By on March 15, 2017

bmw grille

The U.S. Justice Department requested information from BMW AG’s leasing unit last year, hoping to get a handle on how it deals with delinquent payments from military personnel. The Servicemembers Civil Relief Act is intended to provide a wide range of protections for individuals required to enter active duty by suspending certain civil obligations, including outstanding credit card debt and auto leases.

However, BMW’s Financial Services said it doesn’t know how many of its leases might be affected by the Servicemembers Civil Relief Act’s terms. That’s not a great position to be in when federal law explicitly bans any action or penalty against currently deployed military personnel.

According to documents obtained by Bloomberg, which are tied to a $1 billion bond transaction being marketed to investors this week, BMW doesn’t have the foggiest on which of its lessees are on active duty.

Car loans have come under growing scrutiny as the outstanding auto debt in the United States has surpassed the trillion dollar mark. Many auto loans are even being financed in a manner similar to the way subprime mortgages were grouped into securities right before the recession.

The Justice Department began taking an interest in auto lending practices in 2014. Early investigations focused on lending to borrowers with subprime credit and the unhealthy financially engineering of those loans. However, officials are now taking direct action against lenders over how they manage defaults.

“We shouldn’t wait until there is a crisis to pay attention,” the Justice Department’s former Acting Deputy Attorney General Sally Quillian Yates said in 2014. “We can and should use our experience investigating mortgage-backed securities to be on the lookout for, and head off, any potential threat, rather than waiting until after losses have been suffered.”

Although, in all fairness, BMW probably doesn’t keep tabs on every lessee on the off chance that they might go on active duty and the leasing industry is a vital component of any automotive company. BMW makes a lot of money from leased vehicles, as do most premium brands, and that is especially important for the automaker after posting its uncharacteristically weak earnings from last year. Still, the law is the law and the Civil Relief Act exists specifically to protect individuals from coming under financial hardships through no fault of their own.

BMW Financial has stated that it is cooperating with the Justice Department’s requests but would not elaborate further.

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15 Comments on “BMW Under Investigation Over Car Leasing Practices to Military Members...”


  • avatar
    low_compression

    “Although, in all fairness, BMW probably doesn’t keep tabs on every lessee on the off chance that they might go on active duty”

    Generally speaking, this can be done by scrubbing your lists with the DoD before taking actions on a loan in default. It not easy, but this should be part of their procedures. Not knowing this as a debt collector in 2017 is pretty bad.

  • avatar
    Loser

    It is up to the military member to properly notify companies in cases like this.

    • 0 avatar
      Waterview

      While I’m a big proponent of personal responsibility, you’re repsonse would cause you to not be in compliance with the Act (as BMW is discovering). It is up to the note holder to track its customers. It’s part of the cost of the business.

    • 0 avatar
      LS1Fan

      Wrong answer sport.

      Even Joe Fudd’s Tackle Shop and Credit Union knows to either request military status at the time of application specifically or infer it by address & employment info provided-the latter of which will say Active/Nat’l Guard/Reserve.

      Military customers have a *heavy incentive* to pay their bills. Failure to maintain financial solvency constitutes a violation of their security clearance.

      The Servicemembers Relief Act was passed to avoid the horrific event of deployed vets landing home to find out they’d missed months of litigation -sometimes because the spouse hit the road and let the bills of the household go delinquent.If BMW isn’t in compliance that is a DoublePlusUngood on the Bavarians .

      • 0 avatar
        Loser

        Correct answer, I have lived it for 22 years AD in the Air Force, sport.

        Invoking the SCRA Protections: Many SCRA protections are not automatic and require the member to request the protection in a timely manner. For certain SCRA protections (i.e., interest rates), the member also may have to show that the active military service materially affects the member’s ability to pay.
        How to Assert Your Rights under the SSCRA

        Generally, you can assert your SSCRA rights upon entering active duty by sending a letter, stating you are on active duty, and providing documentation, such as a copy of your orders, or a letter from your commanding officer.

        http://www.militaryauthority.com/benefits/legal-issues/understanding-the-soldiers-and-sailors-civil-relief-act.html

        http://www.benefits.va.gov/homeloans/documents/docs/scra_notice.pdf

      • 0 avatar
        JRobUSC

        I was Active Duty and then in the Reserves. I’m sorry, but why would the lender be responsible for finding out if a military member deploys? Even if the lender knows you are in the service in the first place (which is by no means guaranteed), they have no way of knowing if and when you may deploy. Notifying creditors of a change in status is the responsibility of the service member. That was made explicitly clear to us. I personally had to council quite a few soldiers for failing to cover their debts.

        Which takes us to the second point — the bank isn’t automatically going to know if someone is even in the military. Most people in the Guard or Reserves, for example, aren’t full-time military and would have full-time non-military jobs when they’re not doing their “one weekend per month, two weeks per year” Guard/Reservist duty. As such they wouldn’t necessarily even put that on a credit application. The lender would have absolutely no way of knowing.

        Respectfully, anyone advocating that the responsibility for magically determining if someone is a service member and if and when they’re deployed should fall on the lenders instead of the service members might as well be asking for the lenders to simply stop approving loans to service members. Because that’s the next step.

  • avatar
    LS1Fan

    We are all overjoyed you’re two years past retirement age Loser.

    However,returning to the article…..

    “BMW’s Financial Services said it doesn’t know how many of its leases might be affected by the Servicemembers Civil Relief Act’s terms.”

    …it is not the members responsibility to track BMWs lease portfolio of military clients. They don’t know which accounts could be affected,which is an internal data fail of substantial proportions.

    • 0 avatar
      Loser

      Not here to impress anyone, just letting you know this is beat into our heads constantly. BMW has no way to know who has been deployed without notification.

      Directly from the VA site:

      “Invoking the SCRA Protections: Many SCRA protections are not automatic and require the member to request the protection in a timely manner. For certain SCRA protections (i.e., interest rates), the member also may have to show that the active military service materially affects the member’s ability to pay.
      How to Assert Your Rights under the SSCRA”

    • 0 avatar
      threeer

      What the heck does being at 22 years Active Duty have anything to do with anything? And why did it require a response? My father served 26 years of his own choosing…does that make him less of a soldier for having done so? (BTW to Loser: my son is just now on year 4 of AD with the AF, and loves it. Couldn’t be prouder of my soon-to-be O3 C-17 jockey!).

      While the SCRA does provide certain protections, servicemembers are still required to do their due diligence. As has been said already, there is a vested interest in not screwing your financial house up if you serve.

  • avatar
    deanst

    Given the fact that about 1% of working Americans are service personel, and the average owner of a BMW is 50, and half the value of a lease is tied up in the residual value, I would guess that BMW can’t answer these questions because they are immaterial to their finance results.

  • avatar
    johnnyz

    Useless and pointless foreign wars! Unenforceable debts.

    The primary goal should be to legalize weed.

  • avatar
    CarnotCycle

    A quick trip around Camp Pendleton or Lejeune is a wonderland of what late-teen and twenty-something men do with cars when they have some money and no real bills. The goofiest lifted pickups, the goofiest slammed pickups, superchargers sprouting from things like old Escorts, IROCs right out of a five-year old’s dream, etcetera. I’m sure the financing for many of those items is just as silly and marginal – not just the leases on BMW’s.

    • 0 avatar
      Erikstrawn

      The Servicemembers’ Civil Relief Act does not judge what kind of car the servicemember has. I will say that military lawyers gleefully jump on car dealers whose financing violates the SCRA. Buy-Here-Pay-Here lots be warned! When that kid who bought a $5000 heap for $10,000 deploys, his payments stop until he returns – so long as he invokes his rights by giving you notice.


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