Washington, DC – February 25, 2015 — Auto lender Santander Consumer USA agreed to pay at least $9.35 million for improperly repossessing more than 1,100 vehicles from active duty military service members, the Justice Department said Wednesday.
Under federal law, service members have additional rights before a lender can seek to foreclose or repossess a vehicle for nonpayment.
“By failing to obtain court orders before repossessing motor vehicles owned by protected service members, Santander prevented service members from obtaining a court’s review of whether their repossessions should be delayed or adjusted in light of their military service,” the Justice Department said.
The settlement covers the improper repossessions of 1,112 motor vehicles between January 2008 and February 2013 and represents the largest settlement for illegal automobile repossessions ever obtained by the United States. It must be approved by a federal judge in Texas.
The law requires a court to review and approve any repossession “if the service member took out the loan, and made a payment, before entering military service.” A judge may delay the repossession or require a lender to refund prior payments before repossessing a vehicle or may appoint an attorney to represent the service member, require the lender to post a bond with the court and issue any other orders under the Servicemembers Civil Relief Act.
“This is a just resolution that will provide service members with financial relief and help repair their bad credit caused by Santander’s improper repossessions and fee collections with respect to more than 1,100 cars,” said Acting Associate Attorney General Stuart Delery. “The Department of Justice will continue devoting time and resources to protect our service members and their families from such unjust actions and hold bad actors accountable.”
The settlement comes amid growing scrutiny of auto lenders by the Justice Department and state attorneys general for a variety of issues, including lending practices. The Justice Department has subpoenaed the lending unit of General Motors Co. among other lenders as part of a review to determine if banks were misled into buying some auto loans.
In December, Toyota Motor Credit Corp., the lending arm of the world’s largest automaker, said it has been accused of discriminatory pricing of loans by the Justice Department and the Consumer Financial Protection Bureau. The Justice Department and the CFPB want Toyota Credit to pay fines and make changes to its pricing practices.
The Justice Department said Santander initiated and completed 760 repossessions, without court orders, of motor vehicles owned by service members. The agreement requires Santander to pay $10,000 plus compensation for any lost equity plus interest to each of these service members.
The bank is a unit of Spain’s Banco Santander.
The lawsuit also alleges that Santander sought to collect fees arising from an additional 352 repossessions that unrelated motor vehicle lenders had conducted in violation of the law before Santander acquired the loans. The agreement requires Santander to pay $5,000 to each of these service members.
Santander also must repair the credit of all impacted service members, the Justice Department said.
For future repossessions, the government will require Santander to check the Defense Department’s database to see if a car’s owner is in military service prior to conducting a repossession.
The Department of Justice initially learned of Santander’s repossession practices through a referral from the U.S. Army’s Legal Assistance Program. The referral involved a claim that Santander illegally repossessed the car of a service member in the middle of the night after having been informed that he was at basic training.
The settlement also requires Santander to conduct a review and provide compensation for any additional unlawful repossessions that may have occurred since February 2013.
In February 2013, Chrysler Group LLC announced a deal with Santander to form Chrysler Capital, which will replace Ally Financial Inc. as the automaker’s preferred lender. The private-label agreement will allow Chrysler Capital to provide financing to customers and dealers.
The company — now part of Fiat Chrysler Automobiles NV — has had a long-standing relationship with Santander, which is Spain’s largest bank. Chrysler had previously been using Santander to help provide subprime loans to customers in the United States.
Source, The Detroit News; http://www.detroitnews.com/story/business/autos/2015/02/25/auto-lender-agrees-million-doj-settlement/23996561/
Repo 1784 you made my point. Thank you. Whether you agree with the law or not, it has to be followed and since I have been in this industry since the Vietnam era the scenario you presented is BS. I personally know of one of these cases where the adjuster was so ignorant that when the wife told him her husband was in the reserves and got called up four months before and was in Iraq, that she had told the collector from Santander and he still took the car because he wasn’t going to get paid otherwise. The Army demanded that Santander return the car and they refused. Ten Grand isn’t near enough. Left her with out transportation and young children. A professional would have verified the information given to him and backed off. The agency owner was so afraid of losing Santander business that he should have known to give the car back, no charge and probably nothing else would have happened. Pay peanuts get monkeys.
Part of the Smoke and Mirrors sales pitch that forwarders use to clients is that by using a Forwarder a client can “layer” themselves from “liability”. Looks like the New Sheriff (CFPB) doesn’t buy that scenario. When will clients wise up? Save Money–Go Direct–Cut out the Middleman (Forwarder).
repo1784–so you think the outcome is unfair. Get out your Forwarding checkbook and hire some lobbyists and change the law.
If the truth be known, 50% or more of the repossessions, in most cases, were legitimate. The government only looks at a person as being in the military, AFTER they sign up. One question remains, in my opinion, and that is “Was the debtor behind on their bill/contract prior to entering in the military?” The SSCRA works in reverse – no matter when they enter, they are covered. Do they take into account the standards required of our soldiers? I agree, that if the contract is current, the SSCRA should cover the soldier and/or family. If the contract is in a delinquent status and in danger of being repossessed, why should SSCRA cover them? They weren’t paying when they weren’t active duty in the first place. The standards and compliance required for direct repossession vendors are, at times, excruciating, but worth it to receive their assignments. I don’t believe the “forwarding houses” are held to the same standards. I simply believe that the SSCRA bill needs to be re-visited. In regards to the guy that went to basic training….he shouldn’t be covered and shouldn’t be compensated. He probably didn’t tell the bank he went in and then hid the car at his mom’s house.
We as recovery companies are expected to keep ourselves and our staff trained and certified when are we going to require the same for the forwarders, we have experienced the most uninformed people on that side of the fence, makes no sense and they are building empires of the back of the working man and to agree with Steve in the previous post paying slave wages.
Isn’t it interesting that Santander just spent a load of money proving that they hire the least informed least trained recovery companies in the United States! You get what you pay for, and then some when you get caught. All companies that employ forwarders and pay slave wages should expect the same to thing to happen to them. I only wish it had been more.