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Consumer Watch: Navy Federal settles lawsuit over repossessed cars

Nov. 11, 2010 - 07:59PM   |   Last Updated: Nov. 11, 2010 - 07:59PM  |  
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It started with a consumer who asked a lawyer to review her case after her car was repossessed.

Donna Whitaker of Laurel, Md., wanted to make sure Navy Federal Credit Union wasn't violating her rights under Maryland law as part of her effort to determine whether she could get her car back.

As a result of that review, she became the plaintiff in a class-action lawsuit eventually joined by 6,265 other Navy Federal Credit Union members whose vehicles had been repossessed in the four years before the suit was filed in July 2009.

Navy Federal has settled the class-action lawsuit and agreed to forgive the unpaid debt that the members owed on those vehicles after their cars were sold. Navy Federal also agreed to notify the three national credit reporting bureaus to delete the adverse information on the plaintiffs' credit reports.

The amount of debt forgiven is about $5 million, according to Fort Lauderdale, Fla., consumer law attorney Robert Murphy, one of Whitaker's attorneys.

There is no plan to reimburse people money they already may have paid to Navy Federal toward satisfying their debt.

Proper notification

The issue in this case is not whether the cars should have been repossessed but whether Navy Federal's notices to these credit union members properly informed them of their rights under Maryland's Uniform Commercial Code.

That includes specifying whether the credit union planned to sell the vehicles privately or in a public sale and, if public, the time and place of the sale; a full accounting of the unpaid indebtedness; and the correct time period that owners had to redeem their vehicles.

Bernard Thomas Kennedy, another attorney representing Whitaker, said he believes all affected credit union members have been notified by Navy Federal.

Navy Federal officials had no comment. "The settlement speaks for itself," spokeswoman Jennifer Sadler said. Navy Federal regularly updates the wording of its notices to members and has done so in this case, she said.

The credit union denies liability, and the court did not make a decision concerning liability in the case. The judge noted that if Whitaker and the other plaintiffs proved their claims against Navy Federal, they would still owe the credit union more money than they would collect in damages.

The 6,266 members affected by the lawsuit are not receiving any payment; any remaining debt they owe to Navy Federal is simply being waived.

Know your rights

Let's be clear: You should make every effort to pay your debts. And no one involved in this case is implying otherwise.

But even if you default on a vehicle loan, you have certain rights. It's in your interest to ask your military legal assistance attorney or another consumer attorney to review the pertinent documents.

For example, state law may allow you to get your car back simply by making up the payments. These laws vary from state to state.

And mistakes can be made. "Just because your car gets repossessed doesn't mean you owe the finance company money," Murphy said.

He said the repossession issue is a lot more complicated than the Whitaker case — with other consumers facing problems such as an undisclosed history of the vehicle that could affect its value; and problems with the manner of repossession, for example.

Whitaker bought a 2006 Acura in October 2007, financed with a $31,687 loan from Navy Federal. The car was repossessed in March 2009 after Whitaker fell into financial difficulty and defaulted on the loan, Murphy said.

In addition to forgiving the remaining debt on her repossessed Acura, totaling $17,542.95, Navy Federal will pay Whitaker $5,000 as an incentive award as the representative of the class-action group. It will also donate $50,000 to Army Emergency Relief.

In Whitaker's case, it was "happenstance" that she had an attorney review her repossession paperwork, Murphy said.

"I can't tell you how many times things have crossed my desk that I wished I'd had a chance to help" before it was too late, he said.

This case revolved around notification. But all too often, problems start when a service member buys a car and doesn't understand the full implications of the financing terms.

Save yourself some money and heartburn: Before you sign on the dotted line, take the contract to your military legal assistance office for a free review.

Questions? Comments? Contact staff writer kjowers@militarytimes.com?subject=Question from ArmyTimes.com reader">Karen Jowers at kjowers@militarytimes.com.

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