UPDATE 1-BMW settles U.S. claims it refused lease refunds to military personnel

personnel@ (Adds settlement details, comments, byline)

Feb 22 (Reuters) - BMW AG agreed to pay more than $2.2 million to settle U.S. government claims that it failed to refund lease payments to 492 military personnel who lawfully terminated their leases because they were called to duty.

In the first case of its kind, the U.S. Department of Justice accused BMW Financial Services NA of violating the federal Servicemembers Civil Relief Act by refusing to reimburse so-called capitalized cost reductions to service members who ended their leases early.

BMW's payout includes $2.17 million to compensate the 492 service members, plus $60,788 to the U.S. Treasury.

The German automaker had no immediate comment.

Capitalized cost reductions are upfront payments made to reduce monthly lease payments, and typically amount to thousands of dollars.

In papers filed with the federal court in Newark, New Jersey, the government said BMW had as a matter of policy failed since August 2011 to give required refunds to service members who were called to duty for 180 days, or permanently assigned to new locations.

The papers cited as illustrations BMW's refusal to give refunds to two Air Force sergeants who each terminated a lease for a 2015 BMW 328i, because they were respectively deployed for six months to Afghanistan and relocated for three years to Japan.

"Men and women who serve in the armed forces have made enormous sacrifices while selflessly protecting our nation from danger," U.S. Attorney Craig Carpenito in New Jersey said in a statement. "We must honor their sacrifice by ensuring that their rights are protected when duty calls for their relocation or deployment overseas."

BMW Financial Services is based in Woodcliff Lake, New Jersey. The automaker's brands also include Mini and Rolls-Royce. (Reporting by Jonathan Stempel in New York; Editing by Chizu Nomiyama and Jonathan Oatis)