Justice Department Obtains Over $1.5 Million from American Honda Finance Corporation

Department of Justice

WASHINGTON, D.C. — The Department of Justice announced that American Honda Finance Corporation (AHFC) agreed this week to settle a federal lawsuit alleging that it violated the Servicemembers Civil Relief Act (SCRA) by failing to refund a type of up-front lease payment to servicemembers who lawfully terminated their motor vehicle leases early. Under the settlement agreement, AHFC must pay up to $1,585,803.89 in compensation to 714 servicemembers who were harmed by the alleged violations.

“This case illustrates the Justice Department’s steadfast commitment to protecting the rights of servicemembers,” said Assistant Attorney General Kristen Clarke of the Justice Department’s Civil Rights Division. “We will continue to vigorously enforce federal law to ensure that no servicemember faces unlawful treatment by auto leasing companies or other entities.”

“Servicemembers selflessly heed the call to duty, and their sacrifice should not subject them to unlawful economic harm,” said Acting U.S. Attorney Tracy L. Wilkison of the Central District of California. “This settlement is the latest resulting from investigations my office has conducted in conjunction with Justice Department attorneys to ensure our brave men and women in uniform can perform without having to worry about unjust actions at home.”

The SCRA permits servicemembers 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. When servicemembers lawfully terminate motor vehicle leases, the SCRA requires that they be refunded all lease amounts paid in advance.

AHFC is a California-based auto-financing company that provides auto-leasing for customers of Honda and Acura. Individuals who lease vehicles from AHFC, including servicemembers, 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. 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. The remainder, which is called the capitalized cost reduction amount, operates to reduce the monthly payment the lessee must make over the term of the lease.

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The settlement, which must be approved by the U.S. District Court for the Central District of California, resolves a lawsuit filed this week by the Department of Justice. The lawsuit alleges that, while AHFC regularly provided refunds of cash payments toward capitalized cost reduction made by servicemembers, AHFC failed to provide refunds of vehicle trade-in credit that was applied toward capitalized cost reduction, in violation of the SCRA.

In addition to compensating 714 servicemembers, the settlement requires AHFC to pay $64,715 to the U.S. Treasury to adopt new policies and implement new training requirements.

Servicemembers and their dependents who believe their SCRA rights have been violated should contact the nearest Armed Forces Legal Assistance Program Office. Office locations can be found at http://legalassistance.law.af.mil/.

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