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COMPLIANCE WITH THE SERVICEMEMBERS CIVIL RELIEF ACT: VITAL, BUT EASY, FOR THE
TOWING INDUSTRY

Posted by Roy L. Kaufmann

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.


2) TRAINING

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:

EMPLOYEE ACKNOWLEDGMENT

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

responsibilities.

________________________________

Print name

________________________________ _________

Signature Date

________________________________

Title

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.


3) CHECKLIST

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.

We want to thank American Towman Magazine for featuring us in their January 2021
issue.


ROY L. KAUFMANN



Attorney Roy Kaufmann serves as the Director of the Servicemembers Civil Relief
Act Centralized Verification Service, located in Washington, D.C. As a
recognized authority on the Servicemembers Civil Relief Act, Mr. Kaufmann has
published hundreds of articles and hosted many webinars. His teachings help law
firms and businesses to remain compliant with the SCRA rules and regulations so
as to avoid costly fines.




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