Wells Fargo Paid $9.5 Million for Illegally Repossessing Servicemembers' Vehicles

In September 2016, the Department of Justice announced that Wells Fargo Bank N.A., doing business as Wells Fargo Dealer Services, would pay over $4.1 million to resolve allegations that it illegally repossessed 413 vehicles owned by active-duty servicemembers without obtaining court orders, a direct violation of the Servicemembers Civil Relief Act.

Then in December 2017, the DOJ returned. Wells Fargo had to pay an additional $5.4 million after identifying 450 more servicemembers whose vehicles were unlawfully repossessed and who were not covered by the original settlement.

Total: $9.5 million. 863 servicemembers. Vehicles seized while their owners were serving on active duty.

What Happened

The DOJ launched its investigation after receiving a complaint in March 2015 from the U.S. Army’s Legal Assistance Program. Army National Guardsman Dennis Singleton had his used car repossessed in Hendersonville, North Carolina, while he was preparing to deploy to Afghanistan for Operation Enduring Freedom.

The investigation uncovered a systemic failure. Wells Fargo Dealer Services’ repossession process had no mechanism to check whether a borrower was on active duty before seizing their vehicle. When a borrower fell behind on payments, the standard collections process ran. The standard process treated every delinquent borrower the same, regardless of military status.

Under 50 U.S.C. Section 3952, when a servicemember took out an auto loan before entering active duty and made at least one payment before service, the lender cannot repossess the vehicle without first obtaining a court order. Wells Fargo’s process did not include this check. For years, no one noticed.

The Settlement

Phase 1 (September 2016)

Wells Fargo agreed to:

• Pay $10,000 to each of 413 affected servicemembers, plus compensation for any lost equity in the repossessed vehicle with interest
• Repair the credit of all affected servicemembers
• Pay a $60,000 civil penalty to the United States
• Implement DMDC verification before every future repossession. If a borrower is on active duty, Wells Fargo will not repossess without a court order
• Adopt new SCRA compliance policies and procedures

Phase 2 (December 2017)

After the initial settlement, Wells Fargo and the DOJ identified 450 additional servicemembers whose vehicles were illegally repossessed but who were not identified in the first round. Wells Fargo agreed to:

• Pay an additional $5.4 million to compensate the 450 newly identified servicemembers
• Apply the same $10,000 minimum payment plus lost equity formula

Total compensation across both phases: $9.5 million to 863 servicemembers.

What Went Wrong

The root cause was straightforward: Wells Fargo’s repossession workflow had no military status verification step.

When a borrower became delinquent, the collections system flagged the account for repossession. A recovery agent was dispatched. The vehicle was seized. At no point in this process did anyone, or any system, check whether the borrower was a protected servicemember.

This wasn’t a training failure or a rogue employee. It was a structural gap in the process itself. The system was designed without the SCRA in mind, and no one retrofitted it.

The scale tells the story: 863 servicemembers across the country, over a period of years. This was not a few isolated mistakes. It was the default behavior of the system.

What Would Have Prevented It

A single workflow change: verify military status through DMDC before every repossession. If the borrower is on active duty and the loan was originated before service, halt the repossession and route the case to legal for a court order petition.

Wells Fargo could have caught every one of those 863 cases with a DMDC check. The database is free. The check takes seconds. But the process didn’t include it.

Consent Decree Requirements

The Wells Fargo consent decree requires:

1. DMDC verification before every repossession
2. Written SCRA compliance policies
3. Annual SCRA training for all collections and repossession staff
4. Documentation retention for all DMDC checks and repossession decisions
5. Ongoing DOJ monitoring and reporting

These are now the minimum standards the DOJ expects from every auto lender, not just Wells Fargo.

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Sources: DOJ Press Release, September 2016 (justice.gov/archives/opa/pr/justice-department-reaches-4-million-settlement-wells-fargo-dealer-services-illegally); DOJ Press Release, December 2017 (justice.gov/archives/opa/pr/justice-department-obtains-54-million-additional-relief-compensate-servicemembers-unlawful)