CFPB Tackles Payment Processor for Charging Servicemembers Hidden Fees, Orders Over $3 Million in Consumer Relief

CFPB UDAAP Servicemembers Payment Processors

On April 20, the CFPB announced an enforcement action against a Kentucky-based third-party processor of military allotments and its subsidiary – together “Respondents” – for allegedly charging servicemembers millions of dollars in hidden fees. According to the Bureau, servicemembers set up allotment arrangements with the Respondents, and the Respondents were to pay creditors – auto lenders, installment lenders, and retail merchants – on behalf of deployed servicemembers. The Bureau alleges that from 2010 to 2014, the company violated UDAAP provisions of the Consumer Financial Protection Act by failing to (i) adequately disclose information about various fees associated with the Respondents’ services; and (ii) inform servicemembers when they were being charged residual-balance fees. The consent order requires that the Respondents pay approximately $3.1 million in relief to the affected servicemembers.