Connecticut Law Tribune: Santander USA Settlement

Conn. Lawyer Helps Soldiers, Feds Bring Case Against Lender

By Christian Nolan, March 4, 2015

The lawyer was in Connecticut and the client was in California.

But the distance did not prevent them from eventually putting an end to the illegal practices by an automobile lender that was repossessing the vehicles of military service members on active duty in Iraq or Afghanistan.

Late last month, the U.S. Department of Justice announced a $9.35 million settlement between the federal government and Santander Consumer USA Inc. Officials alleged in a complaint filed in U.S. District Court in the Northern District of Texas that Santander improperly repossessed 1,112 motor vehicles between January 2008 and February 2013 in violation of the Servicemembers Civil Relief Act (SCRA).

“This kind of stuff is totally egregious,” said Sergei Lemberg, of Lemberg Law in Stamford, who provided information to federal authorities about Santander’s practices. “That’s why the law was passed. These [military personnel] are completely vulnerable.”

Lemberg said the repossession process is simple for average citizens who default on their car loan payments; the lender can simply send someone to their home and take the vehicle. But SCRA provides for a different procedure for active duty military personnel. “The law says if you want to repossess a vehicle belonging to an active service member, you have to get a court order,” said Lemberg. He said most judges would tell the lender “tough luck, wait until they get back.”

“Imagine going to a judge and saying, ‘We have a guy fighting in Iraq and he’s not paying us,” said Lemberg, who added that once the military member is back in the U.S. and off active duty, their vehicle is fair game.

According to court documents, Santander is one of the nation’s largest motor vehicle lenders, and primarily serves borrowers with nonprime credit scores. In 2014, Santander originated and retained $14 billion in motor vehicle loans, with an average interest rate of 16.4 percent. Santander, whose principal owner is the financial services conglomerate Banco Santander, S.A., which is headquartered in Spain, has relationships with new and used motor vehicle dealerships throughout the United States that arrange loans for car buyers through Santander.

‘Scot Free’

Lemberg said U.S. Army National Guard Sgt. Charles Beard of Lemoore, Calif., reached out to him after having his car repossessed. Lemberg said there was “no rhyme or reason,” as to why the sergeant contacted a Connecticut attorney, other than perhaps noticing Lember’s website and seeing he that he has handled consumer protection class action cases. Lemberg also chairs the Connecticut Bar Association’s Consumer Law Section.

Lemberg said a military attorney wrote a letter to the auto lender telling them they were not allowed to repossess Beard’s car. He noted that Beard had a wife with several young children and needed the car. Beard filed a lawsuit in California claiming Santander was violating his rights under the SCRA, but a judge ruled that the loan agreement terms required such disputes to be resolved via arbitration. “So the case was sent to arbitration but I thought at the time that was a really unfair outcome because [Santander] are getting off almost scot free and they’re continuing to do this to people,” said Lemberg.

Lemberg said he next wrote a letter to U.S. Sen. Elizabeth Warren, D-Mass., telling her about Beard and the plight of similar service personnel. Warren apparently contacted a nonprofit group called the National Consumer Law Center, which reached out to Lemberg.

In the meantime, Lemberg’s letter was forwarded to the U.S. Justice Department. And Beard was awarded around $5,000 or $6,000 in his arbitration claim against Santander.

Unbeknownst to Lemberg, the department was already investigating Santander’s practices. Government officials say they first learned of Santander’s repossession practices through a referral from the U.S. Army’s Legal Assistance Program. They claimed Santander illegally repossessed a car belonging to U.S. Army Specialist Joshua Davis in the middle of the night, even though the lender had been informed that the soldier was at basic training.

Government officials continued investigating Santander after hearing about Beard’s case. The federal lawsuit later filed by the government in Texas alleges that Santander initiated and completed 760 repossessions, without court orders, of motor vehicles owned by SCRA-protected service members. The Beard case was specifically cited in the federal lawsuit. “Requiring Sergeant Beard to resolve his dispute in a private, individual arbitration rather than a public class action lawsuit hindered the ability of Sergeant Beard to pursue relief for anyone but himself,” the complaint stated.

As part of the $9.35 million settlement, Santander must pay $12,000 plus compensation for any lost equity, with interest, to each of these service members. The lawsuit also alleges that Santander sought to collect fees arising from an additional 352 repossessions that unrelated motor vehicle lenders had conducted in violation of SCRA prior to Santander acquiring the loans. The settlement requires Santander to pay $5,000 to each of these service members as well as repair the credit of all affected service members.

Santander has neither acknowledged nor denied the allegations. A Santander spokeswoman said the company “cooperated fully” with the investigation and has improved its loan-servicing practices.

Original story: At the Connecticut Law Tribune