LOS ANGELES –Westlake Financial here has agreed to pay more than $225,000 to resolve allegations it violated the Servicemembers Civil Relief Act (SCRA) by failing to provide qualified servicemembers with interest rate benefits for the entire period required under the SCRA and by improperly delaying approval of interest rate benefit requests.
The Justice Department reminded the SCRA provides that interest on any debt incurred by a servicemember before entering military service is limited to 6% per year. To take advantage of the interest rate cap, a servicemember must provide the creditor with written notice and a copy of their military orders or other documentation of their military service no later than 180 days after leaving service.
After receiving notice, a creditor must forgive any interest in excess of 6% retroactively back to the date orders are issued calling the servicemember to active duty, the DoJ stated.
70 Repossessions
Westlake Financial is an auto finance company that specializes in subprime and near-subprime loans. In 2017, the Justice Department filed a complaint in United States District Court in Los Angeles alleging the company and its subsidiary, Wilshire Commercial Capital, violated the SCRA by unlawfully repossessing at least 70 vehicles owned by SCRA-protected servicemembers. To resolve those allegations, Westlake entered into a settlement requiring the company to pay over $700,000 to servicemembers and a $60,788 civil penalty and to be subject to monitoring by the department, the DoJ noted.
While monitoring Westlake’s compliance with the SCRA, the Justice Department said it discovered problems with the company’s handling of interest rate benefit requests. The department determined that Westlake was failing to apply interest rate benefits back to the date orders were issued calling the servicemember to active duty.
Improper Delays
The department also determined that Westlake had improperly delayed the approval of interest rate benefits to some servicemembers.
Under an amended settlement agreement, the DoJ said Westlake has agreed to pay an additional $185,460 to 250 servicemembers who did not receive interest rate benefits back to the date their orders were issued or who had to wait more than 60 days to receive their benefits. Each servicemember who did not receive interest rate benefits back to the date their orders were issued will receive a refund of any excess interest they paid, as well as an additional payment of three times the overpayment or $100, whichever is higher. Servicemembers whose interest rate approvals were delayed more than 60 days will each receive $500.
Additional Penalty
Westlake will also be required to pay an additional $40,000 civil penalty to the United States. The amended agreement further requires Westlake to revise its SCRA policies and procedures and training to ensure that interest rate benefits are timely and appropriately applied to servicemember accounts, the DoJ said.
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