- Auto lenders need a court order to repossess certain vehicles.
- The DOJ targeted CarMax over repossessing military cars.
- CarMax says it will update policies to prevent repeats.
CarMax is on the hook for nearly $500,000 after the US Justice Department alleged it illegally repossessed vehicles from active duty servicemembers. Most of that money will go directly to those affected.
According to the consent agreement, the case involves “at least 28 servicemembers” whose vehicles were repossessed between March 1, 2018, and at least Oct. 24, 2023. Each affected servicemember is set to receive $15,000, plus any lost equity in their vehicle.
A Justice Department investigation found that CarMax repossessed vehicles from servicemembers without first obtaining court orders, as required under federal law. In some cases, it allegedly proceeded even after being told the owners were on active duty.
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Under the Servicemembers Civil Relief Act, an auto finance or leasing company cannot repossess a servicemember’s vehicle without a court order. The protection applies as long as the servicemember made at least one payment before entering military service.
Investigators also allege CarMax failed to extend those SCRA safeguards to reservists who had already received orders to report for active duty.
Financial Penalties And Oversight Measures
Earlier this week, the Justice Department reached a settlement with CarMax to resolve the allegations. The used car juggernaut will pay at least $420,000 in damages to affected servicemembers, plus a $79,380 civil penalty to the US government.
The four-year agreement requires CarMax to notify affected servicemembers within 30 days, provide free ways to get in touch, and ask credit bureaus to remove negative marks tied to the repossessions. It must also give the Justice Department updated SCRA policies, including how it verifies military status through the Defense Department database.
“Federal law prohibits businesses from repossessing service members’ vehicles without a court order,” said Assistant Attorney General Harmeet K. Dhillon from the Justice Department’s Civil Rights Division. “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.”
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The used vehicle retailer says it will revise its policies to ensure that no illegal repossessions like these happen in the future. However, it noted that the settlement does not constitute an admission of wrongdoing, and under the consent agreement, the company neither admits nor denies the allegations.
“Supporting our nation’s military is rooted in CarMax’s culture, and we take these matters seriously given our long-standing commitment to servicemembers, veterans and their families. Our focus has been – and remains – on providing our customers with a fair, transparent and straightforward experience, and we are committed to serving our military community with care and respect,” the company said.
