A soldier whose monthly car loan bill went up when she told BayPort Credit Union that her active duty status was supposed to cap fees and interest at 6% sparked a federal investigation alleging the Newport News-based institution charged service members excessive interest rates and improperly repossessed their cars.
BayPort has agreed to settle the matter by paying nearly $110,000, the Department of Justice said.
The settlement requires BayPort repay nearly $70,000 to the affected service members, as well as a $40,000 civil penalty to the federal government. BayPort must also revise policies and procedures to prevent future violations of the federal Servicemembers Civil Relief Act.
That act caps interest rates and fees on loans and installment contracts, as well as setting rules for when and how to collect debts repossess vehicles and manage evictions.
“Entering military service can create financial hardships for our service members who make incredible sacrifices for our nation’s security,” said U.S. Attorney Jessica D. Aber for the Eastern District of Virginia. “This consent order helps ensure that these men and women are not disadvantaged by their military service and that service members’ rights are protected going forward.”
In investigating the one soldier’s complaint, officials charged BayPort with charging excessive interest to 21 service members who sought civil relief act protections. Federal prosecutors also charged BayPort with improperly repossessing three service members’ vehicles.
The investigation started when a soldier asked BayPort in writing to apply the 6% cap to a 9.99% car loan she obtained before enlisting. Over the four months that followed, she repeatedly followed up, and when BayPort finally lowered the interest rate, it increased her monthly payment from $319.80 to $330.93, court records show.
When the soldier reminded BayPort that the civil relief act says lenders must reduce periodic payments when lowering the interest, the credit union reset monthly payments at the old $319.80. And while BayPort lowered the interest rate on the soldier’s credit card, it did not apply that retroactively to her enlistment day, as required by law.
The U.S. Attorney’s Office investigation found BayPort account records showing that in October 2013, the credit union violated civil relief act protections of at least 20 other service members by denying requests for an interest rate reduction or by incorrectly implementing the required reduction.
The account records did not reveal even a single instance where Defendant correctly implemented an civil relief act rate reduction for an eligible account before the U.S. Attorney opened the investigation, court records say.
Dave Ress, 757-247-4535, firstname.lastname@example.org