Advertisement
Find a Car
Go!

Feds Order U.S. Bank To Refund $6.5 Million From Deceptive Car Loans

Follow Richard

After all the crashes, mergers, and investigations that bankers have endured the past few years, you'd think they might've learned a thing or two.

Apparently, you'd be wrong.

According to Reuters, the Consumer Financial Protection Bureau ruled yesterday that U.S. Bank and Dealers' Financial Services had engaged in deceptive lending practices. And as if that weren't bad enough, the two companies had preyed on U.S. military personnel. 

Now, the Bureau has ordered them to refund $6.5 million to those affected by shady loan deals.

The probe began when a Massachusetts man contacted the Bureau suspecting that something was fishy with his son's car loan. The man said that the bulk of his son's paychecks were being spent on loan payments and upkeep. After a bit of poking and prodding, the Bureau discovered that the man's concerns were justified and the problem was widespread. 

The trouble stems, in part, from the Military Installment Loans and Educational Services program, or MILES. It's provided as a perk to those in the military, allowing them to have loan payments for cars, education, and other things deducted directly from their paycheck.

As convenient as that might sound, it makes fees less noticeable to service members, meaning that it's harder to spot discrepancies. Also, some lenders charge additional fees for using the MILES program -- a fact that isn't always made clear -- and in the end, borrowers may take on bigger loans than they can afford. 

On Thursday, the Bureau announced the findings of its investigation -- namely, that U.S. Bank failed to disclose a monthly processing fee associated with its loans, and it didn't make clear the fact that borrowers had to make payments two times each month.

U.S. Bank's non-bank partner, Dealers' Financial Services, was responsible for marketing the MILES program to personnel and processed the bulk of loan applications. The Bureau found that DFS inaccurately represented the cost of certain add-on products.

According to the terms of the settlement, neither company admitted wrongdoing. However, the two will fork over $6.5 million to over 50,000 members of the U.S. military who borrowed through the MILES program. Of that sum, U.S. Bank will pay $3.2 million, and Dealers' Financial Services will contribute $3.3 million.

Not surprisingly, U.S. Bank has washed its hands of the MILES program. DFS plans to continue overseeing it and is in the process of recruiting new lenders. Hopefully, they'll all be more aboveboard this go-round.

___________________________________________

Follow The Car Connection on FacebookTwitter and Google+.

Advertisement
 
Follow Us

 

Have an opinion?

  • Posting indicates you have read this site's Privacy Policy and Terms of Use
  • Notify me when there are more comments
Comments (3)
  1. Don't discuss anything with your spouse when the salesperson goes to talk with the boss. They bugged the room.
     
    Post Reply
    Vote
    Bad stuff?

  2. Shame on US Bank. How low can you go. Looks like our enemies aren't the only ones taking shots at our brave armed forces. And US Bank got away with it, admitting no wrong doing. What a joke.
     
    Post Reply
    Vote
    Bad stuff?

  3. Car financing and related products represent the largest profit center for the car dealer. Dealer finance people brag about how much they make in F&I office. Often $2,000 or $3,000 or more on a car deal.

    Dealer reserve, where the dealer inflates the buyer qualified interest rate, grossly overpiced extended service contracts, GAP, mop and glow, window etching all contribute to the dealer's profit. And do not forgot that $500 the dealer needs to process the paperwork, pure profit to the dealer.

    That overly pleasant person lurking in the dealer's F&I office is really the dealer's top sales person. Always ask the F&I person to disclose the interest rate you qualified for and ALWAYS say NO to anything offered in the F&I office.
     
    Post Reply
    Vote
    Bad stuff?

 

Have an opinion? Join the conversation!

Advertisement
Advertisement
Try My Showroom
Save cars, write notes, and comparison shop with hi-res photos.
Add your first car
Take Us With You!
   
Advertisement

 
© 2014 The Car Connection. All Rights Reserved. The Car Connection is published by High Gear Media. Stock photography by izmo, Inc. Send us feedback.
Advertisement