By Ryan Labriola, Senior Manager
Over the course of this past summer, the United States Department of Justice (DOJ) pursued a steady docket of settlements pertaining to the Servicemembers Civil Relief Act (SCRA). From June through September 2025, four different defendants settled cases with the DOJ for alleged violations of servicemembers’ rights under the SCRA.
Early Lease Terminations
Three of the four cases were related to the SCRA’s prohibition against assessing early termination fees for certain contracts and leases. Under the SCRA, servicemembers have the right to terminate residential and auto leases (under certain conditions) and lessors are prohibited from assessed early termination fees (50 U.S.C. § 3955). The same rights extend to other contracts, such as gym memberships and cell phone plans (50 U.S.C. § 3956). In two of the three cases, the DOJ alleged the defendants assessed early termination fees to servicemembers who broke their residential leases early after receiving qualifying military orders. In the third case, the DOJ alleged “subsidy fees” or “balance recovery costs” assessed to servicemembers exercising their early termination rights on a cell phone plan constituted an early termination charge. All three cases, which resulted in consent decrees, required the respective defendants to pay redress and civil monetary penalties. In one case, the DOJ required the defendant to pay $1.35 million in damages which “include[ed] triple damages to servicemembers who paid…early termination charges.”
While these cases center around leases and contracts not traditionally offered by financial services companies, the SCRA prohibits the same early termination charges on auto leases terminated by servicemembers. Banks, credit unions, captive financial services companies of major auto brands, independent leasing companies, and others offer auto leases every day throughout the country and are subject to this provision of the SCRA. If a servicemember provides to the lessor written notice of termination and a copy of the qualifying military orders, the lessor is obligated to terminate the lease in accordance with the applicable provisions of the SCRA, including “not impos[ing] an early termination charge” (50 U.S.C. § 3955)(e)(2)). The three cases highlighted here do not pertain to auto leases, but provide some valuable learnings and considerations for those that engage in automobile leasing transactions:
- In one of the cases, the lessor was using a system that did not contemplate military status when automatically applying an early termination charge. If institutions offering car leases have similar systems in place or automated features in servicing platforms that apply such charges, compliance monitoring and testing or audit should confirm that overrides can be applied in the event of an SCRA protected lessee.
- Relabeling a fee won’t evade regulatory scrutiny either. If the regulators believe a certain fee is a proxy for an early termination charge, as the DOJ determined in one of these cases, the DOJ may consider it an SCRA violation.
Repossessions
The fourth and final case related to an auto financing company that allegedly repossessed servicemembers’ vehicles without court orders. Under the SCRA, servicemembers who 1) originated an auto loan before entering military service, 2) made a deposit or first installment payment, and 3) subsequently entered military service, are protected from repossession without a court order (50 U.S.C. § 3952).
Of note, the DOJ outlined specific requirements of the company as part of the consent decree:
- A company seeking to repossess a vehicle must conduct Department of Defense Manpower Data center (DMDC) searches at the following intervals:
- No more than two business days before referring a vehicle for repossession.
- No more than two business days after repossession has occurred.
- No more than two business days before vehicle sale or disposition.
- If a search identifies an SCRA protected borrower or co-borrower after repossession, the order requires the company to attempt to make verbal contact with the aggrieved party, reverse all repossession related charges, and return the vehicle in 24 hours. Under the consent decree, the institution must make three attempts to contact the borrower(s).
The DOJ’s requirements in the consent decree serve as a road map to financial institutions as they navigate repossessions. While it is standard practice to perform DMDC searches and internal record searches to identify indications of military service prior to repossessing a vehicle, the explicit requirement to obtain DMDCs prior to referring a vehicle to a repossession agent speaks to the DOJ’s strict expectations surrounding financial institutions’ attempts to identify active duty servicemembers.
With respect to penalties, the DOJ required the company to pay a $60,000 civil monetary penalty and $60,000 to four aggrieved parties – which amounts to $15,000 per repossession.
Conclusion
Continued enforcement of the SCRA appears to have been on this summer’s docket for the DOJ. Financial services companies should take note of these consent decrees and use this opportunity to review internal processes to ensure they are operating in conformance to the servicemembers’ rights and benefits under the SCRA.
About the author
Ryan Labriola is a Senior Manager with Asurity Advisors. Ryan has expertise in military lending laws and regulations, including the Servicemembers Civil Relief Act and the Military Lending Act. He has advised financial institutions and non-bank lenders on SCRA and MLA compliance, and has participated in significant lookback and remediation engagements relating to servicemembers’ benefits and protections under federal and state law.
Sources
https://www.justice.gov/crt/case/united-states-v-greystar-management-services-llc
https://www.justice.gov/crt/case/united-states-v-jwb-property-management-llc
https://www.justice.gov/crt/case/teleguam-holdings-llc-dba-gta