CarMax to pay at least $420K to settle allegations of illegal repossessions of troops’ cars

CarMax, the nation’s largest retailer of used cars, has agreed to pay at least $420,000 in damages to service members whose vehicles were allegedly illegally repossessed, the Justice Department announced Monday.

According to the consent agreement, CarMax repossessed the vehicles of “at least 28 service members who were in military service or had been called to military service,” during the period from March 1, 2018, through at least Oct. 24, 2023. Each service member will receive $15,000, plus any lost equity in the repossessed vehicle.

CarMax will also pay a civil penalty of $70,380 to the U.S. government.

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“The Department of Justice is proud to defend the rights of those who serve in our military and will continue to vigorously enforce the laws that protect them,” said Assistant Attorney General Harmeet Dhillon of the Justice Department’s Civil Rights Division, in the announcement about the settlement.

Under the Servicemembers Civil Relief Act, businesses are prohibited from repossessing service members’ vehicles without a court order, as long as the service member made at least one payment on the vehicle before entering military service. This allows a judge to consider the factors involved, such as deployment, and possibly delay action against the service member.

Justice officials allege that in some cases, CarMax repossessed some vehicles even after the owners told CarMax that they were in the military. The company also allegedly failed to extend the SCRA protections to reservists who had received orders to report for active duty.

According to the consent agreement, CarMax neither admits nor denies the allegations.

In a statement emailed to Military Times, CarMax officials stated, “CarMax Auto Finance has cooperated fully with the DOJ to reach a resolution to the allegations and has further strengthened our existing compliance program. The resolution between the DOJ and CarMax Auto Finance does not constitute an admission of wrongdoing by CarMax Auto Finance.”

Since 2003, CarMax Auto Finance has provided relief to more than 26,000 service members and dependents, in line with the SCRA, in the form of finance charge reductions and protection from vehicle repossession, CarMax officials stated.

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The company has taken action to enhance its processes for complying with the SCRA, expanded proactive screening and outreach and reinforced employee training, officials said.

CarMax is required to notify each affected service member by letter within 30 days, and must establish and maintain multiple cost-free methods for affected service members to contact them, including an email address, a website and a toll-free phone number. CarMax must also request that all the credit bureaus delete the negative information for accounts belonging to affected service members.

The settlement agreement also requires CarMax to send Justice officials its proposed SCRA policies and procedures for motor vehicle repossessions, including the review of military service information provided by borrowers, and searches of the Department of Defense Manpower Data Center database.

The agreement, which will be in effect for four years, lays out additional reporting requirements for CarMax.