The U.S. Department of Justice Wednesday announced that a Los Angeles-based auto finance company has agreed to pay more than $225,000 to resolve new allegations that it violated federal law by failing to provide qualified service members with interest rate benefits and improperly delaying approval of interest rate benefit requests.
Westlake Financial specializes in subprime and near-subprime loans. In 2017, the DOJ filed a complaint in Los Angeles federal court alleging that Westlake and subsidiary Wilshire Commercial Capital unlawfully repossessed at least 70 vehicles owned by protected service members. To resolve those allegations, Westlake entered into a settlement requiring the company to pay over $700,000 to service members and a $60,788 civil penalty and to be subject to DOJ monitoring.
While monitoring Westlake’s compliance with the Servicemembers Civil Relief Act, the DOJ discovered problems with the company’s handling of interest rate benefit requests. Prosecutors determined that Westlake was failing to apply interest rate benefits back to the date orders were issued calling the service member to active duty. The department also determined that Westlake had improperly delayed the approval of interest rate benefits to some service members.
Under an amended settlement agreement, Westlake agreed to pay an additional $185,460 to 250 service members 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, the DOJ said Wednesday.
Each service member 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. Service members whose interest rate approvals were delayed more than 60 days will each receive $500, according to the updated settlement.
Westlake will also be required to pay an additional $40,000 civil penalty to the United States. The amended agreement also requires Westlake to revise its SCRA policies and procedures and training to ensure that interest rate benefits are timely and appropriately applied to service member accounts.
“Service members make enormous sacrifices, and we have a responsibility to protect their rights and ensure they have full access to important benefits guaranteed under the law,” U.S. Attorney Martin Estrada said in a statement. “The settlement with Westlake Financial reflects the Justice Department’s firm commitment to protecting the rights of service members — and to defending civil rights for everyone.”
The SCRA provides that interest on any debt incurred by a service member before entering military service is limited to 6% per year. To take advantage of the interest rate cap, service members 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 service member to active duty.
The act makes clear that “those serving in our nation’s military are entitled to receive interest rate benefits as soon as they are called to service,” said Assistant Attorney General Kristen Clarke of the Justice Department’s Civil Rights Division.
“This settlement sends the message that we will hold companies accountable when they deny service members the important interest rate benefits they are entitled to under federal civil rights law,” she said.