WASHINGTON — The Justice Department announced Monday that it had reached a $434,500 settlement with HSBC Finance Corporation over the repossession of cars owned by military service members.
The settlement covers the repossessions of 75 cars that occurred between 2008 and 2010 and that federal officials say were done without the proper court orders.
The deal resolves allegations that HSBC violated the Servicemembers Civil Relief Act, which is designed to safeguard the legal rights of people in the military and provides protection against auto repossessions.
Under the law, judges are supposed to review and approve an auto repossession in instances when a service member took out a loan on a car and made a payment on it before entering military service. Judges can also delay the transaction or appoint a lawyer to represent the military service member.
But the federal government says HSBC sidestepped the law by failing to obtain court orders before repossessing the cars.
"Service members should never have to worry that they will lose their cars while they answer our nation's call to duty," Vanita Gupta, head of the Justice Department's Civil Rights Division, said in a statement.
HSBC in 2010 sold its car lending operations and assets to Santander Consumer USA Inc., which last year reached a $10.5 million settlement with the Justice Department for improper repossessions.
The Justice Department says most of the military service members owed compensation under this settlement also received partial compensation through the Santander settlement. The new deal calls for service members who received payments under the Santander settlement to receive $5,500, and for those who did not, to receive $11,000.
The settlement requires approval in the U.S. District Court of the Northern District of Illinois.