Westlake and Wilshire SCRA Case: 70 Cars, at Least Four on Title Loans

What happened

On September 27, 2017 the United States filed suit in federal court in Los Angeles (Central District of California, Western Division) against Westlake Services, LLC, which does business as Westlake Financial Services, and its wholly owned subsidiary Wilshire Commercial Capital, LLC, which does business as Wilshire Consumer Credit. Both are headquartered in Los Angeles. The complaint describes Westlake as an indirect lender that buys and services subprime and near-subprime auto loans, and Wilshire as a lender that extends auto title loans directly to consumers, largely over the internet, and it alleges that both specifically target servicemembers, including junior enlisted members. The settlement agreement was executed that day too.

The Consumer Financial Protection Bureau's Office of Servicemember Affairs told the Justice Department on July 11, 2016 that it had received a complaint about the companies' repossessions. DOJ opened its investigation on October 21, 2016, and it reviewed data on all of the companies' repossessions from October 21, 2011 to that date. The complaint counts at least 66 Westlake repossessions on installment contracts, charged under Section 3952(a), and at least four Wilshire repossessions on title loans, charged under Section 3953(c) because those loans originated before service and were secured by a security in the nature of a mortgage.

The complaint points to a specific policy gap. The companies' rules required a Defense Manpower Data Center check to confirm military status before granting a 6 percent interest rate reduction under Section 3937, but did not require one before repossessing a vehicle without a court order.

The agreement barred repossessing a protected servicemember's vehicle without a court order or a valid waiver (paragraph 9). It required status checks at three points: no more than two business days before a loan is referred for repossession, two to five business days after the vehicle is taken, and no more than two business days before it is sold (paragraph 10(a)). If a protected borrower was found after the vehicle was taken, the companies had to try within 24 hours to reach the borrower, offer to return the vehicle, and reverse the repossession charges (paragraph 10(c)). A 2022 addendum over interest rate benefits, which has its own page, extended the agreement's term to September 27, 2024.

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 .

The members of our armed forces should be able to devote their full attention to their duties without having to worry about whether their legal rights will be violated by creditors.

Westlake and Wilshire did not live up to this responsibility.

Who was covered

The owners of the 70 vehicles the United States found were repossessed in violation of the SCRA between October 21, 2011 and October 21, 2016 (settlement agreement paragraph 21), plus any further unlawful repossessions the United States identified in the companies' list of their repossessions from October 22, 2016 to the agreement's effective date (paragraph 22). Section 3952 protection runs during military service; for loans covered by Section 3953, like the Wilshire title loans, the agreement notes it runs one more year after service ends (footnote 1). Non-servicemember borrowers on the title share in the equity payment.

What the settlement paid

• $700,000 placed in escrow to fund the payments, with the companies obliged to add whatever more is needed if the amounts owed run higher (settlement agreement paragraph 20).
• Per repossession: $10,000, all of it to the servicemember borrower on the note once that servicemember signs the declaration and release; any lost equity, figured by starting from the vehicle's retail value in the NADA Guide on the repossession date and subtracting what the borrowers still owed, liens and certain disbursements; and interest on that equity from the sale until payment at the 28 U.S.C. § 1961 rate (paragraphs 23 and 24). Equity and interest are split equally among all borrowers on the title who sign the release. The United States credits any remediation already given, including return of the vehicle (footnote 8).
• The companies may not pursue any deficiency left after these repossessions, must refund deficiency payments already made, and must ask all three major credit bureaus to delete the trade lines tied to the wrongful repossessions (paragraph 34).
• A $60,788 civil penalty due within 30 days (paragraph 36). DOJ's 2017 release put the amount the companies agreed to pay at $760,788.

Why this case matters

The companies already ran the military status lookup: their written policy required it before granting a lower interest rate, and did not require it before a repossession. The same check that guarded the rate request was missing from the decision to take the car. Title loan borrowers should look closely at the Wilshire count: a vehicle pledged for a title loan taken out before service can fall under Section 3953, whose protection lasts a year past the end of service, longer than the Section 3952 shield on an ordinary car loan.