WOODCLIFF LAKE, N.J. -- BMW Financial Services has agreed to pay more than $2.2 million to settle charges that it refused to refund certain up-front car lease payments to 492 service members when they were deployed or re-deployed.
The case is the first case brought by the Justice Department involving a motor vehicle lessor’s failure to refund lease amounts to those service members who exercised their rights to do so early.
The agreement requires BMW FS to refund to each service member portions of the pre-paid CCR amount based on how many days were remaining in their individual leases.
BMW FS -- which has its Eastern Regional Headquarters and Technical Training Center on Chestnut Ridge Road in Woodcliff Lake -- also must:
- pay "indirect damages" to each service member of three times the refund or $500, whichever is larger;
- deposit $2.16 into an escrow account to compensate the 492 service members whose rights were violated -- and pay $60,788 to the U.S. Treasury.
- revise its policies and procedures to ensure that service members who terminate their auto leases early receive the refunds required under the Servicemembers Civil Relief Act (SCRA).
The SCRA allows service members to "terminate motor vehicle leases early without penalty after entering military service or receiving qualifying military orders for a permanent change of station or to deploy," U.S. Attorney Craig Carpenito and Acting Assistant Attorney General John Gore of the Justice Department’s Civil Rights Division said in a joint statement Thursday.
"When service members lawfully terminate motor vehicle leases, the SCRA requires that they be refunded all lease amounts paid in advance," they said.
BMW FS is a New Jersey-based auto financing company that provides auto leasing for customers of BMW, MINI, and Rolls-Royce.
Their leasees "often contribute an up-front monetary amount at lease signing, in the form of a cash payment, credit for a trade-in vehicle, or rebates or other credits," Thursday's statement says. "A portion of this up-front amount can be applied to the first month of the lease and certain up-front costs such as licensing and registration fees," it says. "The remainder, which is called the capitalized cost reduction (CCR) amount, operates to reduce the monthly payment the lessee must make over the term of the lease."
It all began when federal officials received complaints from two service members who said they were denied refunds of pre-paid CCR amounts by BMW F:
- Kristi Steck , then a U.S. Air Force Senior Master Sergeant stationed at Andrews Air Force Base in Maryland, paid $4,000 up-front for a lease and made regular monthly payments for the next 10 months. After receiving orders from the Air Force ordering her to relocate to Japan, she terminated her lease -- and was refused a refund on the prepayment.
- Technical Sergeant A. Menard , also stationed at Andrews, paid $5,000 up front, made regular monthly payments for seven months, then received orders from the Air Force to deploy to Afghanistan. BMW FS refused to refund "any part" of the $5,000, Carpenito and Gore said.
Carpenito's office and Justice's Rights Division investigated and found that BMW FS "failed to refund any portion of the pre-paid CCR amounts to 492 service members who had lawfully terminated their auto leases."
“The men and women who serve in the armed forces have made enormous sacrifices while selflessly protecting our nation from danger,” Carpenito said Thursday. “We must honor their sacrifice by ensuring that their rights are protected when duty calls for their relocation or deployment overseas.
"Through this agreement, we are pleased that hundreds of service members will be compensated for the damages they suffered when they were not refunded pre-paid car lease payments after they were deployed,” the U.S. attorney said.
“We ask a great deal of those who serve our nation, including asking them to drop their affairs to deploy or serve in a new location, sometimes at a moment’s notice,” Gore added. “Our men and women in uniform should be able to devote their entire energy to their service and defense of our nation, and the Justice Department is committed to protecting these rights when their obligations to the American people force them to change their plans.”
The SCRA provides protections for service members in areas such as evictions, rental agreements, security deposits, pre-paid rent, civil judicial proceedings, installment contracts, credit card interest rates, mortgage interest rates, mortgage foreclosures, automobile leases, life insurance, health insurance and income tax payments.
MORE INFO: www.servicemembers.gov
Service members and their dependents who believe that their rights under the SCRA have been violated should contact the nearest Armed Forces Legal Assistance Program Office. Office locations may be found at http://legalassistance.law.af.mil/content/locator.php .
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