The DOJ is making CarMax pay for illegally repossessing soldiers’ cars

DOJ says CarMax broke federal military law

The Justice Department announced on Feb. 23, 2026, that CarMax agreed to pay close to $500,000 to settle claims it illegally repossessed vehicles from military servicemembers.

CarMax, the largest used-car retailer in the country, allegedly took back cars without the court orders required by the Servicemembers Civil Relief Act (SCRA).

The settlement includes about $420,000 in damages to affected troops and a civil penalty of roughly $79,380 to the federal government.

At least 28 troops lost their vehicles

The DOJ said CarMax illegally repossessed vehicles from at least 28 servicemembers between March 2018 and October 2023. That covers more than five years of alleged violations.

Each affected servicemember will receive at least $15,000 under the settlement.

On top of that, they will get back any equity they lost in their repossessed vehicle, plus interest. For someone deployed overseas, losing a car back home can cause problems that ripple for years.

Federal law protects troops from repossession

The SCRA is a federal law designed to shield servicemembers and their families from certain financial actions while they serve.

Under the law, auto lenders cannot repossess a servicemember’s vehicle without first getting a court order. That protection kicks in as long as the borrower made at least one payment before entering military service.

The court order step matters because it gives a judge the chance to review the situation and possibly delay action during a deployment.

CarMax allegedly ignored troops who spoke up

The DOJ said CarMax repossessed some vehicles even after the owners told the company they were in the military.

The company also allegedly failed to extend protections to reservists who had received orders to report for active duty.

Under the SCRA, protections for reservists begin the day they receive their orders, not when they physically show up.

The DOJ said most of the violations came from CarMax policies that simply did not account for military service.

CarMax must overhaul its military policies

Going forward, CarMax must rewrite its policies to protect servicemembers.

The company must submit its proposed SCRA procedures to the Justice Department, including how it reviews military service information from borrowers.

CarMax must also check the Department of Defense Manpower Data Center database to verify whether a borrower is in the military.

The settlement agreement stays in effect for four years, giving the DOJ a window to monitor compliance.

Affected troops will hear from CarMax directly

CarMax must send a letter to each affected servicemember within 30 days of the settlement.

The company also has to set up and maintain several free ways for those servicemembers to get in touch, including email, a website, and a toll-free phone number.

On top of that, CarMax must contact all credit bureaus and ask them to remove any negative marks tied to the affected accounts. That last step matters, since a repossession can drag down a credit score for years.

CarMax denies it broke the law

CarMax said it cooperated fully with the DOJ to reach a resolution, but the settlement does not count as an admission of wrongdoing. The company said supporting the military is part of its culture.

CarMax pointed out that since 2003, it has provided SCRA relief to more than 26,000 servicemembers and their dependents through finance charge reductions and repossession protections.

The company added that it has expanded its screening process and strengthened employee training.

The SCRA controls how lenders collect debts

The SCRA does not make servicemembers immune from debt. It controls how creditors can go after what they are owed.

Lenders must get a court order before repossessing any vehicle tied to a loan that started before military service.

The law also caps interest rates on pre-service loans at 6% per year while a borrower serves on active duty.

Servicemembers can waive SCRA rights in writing during active duty, but any waiver signed before military service is automatically void.

Guard and reserve members get protection too

SCRA protections extend to National Guard members called to active service and reservists from the moment they receive official orders.

That distinction sat at the heart of the CarMax case, where the DOJ said the company failed to recognize when protections began. Dependents and spouses of servicemembers may also qualify for SCRA coverage.

For military families, knowing when these protections kick in can make the difference between keeping a car and losing one.

DOJ has recovered $484 million for troops since 2011

The CarMax case is part of a much bigger effort. Since 2011, the DOJ has secured more than $484 million in relief for over 149,000 servicemembers through SCRA enforcement.

The Civil Rights Division’s Housing and Civil Enforcement Section and the U.S. Attorney’s Office for the Eastern District of Virginia handled the CarMax case.

Past DOJ actions have gone after auto lenders, property managers, towing companies, and landlords for SCRA violations.

Troops can reach out for help now

Servicemembers and dependents who believe their SCRA rights were violated can contact the nearest Armed Forces Legal Assistance Program Office.

CarMax customers can reach CarMax Auto Finance about SCRA benefits by phone at (800) 925-3612 x4077. The DOJ has made clear it will keep going after companies that fail to follow these rules.

For servicemembers who lost vehicles during the period covered by the settlement, the clock to get paid starts now.

This article was created with AI assistance and human editing.

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