The U.S. Justice Department said Wednesday it settled a lawsuit against American Honda Finance Corp., in which it alleged the auto financing entity broke the law by not refunding certain lease payments to service members who ended their vehicle leases early.
The unit will pay more than $1.58 million to 714 affected service members, according to a Justice Department release. The settlement also requires the company to pay $64,715 to the U.S. Treasury to "adopt new policies and implement new training requirements."
American Honda Finance, headquartered in Torrance, Calif., provides retail financing in the U.S. for Honda and Acura vehicles. In a complaint, the Justice Department said the company specifically failed to provide refunds of vehicle trade-in credit that was applied toward capitalized cost reduction.
The department said that violated the Servicemembers Civil Relief Act, a law enacted in 2003 that provides financial protections to active duty service members. The act requires that service members who lawfully end vehicle leases get refunds of all lease amounts they paid in advance, per the department.
"American Honda Finance Corporation has reached a settlement with the Department of Justice regarding errors in the processing of vehicles loans to active duty military personnel under the Servicemembers Civil Relief Act," the financial services unit said in a statement provided to Automotive News. "AHFC has reimbursed affected military customers and has revised its procedures."
The settlement still has to be approved by the U.S. District Court for the Central District of California.