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Government Orders US Bank to Refund $6.5 million for Deceptive Auto Lending Practices

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The Consumer Financial Protection Bureau (CFPB) announced today that it was ordering U.S. Bank and a partner company (Dealer Financial Services’ or DFS) to refund $6.5 million to members of the armed services.  The government took this action because U.S. Bank and DFS engaged in deceptive marketing and lending practices targeting active-duty members of the military.  Specifically, the CFPB noted that they failed to properly disclose all the fees charged to participants in their Military Installment Loans and Educational Services (MILES) auto loans program, and for misrepresenting the actual cost and coverage of expensive add-on products financed with those auto loans.  The MILES program targeted active-duty military members who obtained subprime auto loans.  DFS recruited and maintained 700 participants in the related auto dealer network, processed the loan applications, and marketed the program.

One requirement of the MILES program is that service members were required to pay their auto loans using the military allotment system that automatically deducted the payments from their paychecks.  Because the allotment system can require the use of third party companies who charge for their services, this can result in higher payments to military members.

The specific violations by U.S. Bank included the following:

  • Failing to properly disclose a monthly processing fee that resulted in $180 in additional charges over the life of a typical loan.
  • Telling service members that payments were due and credited once per month, even though their paychecks were being deducted twice per month.  This created a time delay between the payroll deduction and the credit being posted to the account, creating additional interest charges.
  • Misrepresenting the cost of vehicle service contracts that were added to the loan.
  • Misrepresenting the cost of GAP insurance, which provides coverage if a covered vehicle is stolen and totaled, and the insurance payment does not cover the balance due on the car loan.
  • Deceptively suggesting that the vehicle service contracts would cover all expensive repairs, when in fact even basic parts were often not covered.

The companies agreed to stop engaging in the above misconduct.  Further information about this can be found by clicking here.

If you’ve been victimized by an auto dealer who engaged in deceptive practices in your car loan, you have certain rights, regardless of whether you are in the military or not.  If you are in the military (thank you for serving our country), you may also have additional rights.  We welcome you to contact us here at the Rudnitsky Law Firm for a free consultation about your rights and remedies if you’ve been victimized by a car dealer in Central Florida.