As service providers, towing operators rely heavily on their image and reputation to stand out from the competition. Clients expect fast, efficient service with as few complications as possible. Nothing can tank a business faster than towing and selling a car belonging to an active-duty servicemember. Prosecution by the government can follow, or word could get out that the business is not following rules, taking shortcuts — or worse — ignoring the rights of military servicemembers.
What is the SCRA?
The Servicemembers Civil Relief Act (SCRA) is a federal law that protects the rights of servicemembers while on active military duty by suspending or modifying certain civil obligations. The goal is to allow servicemembers to focus on their valuable service to the country without the worry of some financial obligations, repossessions, and some court actions.
Section 3958 of the Servicemembers Civil Relief ActSection 3958 of the Servicemembers Civil Relief Act states that “a person holding a lien [which includes a storage or repair lien or for any other reason] may not during the period of military service or 90 days thereafter foreclose or enforce any lien … without a court order … A person who knowingly takes an action contrary to this section, or attempts to do so, shall be fined … or imprisoned for not more than one year, or both.”
In addition to the federal law, operators should be aware that many states have adopted their own versions of the SCRA, which may impose additional requirements. For example, the federal SCRA protects National Guard members who have been called to duty by the president. A state version of the law may add protections for members who were called up by a governor.
SCRA Towing Lawsuits
The Department of Justice has been vigilant in pursuing operators who tow and then sell vehicles without complying with the Servicemembers Civil Relief Acttow and then sell vehicles without complying with the Servicemembers Civil Relief Act. Four recent federal lawsuits have resulted in consent decrees which levied heavy fines. The Justice Department lawsuits focused on multiple operators who were flagrantly towing and selling vehicles without taking steps to see if the owners were active duty servicemembers or first obtaining court orders.
What Happens to SCRA Violators?
The most recent towing prosecution involving a municipality that towed and then sold cars was resolved earlier this month in Texas. An active duty Air Force staff sergeant deployed in Afghanistan discovered that her car had been towed. Both she and a legal assistance attorney contacted the storage operator repeatedly, advising that the sergeant was on active duty. The facility refused to release the car and refused to allow anyone to retrieve personal property that was in the car, which included military equipment. The car was sold without a court order.
Under the consent decree filed in court, the group involved in towing and selling the cars had to pay a fine of $47,000 to the sergeant and one other servicemember, a $62,000 civil penalty, and an additional $150,000 for a fund to be set up for other servicemembers whose SCRA rights may be violated.
Another towing company became embroiled in a similar towing suit even though the operator waited six months before selling the car after trying to figure out if the owner was in the military.
In another Justice Department lawsuit, the operator was accused of ignoring the obvious. The car was towed in the vicinity of a base, had military decals, and had papers in the glove box about military matters.
But the real damage to the operator goes beyond the out-of-pocket costs.
SCRA Repossession Repercussions
There is justifiable negative publicity when an operator is found to have cavalierly ignored the law and intentionally ignored a servicemember’s situation. When a business, landlord, or municipality body hires a towing company, they want a smooth operation. They do not want to be embroiled in a disaster that reflects badly upon everyone. The industry is expected to comply with laws to the letter and to show some common sense.
All the consent decrees between tow operators and the Justice Department have resulted in lengthy and strict sets of procedures with constant reports to the Justice Department to make sure that the operator is complying with the SCRA. The continuing administrative burden and costs are significant.
Steps to Comply with the SCRA
Compliance with the SCRA is essential for the industry and is not difficult or expensive. But, it requires focus and creating a plan to create a document called “SCRA Policies and Procedures for Vehicle Sales and Disposal” which should include the following:
1) Name Someone to Be in Charge of Compliance
A good start would be to name one person who will be in charge of SCRA compliance. This compliance officer would be the one who has the final sign-off on a checklist before a vehicle is sold. The compliance officer could be the office manager or an owner of the company and should be prepared to take the heat if a servicemember’s car is sold without a court order.
Train your employees to make sure they know that active duty servicemembers have certain protections because they deserve them. This mindset has to overcome the default impression that the owners of vehicles can be dismissed as scofflaws or delinquent debtors. After the training, employees should sign an acknowledgment that should be retained and available in case there is ever an allegation that you took no steps to train your employees.
An acknowledgment could look like this:
I acknowledge that on ___________________, 20___, I was provided training regarding compliance with the Servicemembers Civil Relief Act and copies of my employer’s SCRA Policies and Procedures applicable to my duties. I have read and understand these documents and have had my questions about these documents and the SCRA answered. I understand my legal responsibilities and shall comply with these
Once a year, there should be a refresher course, or a bulletin circulated with a similar Employee Acknowledgment to be signed. These acknowledgments have great value if you ever are investigated.
An electronic or paper folder should be kept with a checklist. The compliance officer’s signature should be required before a sale.
a. Is the owner of the vehicle protected by the SCRA?
Being protected by the SCRA and being employed as military personnel are not the same. For example, a person could have retired from the military, but they may continue to have some SCRA benefits after termination. If you receive information that the person may be on active duty, stop and listen.
b. Determine SCRA protection eligibility.
Find the owner’s name, possibly by checking the VIN or tag number. Carefully note the spelling of the name.
Use an online verification tool and be sure to spell the owner’s name correctly. If you are aware of any variations in the last name or aliases (e.g. maiden names, hyphenated or composite surnames, various spellings, etc.) used by the owner, run a separate search for each name variation or alias.
The most comprehensive resource for the towing industry is the Servicemembers Civil Relief Act Centralized Verification Service (www.ServicemembersCivilReliefAct.com) (known as the SCRACVS), a private contractor used by many in the industry. It is cost-effective, streamlined and no Social Security number is required.
You can save the email response verification or order a notarized military affidavit. Attach the affidavit or response to the checklist so the compliance officer sees it before they sign off on the sale.
The Department of Defense also operates a database called the Defense Manpower Data Center (which is free), but is only a reliable resource if you have the owner’s Social Security number. You can also submit a search to the DMDC with the date of birth only, but responses come with a warning that stipulates that the results are not guaranteed which may not satisfy a judge. If you have neither the Social Security number nor the date of birth, you cannot use the DMDC.
c. Mark your calendar so you can redo your online military verification not more than two days before any sale.
It is probably a good idea to avoid scheduling sales for Mondays or days following holidays to be certain your verification comes back in time.
d. Inspect the car.
Are there military decals, uniforms, documents about military service or are there papers in the vehicle (if you have access) that would lead you to believe that the owner may be in the military? Any information should be noted on the checklist for the compliance officer.
e. Review any waiver given to you.
If you have a written document from the owner purporting to waive SCRA protections you should:
- Check with your lawyer to make sure that the document is sufficient under the SCRA at 50 U.S.C. § 3918. A good example of a sufficient waiver can be found as Exhibit A to the Consent Decree.
- Make sure the waiver is executed after or during the period of military service (not before).
- Send a copy of the waiver to the owner before the 30th day before the auction or sale along with a notice that the sale is taking place. Attach a copy to your checklist.
- Check with your local lawyer to see if your state has additional requirements or any database that needs to be checked to add to your checklist.
- Obtain a court order if in doubt before you sell or dispose of a vehicle.
When in Doubt, Get a Court Order
The SCRA says that you should first obtain a court order if the vehicle belongs to a servicemember. If you are in doubt, obtain a court order first. Why take a risk when the stakes are so high? Your local lawyer will show you a streamlined approach.
Before a court issues your order, it will require an affidavit saying whether the owner is in military service or, if the plaintiff is unable to determine whether the owner is in military service, stating that the plaintiff is unable to determine whether the owner is in military service (usually called “affidavits of due diligence”). These affidavits are available from the SCRACVS. A local lawyer will assist you.
Compliance with the SCRA is crucial for towing operators. Successful professionals know the importance of setting up the procedures and the value of a checklist. SCRACVS is a good source of information, but having a local attorney is vital as the ultimate resource.