Banking and Finance Law Daily Wrap Up, SERVICEMEMBERS CIVIL RELIEF ACT—BayPort reaches $110,000 deal with DOJ in SCRA lawsuit, (Mar 14, 2022)

By Jeff Williams

The settlement includes nearly $70,000 in payments to servicemembers and a $40,000 civil penalty.

BayPort Credit Union has agreed to pay nearly $110,000 to resolve a complaint the Justice Department filed alleging the company violated the Servicemembers Civil Relief Act (SCRA) by charging servicemembers excessive interest on loans and repossessing servicemembers’ cars without court orders. “This case is just the latest example of the Justice Department’s steadfast commitment to safeguarding the rights of servicemembers, who make so many sacrifices in defending our country,” Kristen Clarke, assistant attorney general in the department’s Civil Rights Division, said in a press release. “We will continue to vigorously enforce the protections to which servicemembers are entitled under federal law, including their right to a 6 percent interest rate cap on loans and a right not to have their car repossessed without a court order.”

The complaint, filed in the U.S. District Court for the Eastern District of Virgina-Norfolk, alleged BayPort improperly repossessed three vehicles and charged interest rates of more than 6 percent to 21 qualified servicemembers who asked for the SCRA interest rate benefits. The settlement, which must be approved by the court, calls for BayPort to pay a total of $69,442.10 to affected servicemembers, plus a civil penalty of $40,000 to the U.S. Treasury.

“Entering military service can create financial hardships for our servicemembers who make incredible sacrifices for our nation’s security,” U.S. Attorney for the Eastern District of Virginia Jessica Aber said in a press release. “This consent order helps ensure that these men and women are not disadvantaged by their military service and that servicemembers’ rights are protected going forward.”

The SCRA, the Justice Department noted, directs creditors to reduce interest rates for servicemembers’ financial obligations, including to 6 percent in some circumstances for retail installment sales contracts. The act also prohibits repossession of servicemembers’ vehicles during their military service without a court order, as long as the servicemembers have made a deposit or installment payment on the loan before entering service.

According to the settlement, the payments to the identified servicemembers must include a refund of all paid interest and fees above 6 percent, as well as a payment of $500 or three times the amount of the overpayment, whichever is larger. BayPort also must pay $10,000 to each of the servicemembers whose cars were improperly repossessed, as well as any lost equity for each vehicle and all interest that would have accrued on that equity. BayPort would have 30 days from the effective date of the settlement to request that all credit bureaus remove any negative entries about the affected servicemembers.

The settlement also calls for BayPort to amend its policies to ensure they do not violate the SCRA, as well as provide training to its employees about complying with the act. The settlement gives the company 45 days to submit its revised policies and training plans to the Justice Department for approval and the department would have 45 days to raise any objections. Among other provisions, each BayPort employee would have to sign a statement attesting that they have read the new policies and received the required training.

The settlement also prohibits BayPort from charging servicemembers who have met the requirements in Section 3937 of the SCRA interest rates in excess of 6 percent per year on any loan obligation or liability incurred during their military service. BayPort would also be enjoined from reamortizing any retail installment contract loan connected to a request for SCRA interest rate benefits, as well as from failing or refusing to credit earlier periods of military service when applying SCRA benefits. The company would also generally be prohibited from repossessing any SCRA-protected servicemembers’ cars without a court order or valid SCRA waiver.

Companies: BayPort Credit Union

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