Finance, Credit and Loan Information

Servicemembers win $3.1M relief over hidden fees

One of the largest US processors of bill payments by military servicemembers will pay nearly $3.1 million in consumer relief after a review found the firm charged millions of dollars in hidden fees.

Kentucky-based Military Assistance Company and its parent firm, Fort Knox National Co., will repay soldiers, sailors, Marines and other servicemembers who were harmed, the Consumer Financial Protection Bureau said Monday.

Servicemembers paid millions of dollars in fees, probably without knowing it, said CFPB Director Richard Cordray. Today we are taking action, and others should take note.

Under the terms of a consent order, the companies will pay the settlement to the CFPB, which will contact servicemembers who may be eligible for refunds.

The companies did not immediately respond to a message seeking comment.

The matter focuses on the military allotment system that allows servicemembers to deduct payments directly from their government earnings. The system was created to help active-duty troops send money home to relatives and pay bills at a time when electronic transfers and automatic bank payments were not yet common.

Auto lenders, retail merchants and other creditors in recent years have directed servicemembers to use the allotment system so the companies could collect repayments directly, the CFPB said.

Servicemembers who enrolled with Military Assistance Co. had a portion of their government pay transferred to a pooled bank account controlled by the processing company. The soldiers typically paid the firm a $3 to $5 monthly fee to process payments to creditors.

However, excess funds frequently accumulated in the payment account, CFPB examination found. Often unaware of the surpluses, tens of thousands of servicemembers had their money slowly drained from their accounts from 2010 to 2014 because they were unaware of fees charged by the processing firm, the CFPB said.

The consumer agencys review found:

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