Auto Finance Could Be DOJ's Next Focus in SCRA Enforcement

Auto Lending News Reports:

The down payment assistance for auto financing arena could be the next target of the Department of Justice in order to enforce the Servicemembers Civil Relief Act after the recent announcement that two towing companies have settled an action alleging violations of the SCRA.

According to firm Ballard Spahr, if the DOJ targets down payment assistance for auto financing in future SCRA enforcement actions, it could target actions like:

- Failing to reduce a servicemember?s interest rate as required;
- Repossessing property purchased by a servicemember under an installment contract without a court order;
- Failing to comply with SCRA requirements related to a lease termination requested by a servicemember.

Indeed the Consumer Financial Protection Bureau? through its Office of Servicemember Affairs? has identified the SCRA as a focus for its own examinations and enforcement actions which could be a sign of whats to come.?

In 2009, after an amended complaint against two towing companies was filed in federal court in Virginia, the DOJ alleged that the two companies towed the cars of servicemembers who were on active duty and sold the cars at auction without obtaining a court order. The DOJ claimed the sales violated the SCRA provision prohibiting someone who holds a storage lien on property of a servicemember from enforcing the lien while the servicemember is on active duty, and for 90 days thereafter, without a court order.

From jdsupra.com: The DOJ?s consent order provides relief to 26 servicemembers whose cars were alleged to have been towed and sold by the defendants in violation of the SCRA. It requires the defendants to pay $75,000 in damages and request that all major credit bureaus remove any negative entries resulting from information reported by the defendants.

Ballard Spahr points out that the firm has counseled auto finance companies on the implications of the consent order on their operations as well as on the likelihood of related DOJ enforcement actions.

I wonder who might be privy to this case or others like it that could be a sign that auto finance companies are becoming a target of the DOJ.

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