The nation’s largest retailer of used cars, CarMax, will pay at least $420,000 to resolve allegations that it repossessed vehicles from U.S. service members without court orders, the U.S. Department of Justice announced Monday.
In addition to compensating affected service members, the company will pay a $79,380 civil penalty to the U.S., according to the DOJ.
Federal officials accused CarMax of violating the Servicemembers Civil Relief Act (SCRA) by seizing vehicles owned by members of the armed forces without first obtaining court approval.
“Federal law prohibits businesses from repossessing service members’ vehicles without a court order,” Assistant Attorney General Harmeet K. Dhillon said. “The Department of Justice is proud to defend the rights of those who serve in our military and will continue to vigorously enforce the laws that protect them.”
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The violations allegedly occurred between March 1, 2018, and at least Oct. 24, 2023, affecting at least 28 service members. Each is entitled to a minimum payment of $15,000, plus lost equity in the vehicle and interest on that amount.
As part of the settlement, CarMax – which did not admit or deny the allegations – agreed to revise its policies and procedures to better protect the rights of U.S. service members.
In a statement, CarMax said it cooperated fully with the DOJ to reach a resolution and has further strengthened its existing compliance program. The company also said the resolution does not constitute an admission of wrongdoing by CarMax Auto Finance.
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“Supporting our nation’s military is rooted in CarMax’s culture, and we take these matters seriously given our long-standing commitment to servicemembers, veterans and their families,” the company said. “Our focus has been – and remains – on providing our customers with a fair, transparent and straightforward experience, and we are committed to serving our military community with care and respect.
“Since 2003, CarMax Auto Finance has provided relief to more than 26,000 servicemembers and dependents of servicemembers in accordance with the SCRA, in the form of finance charge reductions and protection from vehicle repossession,” CarMax continued. “Consistent with CarMax Auto Finance’s commitment to continuous improvement and supporting those who serve, we have enhanced our SCRA processes, expanded proactive screening and outreach, and reinforced employee training to help ensure all eligible servicemembers and their dependents receive the protections they deserve.”
The SCRA is a federal statute designed to safeguard the legal and financial interests of U.S. service members and their families while they are on active duty.
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It bars auto lenders and leasing companies from repossessing a service member’s vehicle without a court order if the borrower made at least one payment before entering military service.
For reservists, those protections begin when they receive official orders to report for active duty.
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Service members or their dependents who believe their rights were violated are encouraged to contact their nearest Armed Forces Legal Assistance Program office.