CFPB Takes Action, Fines Military Allotment Processor Millions
The CFPB (Consumer Financial Protection Bureau) has taken legal action against a military allotment processor who failed to clearly disclose a number of recurring fees to service members.
The outcome? Roughly $3.1 million in relief that is to be paid out to affected service members.
Fort Knox National Company, along with its subsidiary, Military Assistance Company (MAC), had been automatically charging service members fees without clearly disclosing important information about costs. This is in addition to neglecting to notify the service members that these fees had been charged in the first place.
According to the CFPB, the recurring fees levied against the service members often totaled upwards of $100. Information regarding these fees was not readily available and could not be found online. Likewise, the service members did not receive monthly statements from MAC that included this information.
A military allotment processor is a means for service members to send money home to their families and to pay their debts to creditors. The payments are deducted directly from the service members’ earnings, and while this system was established before electronic transfers and automatic bank payments were the norm, some creditors – including installment lenders, retail merchants, and auto lenders – occasionally direct service members to utilize this system.
Examples of some of the hidden fees charged by MAC include:
- Fee to send a letter to a member about a residual balance – $5
- Fee to send a letter to the member’s current/past creditor about a residual balance – $5
- Repeat fee if the account was untouched with a positive balance for greater than six months – $12 to $20
In a related press release, the CFPB writes:
“Tens of thousands of service members had their money slowly drained from their accounts because they were not notified about the charges. And, since active allotments would replenish the money in the payment account, MAC continued to take such fees in a way that service members could not easily track.”
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB has authority to take such actions against institutions in violation of federal consumer financial laws. This includes taking action against institutions who engage in deceptive, abusive, and/or unfair acts or practices.
The CFPB will be contacting service members who may be eligible for relief under this action.