On February 23, 2026, the U.S. Department of Justice announced that CarMax Inc.. the nation’s largest retailer of used vehicles. will pay nearly $500,000 to resolve allegations that it illegally repossessed vehicles owned by active-duty servicemembers without obtaining court orders, as required by the Servicemembers Civil Relief Act.
The violations spanned more than five years, from March 2018 through at least October 2023. Twenty-eight servicemembers had their vehicles taken.
What the DOJ Found
The SCRA is clear on this point: under Section 3952, a lender cannot repossess a servicemember’s vehicle during military service without a court order if the servicemember made at least one payment before entering service. For reservists and Guard members, protections begin when they receive orders to report for active duty.
CarMax failed on both counts.
The DOJ found that CarMax repossessed vehicles from servicemembers who were on active duty, without obtaining the required court orders. In some cases, borrowers had already told CarMax they were in the military. CarMax repossessed anyway. The company also failed to extend protections to reservists who had received activation orders. a population the DOJ and CFPB have specifically flagged as chronically underserved.
“Federal law prohibits businesses from repossessing service members’ vehicles without a court order,” said Assistant Attorney General Harmeet K. Dhillon of the Justice Department’s Civil Rights Division.
The Settlement Terms
CarMax agreed to:
- Pay at least $420,000 in damages to the 28 affected servicemembers. $15,000 each, plus any lost equity in their repossessed vehicles
- Pay a $79,380 civil penalty to the United States
- Overhaul its SCRA policies and procedures for vehicle repossessions, including DMDC military status verification
- Submit those policies to the DOJ for review
- Establish multiple cost-free contact methods for affected servicemembers, including a dedicated SCRA email, website, and toll-free number
- Comply with reporting requirements for four years
The total approaches $500,000. and that’s before you count the legal fees, policy overhaul costs, and four years of DOJ oversight.
The Pattern Nobody Can Ignore
CarMax is not the first auto lender to get caught. It won’t be the last.
Santander Consumer USA paid $9.35 million in 2015 for 1,112 illegal repossessions. at the time, the largest SCRA auto repossession case in history. The DOJ investigation started with a single complaint from an Army Specialist whose car was repossessed during basic training.
Westlake Financial settled in 2017 for $760,000 over 70 illegal repossessions. Then the DOJ caught them violating SCRA interest rate requirements in 2022 during consent decree monitoring. $225,000 more.
Hyundai Capital America is under its own DOJ consent order for SCRA violations.
Every case follows the same pattern: a lender’s internal process was supposed to catch military status before repossession, and it didn’t. The DOJ found the gap through complaints, investigations, or monitoring. and the lender paid. The trend is accelerating.
With today’s settlement, federal agencies have now recovered over $400 million for servicemembers through SCRA enforcement since 2011. Enforcement has spanned both administrations, and the pace is accelerating under the current DOJ, which created a dedicated Enforcement and Affirmative Litigation Branch in September 2025.
Why This Keeps Happening
CarMax is a publicly traded company (NYSE: KMX) with $26 billion in annual revenue, 250 locations, and substantial legal and compliance resources. If any organization had the budget to get SCRA compliance right, it was CarMax.
They couldn’t. And the reason is structural.
The SCRA repossession problem is a verification problem. Before you repossess a vehicle, you need to know whether the borrower is on active duty. That requires checking the Defense Manpower Data Center (DMDC), which is the authoritative federal database of military status.
Most lenders handle this check manually. A staff member is supposed to run a DMDC lookup before initiating repossession. At CarMax’s scale, that means trusting that every repossession in every state goes through the manual check, every time, for every borrower. The DOJ’s findings tell you how that works in practice: it doesn’t.
The problem gets worse with reservists and Guard members, whose military status can change at any time. A borrower who was civilian when they took out the loan could be activated tomorrow. A one-time check at origination misses these transitions entirely, which is why continuous monitoring is now the DOJ’s baseline expectation. The DOJ found that CarMax “failed to extend SCRA protections to reservists who had received orders to report for active duty.”
What Auto Lenders Should Be Asking Themselves
If you finance vehicles and handle repossessions, today’s settlement raises specific questions:
Does your repossession workflow include an automated DMDC check before any vehicle is picked up? If it depends on a person remembering to run the check, you have the same gap CarMax had.
Are you catching reservists and Guard members who activate after origination? The DOJ-CFPB joint letter from December 2024 made the expectation explicit: proactively identify eligible borrowers. Don’t wait for them to tell you.
Can you produce a documented audit trail of every military status verification for every repossession? The CarMax consent decree requires them to submit their DMDC verification procedures to the DOJ. If you were asked to produce yours, what would you hand over?
How confident are you that your process works at scale? CarMax’s violations ran for five years. That’s not a training failure or a one-time mistake. it’s a systemic gap in how the process was designed.
The Consent Decree Clock Is Ticking
CarMax must now implement new SCRA policies, build DMDC verification into its repossession workflow, and submit those procedures to the DOJ. They have four years of reporting ahead of them, during which the DOJ will be watching. These requirements follow the standard consent decree framework the DOJ applies in every SCRA case.
If history is a guide, the DOJ takes consent decree monitoring seriously. Westlake Financial can tell you what happens when you settle and then fail to fix the underlying problem.
For auto lenders who haven’t been investigated yet: the DOJ doesn’t need to audit your portfolio to find violations. They need one servicemember to file a complaint. That’s how the Santander case started. That’s how most of these cases start.
The question isn’t whether your SCRA process has gaps. Given the industry’s track record, it almost certainly does. The question is whether regulators find those gaps before you fix them.
Santander repossessed 760 military vehicles illegally. The settlement: $9.35 million. What does your pre-repo verification process look like?
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Related Reading
- SCRA Compliance for Auto Lenders: The Complete Guide
- How to Conduct a Retroactive SCRA Portfolio Audit Before the DOJ Does
- What a DOJ Consent Decree Actually Requires
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