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HSBC to Pay $434,500 for SCRA Violations

August 11, 2016

WASHINGTON, D.C. — The Justice Department today announced that HSBC Finance Corp. has agreed to pay $434,500 to settle charges that it violated the Servicemembers Civil Relief Act (SCRA) by repossessing 75 cars owned by protected servicemembers without obtaining necessary court orders.

The settlement comes more than a year after the department entered a settlement with Santander Consumer USA — which purchased HSBC’s car lending operations — in February 2015. An investigation into Santander’s repossessions practices found that HSBC had sold Santander the right to collect debts owed by servicemembers after their cars had been repossessed by HSBC without court orders. Once the Justice Department caught wind of this, it pursued legal action against Santander, which agreed to a $10.5 million settlement to compensate affected servicemembers.

Most of the servicemembers who will be compensated as part of the HSBC settlement will also received partial compensation from the Santander settlement. Any servicemember who received compensation from that settlement will receive an additional $5,500 as part of this settlement. Servicemembers who were not part of the Santander settlement will receive $11,000.  

“HSBC repossessed cars without taking into account their owners’ ongoing service to our country,” said Principal Deputy Associate Attorney General Bill Baer. “This settlement rights this wrong, compensates the affected servicemembers and honors our commitment to making sure military members are treated fairly at all times.”

According to the Justice Department’s investigation, HSBC conducted repossessions without court orders, even when it had evidence that suggested the possibility a borrower could be a protected servicemember. In one instance, HSBC repossessed a vehicle after learning that an initial attempt was unsuccessful because guards would not allow its repo truck to enter a secured military post in Indiana where the car was located.

The SCRA protects servicemembers against certain civil proceedings that could affect their legal rights while on active duty, according to the Justice Department. Per the SCRA, any repossession against a servicemember must be reviewed and approved by a court if the servicemember took out the loan and made a payment before entering military service.

A court may delay the repossession or require the lender to refund prior payments before repossessing. The court may also appoint an attorney to represent the servicemember, require the lender to post a bond with the court and issue any other orders it deems necessary to protect the servicemember, according to the Justice Department.

When HSBC failed to obtain a court order before repossessing servicemembers’ vehicles, it prevented servicemembers from possibly having their repossessions delayed or adjusted to account for their military service, the Justice Department noted.

“Servicemembers should never have to worry that they will lose their cars while they answer our nation’s call to duty,” said Principal Deputy Assistant Attorney General Vanita Gupta. “HSBC should have heeded these concerns before repossessing vehicles. I commend the company for working cooperatively to reach an appropriate resolution once the department raised the issue.”

This settlement covers repossessions that occurred between 2008 and 2010. HSBC Auto Finance Inc. originated and serviced car loans until it sold his auto finance operations and assets to Santander Consumer USA Inc. in 2010. The settlement is subject to approval by the U.S. District Court of the Northern District of Illinois.

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