WASHINGTON — U.S. Bank and one of its nonbank partner
companies, Dealers’ Financial Services (DFS), were ordered to pay $6.5
million in restitution to participants in the Military Installment Loans
and Educational Services (MILES) auto loans program, the Consumer
Financial Protection Bureau announced today.
The bureau’s examinations found that U.S. Bank allegedly failed to
properly disclose all the fees charged to participants in the program,
as well as the schedule of payments, a violation of the Truth in Lending
Act and the Dodd Frank Wall Street Reform and Consumer Protection Act’s
prohibition on deceptive acts or practices.
“Through the course of our oversight examinations, we learned that
the MILES program was failing to properly disclose costs associated with
both the military allotments system, which it required service members
to use in order to participate in the program, and the expensive add-on
products being sold to service members,” said CFPB Director Richard
Under the military allotment system, service members pay by allotment
and the lenders often require service members to use third-party
processors that charge one or more fees. If lenders require payments by
allotment, military consumers could be left with no choice but to pay
this additional processing fee in order to qualify and pay for the loan,
the CFPB charged.
The bureau has ordered U.S. Bank to return the undisclosed fees and
costs that service members paid as a result of the allotments they were
required to use — estimated to be at least $3.2 million. Dealers’
Financial Services has been instructed to return approximately $3.3
million to service members related to the cost of add-on products.
“Notably, we are imposing no civil monetary penalties in this
instance in part because of the manner in which U.S. Bank and DFS
cooperated with the bureau to resolve these matters,” Cordray added.
Both companies have agreed to halt practices in question, as well as
pay restitution to service members, provide refunds or credits, and
improve their disclosures to service members regarding the cost and
other material terms of add-on products. Both companies will also be
required to submit a redress plan that the CFPB must approve.
The MILES program also will be modified so that service members are not required to use allotments in order to participate.