IBA Compliance Connection

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We have a customer who is three months behind on his car loan payments. We know he is in the National Guard so we submitted an Active Duty Status request on the Department of Defense’s Defense Manpower Data Center’s website to confirm whether he had “active duty status.” His name was not in the database, so we repossessed his car. Now he claims that he has a letter confirming that he was on active duty status within 90 days of our repossession. If this is true, does that matter under the Servicemembers Civil Relief Act (SCRA)? Do we have to wait 90 days after his active duty status ends before repossessing his car? What is our liability if we were wrong in our understanding of the law?

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admin

No, it does not matter if the customer can establish that he was on active duty within 90 days of your repossessing his car if he was not active at the time of repossession. While the SCRA extends certain protections to service members after the termination of their active duty status — such as protections against a mortgage foreclosure or a storage lien enforcement — this extension does not apply to vehicle repossessions. The SCRA’s protection against a repossession applies only during the customer’s active military service.

In addition, the Department of Defense permits you to rely on its database to determine whether your customer is on active duty status, provided that you document the results at the time of your search. Therefore, even if the customer confirms his current or prior active duty military status, you are protected against liability if you retained the results of your search.

We also note that a service member may waive their protection against repossession while on active duty, provided that the waiver is written in at least 12 point font. Therefore, we also recommend reviewing your loan agreement to see if it includes such a waiver.

For resources related to our guidance, please see:

  • Servicemembers Civil Relief Act, 50 USC App. 532(a)(1)  (“After a servicemember enters military service, a contract by the servicemember for— (A) the purchase of real or personal property (including a motor vehicle); or (B) the lease or bailment of such property, may not be rescinded or terminated for a breach of terms of the contract occurring before or during that person’s military service, nor may the property be repossessed for such breach without a court order.”)
  • Department of Justice, Questions and Answers for Servicemembers (“Q: How does the SCRA protect my car, truck or other vehicle? A: If you purchased or leased your vehicle and made a deposit or installment payment before you entered military service, then your creditor or lessor may not terminate your contract or repossess your vehicle for breach of contract without a court order while you are in military service.”)
  • Department of Defense Regulations, 32 CFR 232.5 (Creates a safe harbor for creditors who make military status determinations using the Department of Defense database or consumer reports from nationwide consumer reporting agencies, provided the creditor timely creates and maintains a record of the information so obtained.)
  • Servicemembers Civil Relief Act, 50 USC App. 517(a) (“A servicemember may waive any of the rights and protections provided by this Act.”)
  • Servicemembers Civil Relief Act, 50 USC App. 517(2) (“The requirement in subsection (a) for a written waiver applies to the following: . . . The repossession, retention, foreclosure, sale, forfeiture, or taking possession of property that— (A) is security for any obligation; or (B) was purchased or received under a contract, lease, or bailment.”)
  • Servicemembers Civil Relief Act, 50 USC App. 517(c) (“Any waiver in writing of a right or protection provided by this Act that applies to a contract, lease, or similar legal instrument must be in at least 12 point type.”)