For the third time in about 13 months, the Justice Department has reached a settlement with a finance company for violating the Servicemembers Civil Relief Act (SCRA) in connection with vehicle repossessions.

This time Westlake Financial Services and its subsidiary, Wilshire Consumer Capital, have agreed to pay $760,788 to resolve allegations that the companies did not follow federal regulations by repossessing 70 vehicles owned by SCRA-protected servicemembers without first obtaining the required court orders.

During its investigation, the Justice Department found that Westlake and Wilshire had failed to adopt policies and procedures necessary to ensure that their motor vehicle repossessions complied with the SCRA. Westlake purchases services subprime and near-subprime retail installment sales contracts while Wilshire, which does business as Wilshire Consumer Credit, originates and services vehicle title loans

Officials said the agreement requires Westlake and Wilshire to provide $10,000 in compensation to each of the 70 affected servicemembers, plus any lost equity in the vehicle with interest.  Westlake and Wilshire also must repair the credit of all affected servicemembers, pay a $60,788 civil penalty to the United States and determine, in the future, whether any vehicle it is planning to repossess is owned by an SCRA-protected servicemember. 

If so, Westlake and Wilshire will not repossess the vehicle without first obtaining a court order or valid waiver of SCRA rights.  The agreement also contains provisions ensuring that all eligible servicemembers will receive the benefit of the SCRA’s 6 percent interest rate cap on their auto loans.

The DOJ indicated the agreement resolves the claims and causes of action asserted in the United States’ Complaint against Westlake and Wilshire filed in the United States District Court for the Central District of California, and the parties will stipulate to the dismissal of the complaint once Westlake and Wilshire deposit the funds required by the settlement agreement into an escrow account and pay the civil penalty to the United States. 

Westlake and Wilshire will contact servicemembers to be compensated through this settlement in the upcoming months.  They will locate victims and distribute payments at no cost to servicemembers.

Officials shared that this matter came to the department’s attention in 2016, when the Consumer Financial Protection Bureau’s Office of Servicemember Affairs notified the department that it had received a complaint that Westlake and Wilshire were conducting motor vehicle repossessions in violation of the SCRA.

The Justice Department reiterated that the SCRA protects servicemembers against certain civil proceedings that could affect their legal rights while they are in military service.  It requires a court to review and approve any repossession if the servicemember took out the loan and made a payment before entering military service. The court may delay the repossession or require the finance company to refund prior payments before repossessing.

The court may also appoint an attorney to represent the servicemember, require the finance company to post a bond with the court and issue any other orders it deems necessary to protect the servicemember. 

By failing to obtain court orders before repossessing motor vehicles owned by protected servicemembers, officials said Westlake and Wilshire prevented servicemembers from obtaining a court’s review of whether their repossessions should be delayed or adjusted to account for their military service.

This development arrived after the Justice Department reached an agreement with CitiFinancial Credit Co. in September as well as Wells Fargo Dealer Services last September for SCRA violations.

“The members of our armed forces should be able to devote their full attention to their duties without having to worry about whether their legal rights will be violated by creditors,” Acting Assistant Attorney General John Gore said.  “We honor all servicemembers for their sacrifice and service to our nation, and this settlement signals our ongoing commitment to protecting the rights of our men and women in uniform.”

Acting United States Attorney Sandra Brown of the Central District of California added, “The women and men who serve in the armed forces protect our country from danger every day.

“Given the enormous sacrifice they make for all of us, we have a responsibility to ensure that their rights are protected. Westlake and Wilshire did not live up to this responsibility,” Brown went on to say. “But the settlement we have reached will fix the lending practices that led to violations, and vindicate the rights of the servicemembers affected.”