Integrity Asset Management SCRA Settlement: Automatic Termination Fees

What happened

The United States filed its complaint against Integrity Asset Management LLC in federal court in El Paso on August 19, 2022, together with a proposed consent order. Judge David C. Guaderrama signed and entered it on September 2, 2022. The complaint describes a Texas company managing approximately 55 multi-family apartment properties in and around El Paso (complaint paragraphs 8 and 9).

In or around October 2018, by the complaint's account, several servicemembers told military legal assistance attorneys at Fort Bliss that Integrity had mishandled their SCRA termination requests. After those attorneys complained, DOJ reviewed Integrity's policies and the tenant files of servicemembers who had asked to terminate, and concluded that from October 1, 2016 to February 11, 2019 Integrity imposed early termination charges on at least 17 of them, ranging from approximately $132 to approximately $2,032 (paragraphs 10 to 13 and 20).

The charges took several forms. Some were chargebacks of rent concessions or discounts, under what the complaint calls a company-wide policy from approximately 2016 to 2019; others were termination penalties and insufficient notice fees. For at least some period between 2016 and 2019, the complaint alleges, Integrity ran software programmed to charge early termination and insufficient notice fees to tenants automatically, regardless of whether the tenant was terminating under the SCRA (paragraphs 14 to 17). The consent order's summary of the allegations adds acceleration of rent (consent order paragraph 3).

On at least two occasions, the complaint says, Integrity would not accept a commander's letter in place of official orders. One servicemember was charged an additional month of rent of approximately $1,175, and the spouse spent several months, while the servicemember was deployed, trying to correct it; the other was charged an extra month of approximately $735 (complaint paragraph 18). Section 3955(i)(1) counts any notification, certification or verification from the commanding officer as military orders.

The law behind this: 50 U.S.C. § 3955

Termination of residential or motor vehicle leases: read the statute , or read § 3955 in plain English, with its enforcement record .

Early lease termination rights are critically important for members of our armed forces as they limit the costs and expenses associated with military moves and deployments.

Our office is committed to ensuring that landlords and property managers honor the rights of servicemembers and their families who willingly sacrifice for us all,

Who was covered

The at least 17 servicemembers the United States determined were charged early termination fees, and the at least two whose terminations it found improperly denied, between October 1, 2016 and February 11, 2019, on lists it gave Integrity (consent order paragraphs 19 and 20). Where Integrity had already taken remedial action, the United States adjusted the award (paragraph 21). The credit repair terms refer to the 19 servicemembers' accounts (paragraph 33). Anyone then residing in Oregon had to return the release in Exhibit B before payment (paragraph 26).

What the settlement paid

• Integrity owed a $45,325.59 deposit, due within ten business days, into an escrow account titled for the benefit of aggrieved persons (consent order paragraph 22); DOJ's case page and release print $45,325.
• For each servicemember charged: the termination charge paid, refunded, plus twice the fee charged. For each of the two denials: rent or other lease charges paid for the period after termination would have taken effect, any early termination charges paid after notice, and two times the sum of those (paragraphs 19 and 20).
• Checks within 60 days with a letter saying that cashing them releases the SCRA claims, preceded by skip tracing and a National Change of Address search, plus accountings to the United States every six months for four years. Four years after entry, funds for anyone not located and compensated were to be reported to the Texas Comptroller of Public Accounts as unclaimed property (paragraphs 25 to 30).
• A $62,029 civil penalty within 60 days (paragraph 36). Integrity also had to send written requests within 60 days to Equifax, Experian, TransUnion and any other database receiving its reports to remove negative entries, and was barred from pursuing related balances (paragraphs 33 and 35). The order ran four years from its September 2, 2022 entry (paragraph 48).

Why this case matters

A landlord's billing system answers to the SCRA too. The complaint alleges Integrity's software billed early termination and insufficient notice fees whether or not a tenant was leaving under the SCRA, and the order bound Integrity together with its attorneys, contractors and vendors (consent order paragraph 8). Its required policies also barred Integrity from denying an SCRA termination request, or rescinding its approval, because the servicemember owed money under the lease, and had it accept notice by e-mail, fax, text message or internet portal (paragraph 11(b) and (c)). An insufficient notice fee billed after you gave notice on orders is the kind of charge the United States alleged here.