The U.S. Department of Justice has questioned BMW’s leasing arm over its actions regarding overdue payments from active duty military members, according to a documents obtained by Bloomberg. Though it’s unclear what drew officials’ attention, auto lenders are increasingly being targeted for violating the Servicemembers Civil Relief Act, which requires them to seek a court order before repossessing an active duty military member’s vehicle. BMW Financial Services says it is unsure just how many of its leases fall under the reach of the SCRA and refused to comment further.
But news of the inquiry comes amidst rising concern over the ongoing explosion of subprime auto loan debt in this country. And while this appears to be the first review involving a manufacturer’s financing branch, some big-name banks and lenders have recently been targeted for SCRA violations and other questionable practices.
Last year, the Justice Department fined Wells Fargo $24 million over its illegal repossession of 413 cars of active duty members dating back to 2008. The investigation stemmed from a single incident in 2013 where the bank repossessed an Army National Guardsman’s used Ford Escape while he was preparing to deploy to Afghanistan. Upon returning, he was also served with a $10,000 balance even though the bank had sold his vehicle at auction.
The Justice Department also went after Santander Consumer USA, the country’s largest subprime auto lender, hitting them with a $9.35 million fine in 2015 over similar allegations involving over 1,000 military members’ cars. HSBC Holdings and Capital One Financial Group have also been punished for violating the SCRA.
So even though the law is on the books, it seems clear companies can get away with ignoring it until someone speaks up.