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Credit for Those Who Served · No. 10

Your Car Was Repossessed While You Were on Orders. Did They Have a Court Order?

Under the SCRA, a lender needs a judge's order to repo a servicemember's car bought before service. DOJ caught four companies skipping it in 2026.

By · · 7 min read
Your Car Was Repossessed While You Were on Orders. Did They Have a Court Order?

You’re on orders. You fall behind on the car payment, or the car gets towed while you’re away, and by the time you’re back it’s been sold at auction. Most people figure that’s just what happens when you miss payments.

For a lot of servicemembers, it’s illegal. Federal law says the company needed a judge’s permission first. In 2026 alone, the Justice Department has settled with a national car retailer, a dealer and two tow companies that didn’t get one.

What the law says

The Servicemembers Civil Relief Act (SCRA) covers this in one short section, 50 U.S.C. § 3952. Once you enter military service, a contract to buy or lease a vehicle can’t be terminated for a missed payment, and the vehicle can’t be repossessed for that missed payment, without a court order. It doesn’t matter whether you fell behind before or during service.

There’s one condition. The section only applies if you paid a deposit or at least one installment before you entered military service. That’s what people mean by a pre-service obligation: you signed and paid before you went in.

A court order isn’t a rubber stamp. The judge can make the lender refund some or all of what you’ve paid before taking the car back, or pause the case if your service makes it harder for you to pay.

Knowingly repossessing in violation of § 3952 is a federal misdemeanor, with a fine or up to a year in jail. Under § 4042, you can also sue for damages yourself, and a court can make the company cover your attorney fees if you win.

Tow yards have their own rule

Your car doesn’t have to be financed for the SCRA to protect it. A separate section, 50 U.S.C. § 3958, covers liens, and the law says that includes a lien for storage, repair or cleaning. Anyone holding a lien on a servicemember’s property can’t enforce it without a court order during military service and for 90 days after.

In plain terms, a tow company that racks up storage fees on your car can’t auction it to cover the bill while you’re serving, or for 90 days after, unless a judge signs off first. There’s no pre-service payment condition here, and the same misdemeanor penalty applies.

What DOJ found in 2026

Four settlements, all posted by the Justice Department’s Civil Rights Division:

  • CarMax, February 23, 2026. DOJ alleged CarMax repossessed 28 servicemembers’ vehicles without court orders, including some after the owners told CarMax they were in the military, and that it didn’t protect reservists who had received orders. CarMax must pay at least $420,000 to servicemembers plus a $79,380 civil penalty.
  • Vehicle Management Solutions, May 28, 2026. DOJ alleged this San Antonio tow company sold or scrapped about 93 servicemembers’ vehicles without court orders. The investigation started with a complaint from a servicemember whose vehicle was towed and auctioned in 2024 while he was deployed to Kosovo. The company pays $220,000 to servicemembers and a $60,000 penalty.
  • S & K Towing, July 14, 2026. DOJ alleged this San Clemente, California tow company disposed of as many as 148 servicemembers’ vehicles, many towed from Marine Corps Base Camp Pendleton. In May 2024, a military legal assistance attorney told the company it was breaking the law. A manager answered, “We do this all the time.” The company pays $160,000 to servicemembers.
  • Holmes Motors, July 30, 2026. DOJ, working with the U.S. Attorney’s Office for the Northern District of Alabama, alleged this “lease here, pay here” dealer in Mississippi, Alabama and Georgia repossessed three leased vehicles without court orders, in one case after a servicemember handed over orders sending her to the southern border. It also allegedly kept deposits and prepaid lease money when servicemembers ended five leases because of military orders. The company pays $77,348 to servicemembers and a $60,000 penalty.

Add it up. That’s as many as 272 vehicles (28 + 93 + 148 + 3). Compensation comes to $877,348 ($420,000 + $220,000 + $160,000 + $77,348), and CarMax’s share is a floor, not a ceiling. Add $199,380 in civil penalties and it’s $1,076,728. Two caveats: the Holmes payment also covers the lease refunds, not only repossessions, and a settlement is not an admission of wrongdoing.

Now the math behind the headline. CarMax’s $420,000 is exactly 28 times $15,000. The settlement sets $15,000 per illegal repossession, plus any lost equity in the car and interest on it. The tow cases work out to far less per car: about $1,081 at S & K and about $2,366 at VMS, before it’s split among whoever DOJ identifies.

The cost doesn’t stop with the servicemember, either. A repossession lands on every borrower on the loan. In the CarMax deal, the company has to ask the credit bureaus to delete the accounts of affected servicemembers and their co-borrowers, and it can’t chase them for more money. That’s a spouse or a parent whose credit took the hit too.

Who this doesn’t cover

  • Loans signed after you were already serving. If your first payment came after you entered military service, § 3952 doesn’t apply. The tow-lien rule in § 3958 still does.
  • People outside the law’s definition. “Military service” under § 3911 means active duty. National Guard members count when called up by the President or Secretary of Defense for more than 30 straight days for a declared national emergency. Reservists are covered starting the day they receive orders, under § 3917.
  • The debt itself. The CFPB says the lender can still charge late fees, report late payments and sue to collect. The SCRA controls how they take the car, not whether you owe.

If it already happened

  1. Call your military legal assistance office first. It’s free. You can find the nearest one at legalassistance.law.af.mil. That’s where DOJ tells servicemembers to start. If you aren’t eligible for legal assistance, you can submit a complaint to DOJ through servicemembers.gov. DOJ says it can’t investigate every complaint and can’t act as your personal lawyer.
  2. Write down your dates. When you got orders or entered service, when you made your first payment, when the car was taken, when it was sold. For § 3952, the first-payment date decides everything.
  3. Pull your reports. They’re free at AnnualCreditReport.com. Look for the repossession, a charge-off, or a collection for a leftover balance. Check any co-borrower’s reports too.
  4. Dispute what’s wrong. If the repossession broke the SCRA, dispute that entry and any balance built on it for investigation under the Fair Credit Reporting Act, 15 U.S.C. § 1681i. The bureau generally has 30 days. Include your dates and a copy of your orders. Be honest: late payments before the repo may be accurate and may stay. Results vary.
  5. File with the CFPB too. It takes complaints about auto lenders at consumerfinance.gov/complaint.

I served in the Army from 1989 to 1999, and this is one of the laws I wish every person in uniform knew by number. If you get stuck, bring your timeline to our free community. And if a tow yard ever tells you they do this all the time, remember where that line ended up: in a Justice Department press release.

This is education, not legal advice. For your specific case, talk to legal assistance or an attorney.

Sources

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