GM Financial to pay $3.5M to settle service members' claims
(CBS DETROIT) - GM Financial has agreed to pay over $3.5 million to resolve allegations it violated a U.S. federal law.
The financial institution, a subsidiary of General Motors, is accused of illegally repossessing 71 service members' vehicles and improperly denying or mishandling more than 1,000 vehicle lease termination requests, according to a news release from the Justice Department Wednesday.
The investigation began after the Justice Department received complaints accusing GM Financial of violating the Servicemembers Civil Relief Act (SCRA), which provides certain legal and financial protections for servicemembers and their families. The law prevents an auto finance or leasing company from repossessing a servicemember's vehicle without first obtaining a court order, as long as the servicemember made at least one payment on the vehicle before entering military service.
The SCRA also allows servicemembers to terminate a vehicle lease early after entering military service or receiving certain qualifying military orders. If a servicemember terminates a vehicle lease under the SCRA, the leasing company may not impose any early termination charges and must refund, within 30 days, any rent or lease amounts paid in advance.
"Members of our Armed Forces should not have to suffer financial hardship as a result of their service to our nation," said Assistant Attorney General Kristen Clarke of the Justice Department's Civil Rights Division. "The Civil Rights Division remains steadfast in its commitment to enforcing laws that safeguard the rights of our servicemembers so that they can devote their energy and attention to the defense of our country."
In a court filing, the department alleges that GM Financial improperly denied servicemembers' lease termination requests, charged servicemembers improper early termination fees or lease amounts after the date of termination, and failed to provide servicemembers timely refunds of lease amounts they paid in advance since 2015. According to the department, GM Financial's failure to properly handle servicemembers' lease termination requests resulted in more than 1,000 SCRA violations.
Under the consent order, GM Financial agreed to pay $3,534,171 to the affected servicemembers and $65,480 civil penalty to the United States. The amount includes:
- At least $10,000 to each of the 71 servicemembers whose vehicles were unlawfully repossessed.
- Refunds to servicemembers charged improper fees after terminating their vehicle leases along with additional damages of three times the fee or $500, whichever is greater.
- Refunds of certain payments, plus up to $5,000 in additional damages, for servicemembers who were improperly denied lease termination requests.
The order also requires GM Financial to repair the servicemembers' credit, provide SCRA training to its employees, and implement policies and procedures that comply with the SCRA.
"The last thing servicemembers should be worried about while deployed is paying off vehicle leases they don't want and can't use," said U.S. Attorney Chad E. Meacham for the Northern District of Texas. "As members of our armed forces put their lives on the line for our country, we are determined to protect their rights here at home."