September 30, 2016
The Justice Department announced on September 29 that it reached a settlement with Wells Fargo Bank, N.A., doing business as Wells Fargo Dealer Services, for violating the Servicemembers Civil Relief Act by repossessing 413 cars owned by protected servicemembers without obtaining court orders. The Department announced that the bank has agreed to change its policies and pay over $4.1 million to resolve the allegations. The settlement covers repossessions between January 1, 2008 and July 1, 2015. The agreement requires Wells Fargo to pay $10,000 to each affected servicemember, plus any lost equity in the vehicle with interest, and repair the credit of all affected servicemembers. Wells Fargo sent payments to many of the affected servicemembers in August 2016. Wells Fargo will locate additional victims and distribute payments in the upcoming months, at no cost to the servicemembers. Wells Fargo will also pay a $60,000 civil penalty to the United States. Wells Fargo will determine if any vehicle it is planning to repossess is owned by an active duty servicemember and, if so, will not repossess the vehicle without a court order. The agreement also has provisions ensuring that eligible servicemembers will benefit from the SCRA's six percent interest rate cap on their auto obligations. The settlement, filed in the U.S. District Court for the Central District of California, is subject to court approval.
At the same time, in a coordinated effort, the Office of the Comptroller of the Currency assessed a $20 million civil money penalty, payable to the U.S. Treasury, against Wells Fargo Bank, N.A. and ordered the bank to make restitution to servicemembers harmed by the bank's violations of the SCRA. The OCC found that between approximately 2006 and 2016, the bank violated three separate SCRA provisions. The OCC alleged that the bank failed to: (i) provide the six percent interest rate limit to servicemember obligations or liabilities incurred before military service; (ii) accurately disclose servicemembers' active duty status to the court via affidavits before evicting them; and (iii) obtain court orders before repossessing servicemembers' automobiles. The $20 million penalty reflects a number of factors, including the duration and frequency of violations, the financial harm to the servicemembers, deficiencies and weaknesses in the bank's SCRA compliance program, and ineffective compliance risk management. Servicemembers eligible for restitution include those who were financially harmed by the violations. The OCC's order also requires the bank to take corrective action to establish an enterprise-wide SCRA compliance program to detect and prevent future SCRA violations.