit A form (paragraph 10).

Why this case matters

Neither soldier was deployed when the car went. By the government's account, the private lost hers on May 9, 2016, the day she began active service, and the specialist lost his eight days after he entered the Army, and both had told the lender they were joining. The amended complaint says the lender protected only servicemembers who could show deployment orders. Section 3952 asks two things: whether the servicemember paid a deposit or installment before service began, and whether the owner is in military service when the vehicle is taken. Both were in military service from the day they reported, training included, so cars financed and paid on before enlistment needed a court order before anyone took them.