The Consumer Financial Protection Bureau announced a public enforcement action against U.S. Bank and Dealer’s Financial Services (DFS). At issue was the way they used the military discretionary allotment system to have servicemembers pay for cars bought through the MILES (Military Installment Loan and Education Services) Program. It’s an important announcement because it shines a spotlight on potential problems with the use of allotments as a way to pay off consumer debt.
The military discretionary allotment system has been around for a long time. When it was first created, there was no such thing as an automatic bank payment or electronic transfer that servicemembers could set up for themselves from a personal bank account. So, the allotment system was very helpful to military personnel who were worried about getting regular payments to their creditors, especially when they were deployed or on the move.
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