CarMax pays $500,000 after illegally seizing 28 military personnel’s vehicles

CarMax Auto Finance illegally seized the vehicles of at least 28 military personnel for more than five years – in some cases even after those military personnel told CarMax they were on active military duty.

Federal law could not be clearer on this point. The Servicemembers Civil Relief Act prohibits any lender from repossessing a vehicle without first obtaining a court order if the borrower is on active duty. CarMax has repeatedly and in some cases deliberately skipped that step.

Three things CarMax did wrong

The DOJ’s investigation found three different categories of SCRA violations:

1. Vehicles seized without a court order — The basic requirement of the SCRA is that lenders must obtain a judge’s sign-off before taking delivery of a service member’s vehicle. In at least 28 cases, CarMax has completely circumvented this requirement.
2. Vehicles seized after soldiers announced their military status – This is the most damning finding. Some military personnel told CarMax they were on active duty. CarMax taken back after all.
3. It has not been possible to extend protection to reservists with active duty orders – SCRA protections apply the moment a reservist is ordered to report for active duty – not just after reporting. CarMax did not extend security at that critical window.

“Federal law prohibits companies from seizing service members’ vehicles without a court order.”– Assistant Attorney General Harmeet K. Dhillon, DOJ Civil Rights Division

What CarMax must pay and do

In addition to writing checks, CarMax must:

• Notify each affected service member within 30 days
• Create a dedicated toll-free phone, email and website contact point for military members
• Request that credit bureaus remove all negative information related to the illegal seizures
• Submit the revised SCRA Compliance Policy to the Department of Justice for review
• Subject to four years of monitoring and ongoing reporting requirements

CarMax said it has “fully cooperated with the DOJ” and has already “further strengthened” its compliance program. The company also noted that it has provided SCRA assistance to more than 26,000 military personnel since 2003 — a claim that makes it more difficult to explain the 28 illegal seizures over a five-year period. (Source: DOJ Eastern Virginia)

What the SCRA actually protects – and what it doesn’t

The Servicemembers Civil Relief Act doesn’t make military members immune from debt – it controls How creditors can enforce debts. This is what it actually does for car loans:

If you are in the military and worried about your car loan

• Tell your lender immediately if you receive orders. Get it in writing. Keep a copy. This creates a paper trail that protects you if they fail to enforce SCRA protections.
• Request the 6% interest limit in writing. Send a written request plus a copy of your military orders to your lender. They must apply it retroactively from the date you started employment.
• If your car was seized while you were on active duty, consult a JAG attorney immediately. Military legal aid offices offer free legal services. They regularly handle SCRA cases.
• File a complaint with the DOJ if you believe your SCRA rights have been violated. Visit servicemembers.gov or call 1-800-514-0301.
• Check your credit report. If a lender has seized your vehicle without a court order, he/she must clean up your credit. If not, dispute it and cite the SCRA violation.

Frequently asked questions

Can a lender seize my car while I am on active military duty?

Only with a court order. The Servicemembers Civil Relief Act requires any lender to obtain a court order before repossessing a vehicle if the borrower has a liability that arose before or during active duty. CarMax’s $500,000 DOJ settlement in February 2026 resulted from this requirement being circumvented at least 28 times between March 2018 and October 2023. If a lender repossesses your vehicle without a court order while you are on active duty, that is a federal SCRA violation.

Who qualifies for SCRA vehicle repossession protection?

Active military personnel in all branches of the military, including the Army, Navy, Marine Corps, Air Force, Space Force, and Coast Guard. Reservists and National Guard members are protected from the moment they are ordered to report for active duty – not just after they physically report for duty. This distinction was specifically addressed in the CarMax settlement: CarMax failed to protect reservists who had received orders but had not yet reported for duty.

What happens if I am affected by CarMax’s illegal seizures?

The DOJ settlement requires CarMax to notify each of the at least 28 affected service agents within 30 days. Each affected person is entitled to at least $15,000, plus compensation for any lost vehicle assets. CarMax must also request that credit bureaus remove any negative information related to the illegal repossessions. If you believe you have been affected and have not yet been contacted, please contact the DOJ’s Military Lending Enforcement Program at servicemembers.gov.

Does the SCRA protect reservists when they receive orders?

Yes – and this was one of the specific violations in the CarMax case. SCRA protections begin the moment a reservist is ordered to report for active duty, not when he or she physically arrives. This is an often misunderstood provision. If a lender waits until you have already filed before applying protections, they may have already missed the window in which your vehicle could have been illegally seized.

What is the difference between a SCRA violation and breach of contract?

A SCRA violation is a violation of federal law; it results in DOJ enforcement authorities, civil penalties payable to the U.S. government, and mandatory damages to the affected military member. Breach of contract is a civil matter between you and the lender. In the CarMax case, the civil penalty of $79,380 went to the government; the $420,000+ in damages went to the 28 soldiers. Both remedies run concurrently – and the DOJ can take enforcement action on behalf of service members who would otherwise have to navigate the courts themselves.

Source: DOJ Eastern District of Virginia: CarMax pays nearly $500,000 | CFPB: Military auto loan rights under the SCRA

Consumer debt expert and investigative writer. Survivor of Personal Bankruptcy (1990). Award-winning author of the Washington Post. Exposing debt fraud since 1994.