Auto Company Pays $2 Million to Settle SCRA Claims Over Military Leasing Practices

The financial arm of a national automobile company has agreed to settle claims brought by the U.S. Department of Justice (DOJ) for failing to refund up-front auto lease payments to service members who terminated their leases early due to military orders.  Under the terms of the settlement, the company will pay over $2 million to the 492 affected service members.

The settlement resolves a complaint filed by the DOJ alleging that the company violated the Service Members Civil Relief Act (SCRA), which provides certain protections in lending for service members during periods of military service. Relevant for the purposes of this settlement, the SCRA permits service members to end motor vehicle leases early without penalty upon entering military service or receiving orders for a permanent change of station or to deploy.  If a service member lawfully terminates an automobile lease, the SCRA requires that the service member be refunded all lease amounts paid in advance for the period after the effective date of termination.

The DOJ alleged that the company violated the SCRA by failing to refund portions of advance lease payments made at lease signing in the form of cash, rebates, vehicle trade-in credit, or other credits, when service members terminated their leases early due to military orders.  Specifically, the DOJ alleged that the company, as a matter of policy or practice, denied refunds to service members of their remaining pre-paid capitalized cost reduction (CCR) amounts, which serve to reduce a lessee’s ongoing monthly lease payments.

The settlement agreement requires the company to deposit $2,165,518.84 into an escrow account for the purposes of compensating all affected service members that terminated leases since August 24, 2011.  It also requires the company to pay $60,788 to the U.S. Treasury.   Additionally, under the terms of the settlement, the company must develop and implement policies and procedures that ensure service members who terminate their auto leases early receive a refund of all eligible lease amounts paid in advance.

The company neither admits nor denies the factual allegations and statements of law contained in the settlement agreement.

The settlement agreement is available here: https://www.justice.gov/opa/press-release/file/1037991/download.