One of the country's largest motor vehicle lenders has agreed to pay at least $9.35 million to service members in connection with the alleged illegal repossession of 1,112 vehicles, Justice Department officials said Wednesday.

It is the largest such settlement involving automobile repossessions ever obtained by the government under the Servicemembers' Civil Relief Act, Justice officials said.

The company, Dallas-based Santander Consumer USA Inc., has agreements with new and used vehicle dealers across the country to offer loans to car buyers. The company primarily serves borrowers with "nonprime" credit scores, according to the complaint, and in 2014, originated and held $14 billion in motor vehicle loans, with an average interest rate of 16.4 percent.

This action involves repossessions of 1,112 motor vehicles between January 2008 and February 2013. The consent order, which is subject to court approval, was filed Wednesday in the U.S. District Court, Northern District of Texas, in Dallas.

The agreement requires Santander to pay $10,000 plus compensation for any lost equity in the vehicles, with interest, to each of the service members who owned 760 vehicles that were allegedly repossessed without court orders.

Justice officials also allege that Santander attempted to collect fees from another 352 repossessions conducted by unrelated motor vehicle lenders in violation of the SCRA before the company acquired the loans. Under the settlement, Santander would pay $5,000 to each of those service members.

Santander must repair the credit of the affected troops.

Santander logo

Photo Credit: Santander

Service members already identified will be contacted later this year by an independent settlement administrator. Santander must conduct a review and also compensate any service members whose vehicles were illegally repossessed since February 2013.

Justice officials alleged that Santander failed to get court orders before repossessing vehicles owned by service members protected under the SCRA — those who took out the loan and made a deposit or an installment payment before entering military service.

The law is designed to ensure that a court reviews any repossession to determine whether it should be delayed or adjusted because of the owner's military service. For example, the court might appoint an attorney to represent the service member, and might require a lender to refund prior payments

Justice officials said they first learned of Santander's practices through a referral from the Army's legal assistance program. That referral involved a claim that Santander illegally repossessed the car of 19-year-old Spc. Joshua Davis, of Casselberry, Fla,. in the middle of the night, after being told that he was at basic training. Army attorneys made the referral to Justice officials after the company did not respond to their complaint letter.

The consent order notes that Santander neither admits nor denies any of the allegations, and notes that the company has cooperated fully with the investigation. Both before and during the investigation, the company has taken steps to improve its compliance with the SCRA, the consent order noted.

Santander spokeswoman Laurie Kight said that since 2012, the company "has used systemic controls to prevent improper repossessions of vehicles, including those who were contracted with SCRA-eligible customers."

"The majority of accounts found objectionable by the DOJ involved repossessions prior to 2012 and approximately one-third were accounts from other financial institutions that were converted to [Santander] accounts at a later date," she said.

The settlement requires Santander to take steps to avoid future problems, such as checking the Defense Department's automated database to find out if a car's owner is in the military before conducting a repossession.

The company will provide SCRA compliance training to employees who provide customer service to military members in connection with the servicing of loans, have significant involvement in servicing loans, or are involved in repossessions.

Santander is required to contract with an independent settlement administrator within 60 days after the judge signs the order.

Kight said Santander has set aside financial reserves for the payments.