Yesterday, the Consumer Financial Protection Bureau (CFPB) announced that Minneapolis-based U.S. Bank violated the Truth in Lending Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act when it targeted active-duty servicemembers with deceptive marketing and lending practices through its Military Installment Loans and Education Services (MILES) auto loans program, according to a press release from the bureau. Lexington, Kentucky-based Dealers' Financial Services (DFS), which markets the program, manages its website and processes loan applications before submitting them to U.S. Bank, was also found guilty of the following deceptive marketing practices: understating the costs of the vehicle service contract, understating the costs of the insurance and misleading consumers about product benefits.

To make payments, the program required servicemembers to use a decades-old system known as the military allotment system, which was originally designed to "help deployed servicemembers send money home to their families and pay their creditors at a time when automatic bank payments and electronic transfers were not yet common bank services." The bureau found that not only did the lenders often require repayment through fee-charging, third-party processors, but that the bank also failed to properly disclose the schedule of payments, which by coming out of every paycheck amounted to twice each month. U.S. Bank must repay at least $3.2 million and DFS has agreed to pay $3.3 million to active-duty servicemembers. The CFPB decided not to impose a civil penalty, but said it will work with the Department of Defense as part of an interagency group tasked with improving the allotment system. For more, read the full press release and remarks from CFPB Director Richard Cordray.