COPOCO Credit Union SCRA Case: The Motion to Dismiss That Failed

What happened

The United States sued COPOCO Community Credit Union, a Michigan-chartered, federally insured credit union headquartered in Bay City, in the Northern Division of the Eastern District of Michigan on July 26, 2016. The complaint put its total assets at $101,583,663 as of March 31, 2016, including loan assets of nearly $68 million (complaint paragraphs 5 and 7).

The lead account was a married couple who, while living in Michigan, bought a 2010 GMC Terrain from a dealership in April 2014 with a COPOCO loan and made their first payment in May 2014. They moved to Washington State, where the husband enlisted in the Army as a private first class and began full-time active duty in January 2015; that month his wife told COPOCO the next payment might be late because of the military's payday schedule. They fell behind in the summer of 2015 and began catching up in September. On or about October 5, 2015, while he was away for additional military training, COPOCO took the car from their driveway in Lacey, Washington, with no court order and with their two-year-old daughter's car seat inside. His wife first thought it had been stolen. She called the Department of Justice on October 6, and a Department attorney arranged with COPOCO that same day for the car to come back that evening; she still missed work (complaint paragraphs 8 to 11).

The Department opened its investigation on October 29, 2015. The complaint alleges that until at least October 6, 2015 COPOCO's repossession procedures included no Defense Manpower Data Center check and no other way of learning a borrower's military status, and that until at least December 16, 2015 it had no written policies on SCRA compliance. It charged both a pattern or practice and a violation raising an issue of significant public importance (paragraphs 12, 15, 16, 19 and 20).

COPOCO moved to dismiss, arguing the complaint alleged neither ground; the United States' opposition said the motion did not dispute that a violation was adequately pleaded. On January 5, 2017 Judge Thomas L. Ludington denied the motion. His opinion notes that the government need only satisfy one of the two grounds in § 4041(a), calls § 3952(a) a strict liability provision, and holds that a repossession practice with no DMDC check or other screening made more violations plausible and even likely, enough to plead a pattern or practice, while leaving the issue open for summary judgment if discovery did not bear it out (order pages 4 to 6). COPOCO's president signed the settlement agreement on July 5, 2017, and DOJ's case page dates the agreement July 6, 2017.

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 .

They cannot use ignorance of the law as an excuse and must instead actively ensure that they comply with the law.

Of the many sacrifices made by our military members while they are in service to our country, losing their cars to repossession should never be one of them.

Who was covered

Four servicemembers listed in the agreement: the private first class whose car came back, and three others whom COPOCO represented had never asserted any claim against it (agreement paragraphs 18 and 20). DOJ's release says the United States learned of those three after filing suit. Each had two years from the agreement to return a declaration and release, and payments not claimed in time were to go to the Treasury (paragraphs 22, 23 and 26). A servicemember counted as protected if he or she had paid a deposit or one or more installments before entering service, and reservists' and inductees' early alert periods counted at the time of repossession but not as service for the payment test (footnote 1). The terms also reached loans acquired from October 29, 2011 (paragraph 33).

What the settlement paid

• For the private first class: $7,500, of which $5,000 was to be applied to reduce his and his wife's principal balance on the car loan and $2,500 was to be paid to him (agreement paragraph 20(a)). DOJ's release says the couple will receive $7,500.
• For each of the other three: $10,000 minus any amount that was past due at the repossession and not later paid, all of it to the servicemember on the note, plus any lost equity measured against the vehicle condition report taken at repossession and interest on it, running from the repossession sale until payment at the rate 28 U.S.C. § 1961 sets, the last two divided equally among everyone on the title (paragraphs 20(b) and 21). COPOCO had 14 days to put sufficient funds in an interest-bearing escrow account and ten days after notice of a signed release to get each check to government counsel (paragraphs 19 and 24). DOJ's case page states $10,000 for each of the three without either adjustment, and its release adds lost equity but not the past-due deduction.
• A request, made along with the compensation, that each of the three major credit bureaus remove trade lines attributable to the wrongful repossessions; no pursuit of any remaining deficiency, indemnity against third parties who pursued one, and refunds of deficiency payments, apart from the past-due offset above (paragraph 28). A $5,000 civil penalty within 30 days (paragraph 30).
• Policies within 30 days, subject to United States approval: DMDC searches at three points, in the two business days before a loan goes out for repossession, within two days once COPOCO or its agent has the vehicle, and in the two business days before it disposes of the vehicle; no repossession from a protected borrower unless a court order, or a written waiver preceded by the Exhibit A notice, is in hand; and, if protection surfaces after the vehicle is taken, an offer to return it within 24 hours with the repossession charges reversed. A second set governed the 6 percent cap across all of a servicemember's loans, retroactive to the first day of eligibility, with no demand for orders showing an end date (paragraphs 9 and 10). Training, complaint reporting and a five-year term, since ended (paragraphs 13 to 17, 32 and 44).

Why this case matters

COPOCO's motion to dismiss argued, in effect, that one repossession is not a federal case. The court disagreed at the pleading stage: the opinion treats a violation like this one as the natural result of a repossession routine that never checks military status, and notes that information about any others is likely within the lender's control (order page 6). The settlement agreement then records the United States' determination that four repossessions violated the SCRA, where the complaint had named one. The other lesson is how this car came back: the spouse called the Justice Department, and the vehicle was returned that evening. A note for anyone searching this name: DOJ's case page for the 2018 Hudson Valley Federal Credit Union settlement in New York says its servicemembers' vehicles were ones "COPOCO unlawfully repossessed," although that case's own complaint is about Hudson Valley's repossessions; the two cases concern different credit unions in different states, and nothing in the COPOCO filings mentions Hudson Valley.