WASHINGTON (6/28/13)--U.S. Bank and a nonbank partner, Dealers' Financial Services (DFS), will be made to repay $6.5 million in total proceeds to U.S. servicemembers under the terms of a Consumer Financial Protection Bureau enforcement action.
U.S. Bank and DFS allegedly violated the Truth in Lending Act and other federal laws that prohibit deceptive marketing and lending practices when they failed to disclose certain terms to participants in a Military Installment Loans and Educational Services (MILES) auto loan program.
The CFPB in a release said the firms specifically failed to properly disclose an allotment fee charged to participants, and did not inform participants on the timing of allotment payments. The companies also misrepresented the true cost and coverage of add-on products financed along with the auto loans, the CFPB added.
The military discretionary allotment system was established to help servicemembers make payments from their accounts while they were away on military duty. The system predates more modern automated payment systems such as automated withdrawals and electronic transfers.
Certain creditors can require military personnel to make payments through the allotment system rather than other forms of credit. Third-party allotment processors often charge fees, the CFPB said.
Around 50,000 servicemembers were impacted by these actions, the CFPB said. The payments will be sent to servicemembers that had outstanding MILES loans between Jan. 1, 2010 and today.
For more on the CFPB action, use the resource link.