BMW Financial Services N.A. has agreed to settle claims brought by the U.S. Department of Justice that the company violated federal law by failing to refund portions of up-front lease payments made by servicemembers who terminated their leases early due to military obligations.  Under the agreement, BMW will pay more than $2 million to affected servicemembers.

The Department of Justice filed a complaint in the District of New Jersey, contending that BMW’s auto finance division violated the Servicemembers Civil Relief Act (“SCRA”), which includes a number of protections to servicemembers.  Under the SCRA, servicemembers may terminate motor vehicle leases early without penalty after entering military service or receiving qualifying military orders for a permanent change of station or for deployment.  If a servicemember terminates a motor vehicle lease, the SCRA requires a refund of all lease amounts paid in advance.

The government alleged that BMW violated the SCRA by failing to refund portions of advance lease payments made in cash or vehicle trade-in credit when servicemembers had to end their leases early due to deployment or relocation.  According to the Department of Justice, servicemembers were denied refunds of their remaining capitalized cost reduction amounts, a portion of their up-front payments that was intended to reduce monthly payments over the term of a lease.

The agreement covers all leases terminated by servicemembers since August 24, 2011, and requires BMW to refund portions of the capitalized cost reduction amounts to each affected servicemember based on the number of days remaining on their leases, plus additional damages consisting of $500 or triple the refund, whichever is higher.  The agreement also requires BMW to revise its policies and procedures to ensure SCRA compliance moving forward.

The case is United States v. BMW Financial Services N.A., LLC (D.N.J.).