The Department of Justice recently entered into a settlement with Hudson Valley Federal Credit Union to resolve allegations that it violated the Servicemembers Civil Relief Act (SCRA) by repossessing vehicles owned by servicemembers without first obtaining the required court orders. The settlement agreement requires Hudson Valley to pay $65,000 to compensate seven servicemembers whose vehicles were alleged to have been unlawfully repossessed and to pay a $30,000 civil penalty to the United States. The DOJ’s press release describes Hudson Valley as one of the largest credit unions in the country and the DOJ alleged in the complaint that as of year-end 2016, Hudson Valley had total assets of $4.445 billion, total deposits of $3.99 billion, and more than 275,000 individual and business members.
The SCRA, in 50 U.S.C. § 3952(a)(1), generally requires a court order to be obtained before the vehicle of an active duty servicemember can be repossessed based on a default under a retail installment sales contract for the vehicle’s purchase as to which the servicemember made at least one deposit or installment payment before being called to active duty.
The DOJ’s complaint alleged that it launched an investigation into Hudson Valley’s repossession practices after learning of two private lawsuits filed in the Southern District of New York by servicemembers who claimed that Hudson Valley repossessed their vehicles in violation of the SCRA. The investigation revealed seven additional SCRA violations by Hudson Valley resulting from repossessions and that, prior to August 2014, Hudson Valley did not have any written policies or procedures that addressed the SCRA’s requirements for vehicle repossessions.
The settlement agreement describes updates made by Hudson Valley in February 2018 to its collection guidelines to address such requirements and prohibits Hudson Valley from making any material changes to those guidelines without providing a copy of the proposed changes to the DOJ and giving the DOJ an opportunity to object. It also requires Hudson Valley to provide SCRA compliance training to all of its collections and lending employees.
Based on the DOJ’s determination that seven of Hudson Valley’s vehicle repossessions between 2008 and 2014 did not comply with the SCRA, the settlement agreement requires Hudson Valley to pay $10,000 in compensation to each of six servicemembers, plus any lost equity in their vehicles with interest. Hudson Valley must also pay $5,000 to a seventh servicemember whose vehicle was repossessed but returned within 24 hours. It also agrees not to pursue or assign any deficiencies associated with the repossessions and must refund any amounts paid by the servicemember or a co-borrower toward any deficiency that was remaining after a repossession.
The settlement with Hudson Valley follows several other lawsuits filed by the DOJ earlier this year and in 2017 alleging SCRA violations related to vehicle repossession and disposition.