U.S. Bank, partner to refund $6.5 million over auto lending
By Emily Stephenson
WASHINGTON (Reuters) - U.S. Bancorp's (USB.N: Quote) U.S. Bank and a nonbank partner will refund about $6.5 million to U.S. military personnel over auto lending practices regulators said were deceptive, the Consumer Financial Protection Bureau said on Thursday.
U.S. Bank and its partner, Dealers' Financial Services of Lexington, Kentucky, failed to properly disclose all of the fees associated with auto loans made through a program targeted at military personnel, the bureau said.
The bureau said it would not require either company to pay a civil penalty, in part because they cooperated with the investigation.
Officials said the announcement highlights problems with the military's so-called allotment system, which allows members to have loan payments deducted directly from their paychecks.
Military personnel sometimes wind up paying extra processing fees as a result of this system, and lenders who receive automatic payments may issue loans that are not necessarily affordable, bureau officials said.
"Today's action reflects our determination to act to protect service members against harmful practices in the consumer financial marketplace," said bureau Director Richard Cordray.
Defense Secretary Chuck Hagel said on Thursday that his department would form a working group with representatives from enforcement agencies and bank regulators to consider changes to the military's allotment system.
The consumer bureau, which was created by the 2010 Dodd-Frank law, has sought to crack down on what it sees as deceptive marketing of consumer products. The bureau keeps a special eye on products aimed at military personnel. Continued...