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Thursday 17 August 2017
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Two Finance Companies Busted for Screwing Our Troops – Car Pro News

screwing our troopsGOOD NEWS. U.S. Bank and a Kentucky-based financial services provider agreed to refund $6.5 million to 50,000 military service members after federal regulators accused both companies of misleading borrowers about fees and costs associated with an auto loan program that targeted active-duty troops. For me personally, they should be federally prosecuted, including jail sentences.
U.S. Bank, headquartered in Minneapolis, along with its partner, Dealers’ Financial Services of Lexington, Ky., violated the law by engaging in deceptive marketing and lending practices, regulators with the Consumer Financial Protection Bureau alleged Thursday.
The auto loan program created by the two companies — the Military Installment Loans and Educational Services program — was designed to appeal to young service members who were new to the car-buying process and had little or no credit history.
It required them to make payments on subprime loans through the military’s so-called “discretionary allotment system,” a process that automatically deducts the money from their salaries before the funds are deposited in a bank or credit union.
Regulators said the program neglected to inform the borrowers of all the fees that third parties would charge to process the automatic deductions.
It also failed to explain how often payments were due or that the intricacies of the payment schedule meant additional interest charges, according to regulators.
“MILES used the military discretionary allotment system to its advantage — requiring that service members pay straight from their paycheck before the money hit their personal bank accounts — without properly disclosing all associated fees and the way the program worked,” Richard Cordray, the consumer bureau’s director, said in a media call.
Without admitting any wrongdoing, U.S. Bank said it took regulators’ concerns seriously and no longer would participate in the loan program.
“At U.S. Bank, we have high expectations for ourselves and our company’s product offerings, and we apologize for any confusion this program may have caused our customers,” the statement said.
DFC Global Corp. Chairman and CEO Jeff Weiss issued a statement on behalf of Dealers’ Financial Services, a subsidiary that also didn’t acknowledge any wrongdoing but said the company had cooperated fully with regulators and was “modifying its compliance management system and communication procedures with customers to take into account these issues.”
Regulators also said that the MILES program had misled service members by understating the cost and coverage of add-on products sold with the loans, such as service contracts and insurance.
For example, marketing materials claimed that a vehicle service contract would cost “just a few dollars” a month, when it added an average of $43 per month, regulators said.
The service contract also promised to protect military personnel from all expensive repairs, yet it didn’t cover many basic parts, they said.
The consumer bureau first learned about problems with the program from a service member’s father, who complained online to the agency about the auto loan that his son, Ari, took out to finance a used Dodge Ram pickup, Cordray said.
“In addition to the $20,000 price tag on the truck, Ari was sold add-on products, including a warranty, costing thousands of dollars,” Cordray said. “With a five-year loan at an 18 percent interest rate, the loan payments and upkeep cost Ari more than $700 a month, or more than 70 percent of his take-home pay.”
Originally intended to help troops stay on top of recurring bills during deployments or relocations, the allotment system may be vulnerable to misuse by lenders, said Holly Petraeus, the consumer bureau’s assistant director of service member affairs.
The MILES program “shines a spotlight on potential problems with the use of the military allotment system as a way to pay off debt,” Petraeus said.
Secretary of Defense Chuck Hagel announced last week that he would form an interagency team to consider changes to the allotment system.




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