US, HSBC in deal over servicemembers' car repossessions

by Eric Tucker
The Associated Press

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 servicemembers.

The settlement covers 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 protect against auto repossessions.

Under the law, judges are supposed to review and approve a car repossession in instances when a service member secured a loan on a car and made a payment on it before entering the military. 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 servicemembers owed compensation under this settlement also received partial compensation through the Santander settlement. The new deal calls for servicemembers who received payments under the Santander settlement to receive an additional $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.

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