On April 14, DOJ announced that a national home security services company agreed to pay over $1.3 million to resolve allegations that it violated the Servicemembers Civil Relief Act (SCRA) by imposing unlawful charges on at least 3,400 servicemembers who terminated their home security contracts after receiving military relocation orders. DOJ alleged the company imposed a 30-day notice requirement on servicemembers terminating contracts, meaning contracts did not end until at least 30 days after the request regardless of when the servicemember desired the termination to occur. According to DOJ, this practice resulted in charges beyond the “billing period in which the termination occurs,” in violation of the SCRA, which permits servicemembers to terminate certain consumer contracts any time after receiving military orders to relocate to a location that does not support the contract. The company denied the allegations and admitted no liability.
Under the four-year settlement, the company will deposit $1.26 million into an escrow account to compensate affected servicemembers, with each receiving a refund equal to “unlawful charges” plus indirect damages (i.e., the larger of $300 or three times the value of unlawful charges). The company will also pay a $79,380 civil penalty, the maximum for a first-time SCRA violation, develop new SCRA termination policies and procedures subject to DOJ approval, provide SCRA compliance training to covered employees, and report to DOJ semi-annually regarding any complaints related to SCRA compliance in the context of default judgments or contract terminations. The agreement requires cooperation with DOJ compliance reviews during its term and specifies that only claims for alleged violations of 50 U.S.C. § 3956 are released; other potential federal claims remain unaffected.
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