Banking and Finance Law Daily Nissan’s auto-financing company to pay $3M for alleged SCRA violations
Friday, August 2, 2019

Nissan’s auto-financing company to pay $3M for alleged SCRA violations

By Lisa M. Goolik, J.D.

The Justice Department alleged that Nissan Motor Acceptance Corporation unlawfully repossessed 113 vehicles and failed to reimburse upfront payments to servicemembers that lawfully terminated leases.

The auto-financing arm of Nissan North America, Nissan Motor Acceptance Corporation (Nissan MAC), has agreed to pay $3 million to resolve charges brought by the Justice Department for violations of the Servicemembers Civil Relief Act. The DOJ alleged that Nissan MAC repossessed 113 vehicles owned by SCRA-protected servicemembers without first obtaining the required court orders and failed to refund up-front capitalized cost reduction (CCR) amounts to servicemembers who lawfully terminated their motor vehicle leases early after receiving military orders. Most of the $3 million penalty will go to a settlement fund to compensate servicemembers whose rights were violated under the SCRA. Nissan MAC also agreed to revise its policies and procedures and conduct employee training to prevent future violations.

Special protections for servicemembers. The SCRA prohibits repossessing a motor vehicle from a servicemember during military service without a court order if the individual made a deposit or installment payment on the loan before entering military service. The SCRA also permits servicemembers to terminate motor vehicle leases early without penalty after entering military service or receiving qualifying military orders for a permanent change of station or to deploy. When servicemembers lawfully terminate motor vehicle leases, the SCRA requires that they be refunded all lease amounts paid in advance for a period after the effective date of the termination.

In it’s complaint, the DOJ alleged that individuals who lease vehicles from Nissan MAC often contribute an up-front monetary amount at lease signing, in the form of a cash payment, credit for a trade-in vehicle, rebate, or other credit, that may reduce the monthly payment the lessee must make over the term of the lease. The DOJ’s investigation revealed that when servicemembers terminated their motor vehicle leases early pursuant to the SCRA, Nissan MAC retained the entire CCR amount. The DOJ further alleged that Nissan MAC had conducted at least 113 repossessions of SCRA-protected servicemembers’ motor vehicles since 2008 without a court order.

Compensation for affected servicemembers. The settlement agreement covers all repossessions of servicemembers’ vehicles and leases terminated by servicemembers since Jan. 1, 2008. Under the terms, Nissan MAC must create a $2,937,971 settlement fund to compensate servicemembers whose rights were violated under the SCRA. Additionally, Nissan MAC must pay $62,029 to the U.S. Treasury.

The agreement also requires Nissan MAC to revise its policies and procedures and provide training to its employees and representatives to prevent future unlawful repossessions of servicemembers’ vehicles and ensure that servicemembers who terminate their auto leases early receive a full refund of all eligible pre-paid CCR amounts.

"Men and women in uniform risk their lives to serve our country, and Congress enacted the Servicemembers Civil Relief Act to protect them when they serve our nation," said Assistant Attorney General Eric Dreiband of the Justice Department’s Civil Rights Division. "The U.S. Department of Justice will continue to enforce the Act vigorously in order to protect servicemembers and to ensure that all covered industries comply fully with the law."

"The SCRA exists to offer protections to our military service members and to minimize undue financial burdens associated with deployments and other instances where our military servicemembers experience a profound and prolonged lifestyle change," said U.S. Attorney Don Cochran, for the Middle District of Tennessee. "We will aggressively hold those institutions and businesses accountable who are required to comply with the Act. Our military deserves no less."

Companies: Nissan Motor Acceptance Corporation; Nissan North America

MainStory: TopStory ConsumerCredit EnforcementActions Loans SCRA SecuredTransactions

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