CarMax, a major used car retailer, must pay nearly half a million dollars. The U.S. Department of Justice accused it of illegally repossessing vehicles from servicemembers who were on active duty. The majority of this amount will be paid directly to the victims.
Violation Details and Compensation Amount
According to the consent agreement, the case involves at least 28 servicemembers whose vehicles were repossessed between March 1, 2018, and October 24, 2023. Each victim will receive $15,000, as well as compensation for lost equity in their vehicle.
The Department of Justice investigation found that CarMax repossessed vehicles from servicemembers without first obtaining a court order, as required by federal law. In some cases, according to the investigation, the company continued its actions even after being notified that the owner was on active duty.
Under the Servicemembers Civil Relief Act, a finance or leasing company cannot repossess a servicemember’s vehicle without a court order. This protection applies provided the servicemember made at least one payment before entering military service.
Investigators also allege that CarMax did not extend these SCRA protections to reservists who had already received orders to report for active duty.
Settlement Terms and Company Obligations
Earlier this week, the Department of Justice reached a settlement agreement with CarMax to resolve the allegations. The used car giant will pay at least $420,000 in restitution to affected servicemembers, plus a $79,380 civil penalty to the U.S. government.
The four-year agreement requires CarMax to notify affected servicemembers within 30 days, provide free means of communication, and request credit bureaus to remove negative marks related to the repossessions. The company must also provide the Department of Justice with an updated SCRA compliance policy, including a procedure for verifying military service status through the Department of Defense database.
“Federal law prohibits businesses from repossessing servicemembers’ vehicles without a court order,” said Assistant Attorney General Harmeet K. Dillon of the Justice Department’s Civil Rights Division. “The Justice Department is proud to protect the rights of those who serve in our military and will continue to vigorously enforce the laws that protect them.”
Reaction and Future Changes
The used car retailer states that it will review its policy to ensure that similar illegal repossessions do not recur in the future. However, the company noted that the settlement is not an admission of guilt, and under the consent agreement, the company neither admits nor denies the allegations.
“Supporting our nation’s military is deeply ingrained in CarMax’s culture, and we take these matters seriously, given our long-standing commitment to servicemembers, veterans, and their families. Our goal was and remains to provide our customers with a fair, transparent, and understandable experience, and we are committed to serving our military community with care and respect,” the company stated.
This case highlights the importance of protections for servicemembers, who can be particularly vulnerable in financial matters during their service. While CarMax commits to correcting its procedures, the incident raises questions about the proper implementation and oversight of compliance with federal laws like the SCRA in large national companies. The agreement also sets a clear precedent for other auto lenders regarding the consequences of violating military personnel’s rights, emphasizing the priority of legal procedures even in operations such as vehicle repossessions.