Research and Statistics

CFPB steps in to save service members money


More than 50,000 active-duty service members who participated in a big bank’s specialty auto loan program are due a refund

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More than 50,000 active-duty service members who participated in a big bank’s specialty auto loan program are due a refund, says the federal consumer watchdog agency.

On June 27, the Consumer Financial Protection Bureau ordered U.S. Bank and a partner company to return $6.5 million to participating service members for engaging in what the agency called “deceptive marketing and lending practices” in the companies’ Military Installment Loans and Educational Services (MILES) auto loan programs.

“The MILES program failed to properly disclose costs associated with repaying auto loans through the military allotments system and the expensive auto add-on products sold to active-duty military,” said CFPB Director Richard Cordray in a press release.


MILES was created to finance subprime auto loans to active military members. The program has expanded beyond U.S. Bank to other lenders, but most of the loans are still financed by the bank. The CFPB reported that the MILES loan program violated the Truth in Lending Act and the Dodd-Frank Act. U.S. Bank will pay $3.2 million and its partner, Dealers’ Financial Services (DFS) will pay $3.3 million for the violations.

U.S. Bank failed to inform the service members about a monthly charge for processing their automatic payments. The average life of a MILES loan is 60 months, and the fees associated with the processing the loan payments would total approximately $180.

Additionally, CFPB found that U.S. Bank did not disclose that payments were due twice a month. U.S. Bank required loan recipients to pay by military allotments, which should have been deducted twice a month from service members’ paychecks. However, U.S. Bank told the service members that payments were due only once a month and only credited their accounts once a month. This resulted in additional interest charges, which added up to about $75 over the life of the average MILES loan.

DFS was responsible for marketing the program and processing the loan applications before passing them on to U.S. Bank. Misrepresenting expensive auto add-ons got the DFS in trouble. Two optional add-on products were sold — a vehicle service contract and an additional Guaranteed Auto Protection (GAP) insurance policy.  The service contract added an average of $43 a month to a bill, but DFS claimed the contracts added just “a few dollars” to a monthly payment. (The site has since been updated removing this language.) The GAP insurance added more than $100 a year to a loan, but according to the CFPB, DFS told some customers the cost would be pennies a day. In reality, the cost of the GAP insurance was closer to 50 cents a day.

The CFPB has ordered the companies to stop all deceptive practices immediately, pay restitutions to the service members, stop requiring the use of allotments, improve their disclosure practices and submit a redress plan for the CFPB to approve. The CFPB has also mandated the reimbursement funds be paid without requiring action from the consumers.

“We take seriously the CFPB’s concerns regarding these disclosures and certain marketing materials used in conjunction with the MILES program,” says U.S. Bank Vice President Nicole Garrison-Sprenger in an email. One of the intents of the MILES program was to help military personnel establish and build a credit profile and offer financial education. “While we intend to exit the MILES loan program, we have also chosen to build on our original objective of financial education, and we will continue to offer and further expand the educational component of the program, broadening the content and extending access to all military service members,” says Garrison-Sprenger.

See related:Military gets thicker armor against predatory loans, Financial education program for military families launched, 12 tips to help military families avoid financial rip-offs

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