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Thursday, February 29, 2024
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Bank Pays $9.4 Million for Illegal Repos

DALLAS (CN) - A U.S. subsidiary of Spanish banking giant Banco Santander will pay $9.4 million to settle claims it illegally repossessed more than 1,100 cars leased by military servicemembers on active duty.

Dallas-based Santander Consumer USA violated the Servicemembers Civil Relief Act when it repossessed the cars from 2008 to 2013, according to the United States federal lawsuit filed Wednesday.

The law protects servicemembers from civil proceedings while they are serving.

"One of those protections is the requirement that a court review and approve a lender's repossession of any motor vehicle owned by a servicemember if the servicemember took out the loan and made a deposit or an installment payment before entering military service," the complaint states.

"The court may delay the repossession or condition the repossession on the refunding of all or part of the prior installments or deposits made by the servicemember. The court may also appoint an attorney to represent the servicemember, require the lender to post a bond with the court and issue any other orders it deems necessary to protect the rights of the servicemember."

Prosecutors say Santander failed to obtain the court orders before repossessing 760 vehicles from January 2008 to February 2013, and tried to collect fees from another 352 repossessions from March 2010 to February 2013.

In one case, a car belonging to 19-year-old Army Specialist Joshua Davis, of Florida, was repossessed while he was in basic training.

"Defendant sold Specialist Davis' car at an auction, after seizing it during the middle of the night from outside his home, and then sent Specialist Davis a bill to pay a deficiency balance of over $9,000 (including nearly $800 in repossession fees), reported his deficiency balance to the major credit bureaus, and sold the deficiency balance to a third-party debt buyer," the complaint states.

In another case, Army National Guard Sgt. Charles Beard, of California, had his federal class action lawsuit against Santander thwarted when an arbitration clause in the loan documents was exercised.

"Requiring Sergeant Beard to resolve his dispute in a private, individual arbitration rather than a public class action lawsuit hindered the ability of Sergeant Beard to pursue relief for anyone but himself," the complaint states.

Santander agreed to pay servicemembers $10,000 apiece and "any lost equity" for each of the 760 repossessed vehicles. It will pay servicemembers $5,000 for each of the 352 repossessions in which it sough fees.

Santander spokeswoman Laurie Kight said the Department of Justice noted in the consent order the company "cooperated fully" with the federal investigation and has "taken steps to improve its servicing practices and compliance with the SCRA."

"Since 2012, SCUSA has used systemic controls to prevent improper repossessions of vehicles, including those who were contracted with SCRA-eligible customers," Kight said Thursday. "The majority of accounts found objectionable by the DOJ involved repossessions prior to 2012 and approximately one-third were accounts from other financial institutions that were converted to SCUSA accounts at a later date. The topic is separate and unrelated to the DOJ subpoena received in 2014 related to origination and securitization practices."

The company has "set aside financial reserves" for the settlement that will not require adjustments to publicly reported numbers, she added.

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