WASHINGTON — US Bancorp and a partner company will repay about $6.5 million to resolve Consumer Financial Protection Bureau claims that they misled military-service members who participated in an auto lending program.
The two companies ''failed to properly disclose costs associated with repaying auto loans'' made to service members under US Bancorp's Military Installment Loans and Educational Services program, bureau director Richard Cordray said Thursday.
The Miles program allows young service members with minimal credit history to finance auto purchases, with repayment debited from paychecks through the military's allotment system.
US Bancorp will reimburse customers $3.2 million, while its partner, Dealers' Financial Services, will pay $3.3 million. The money will go to more than 50,000 service members, providing an average reimbursement of less than $130 per customer, the bureau said.
The bank failed to properly disclose a fee that resulted in paying an additional $180 over the life of a 60-month loan, the bureau said. DFS understated the costs of a vehicle service contract and insurance sold with the loans, both of which raised costs, the agency said.
Tom Joyce, a spokesman for US Bancorp, said the bank will end its program, while noting that it wasn't fined by CFPB. ''At US Bank, we have high expectations for ourselves and our company's product offerings, and we apologize for any confusion this program may have caused our customers.''
DFC Global Corp., the parent company of DFS, said it cooperated with the investigation and would seek new lender partners now that US Bank is exiting the program.