WASHINGTON–The Consumer Financial Protection Bureau is taking action against Fort Knox National Co. and its subsidiary, Military Assistance Company, for charging servicemembers millions of dollars in hidden fees.
The military allotment processor did not clearly disclose various recurring fees, which could total $100 or more, the CFBP said. Under a consent order entered into with the Bureau, Fort Knox National Company and Military Assistance Company will pay about $3.1 million in relief to harmed servicemembers.
“Fort Knox National Company and Military Assistance Company enrolled servicemembers without adequately disclosing their fees, and then charged servicemembers without telling them. As a result, servicemembers paid millions of dollars in fees, probably without even knowing it,” said CFPB Director Richard Cordray. “Today we are taking action and others should take note.”
Kentucky-based Fort Knox National Co., through its subsidiary, Military Assistance Company (also known as MAC), is one of the nation’s largest third-party processors of military allotments. The military allotment system allows servicemembers to deduct payments directly from their earnings.
With MAC, the CFPB said servicemembers would set up an allotment that transferred a portion of their pay into a pooled bank account controlled by MAC. Servicemembers would then pay MAC a monthly service charge – typically between $3 and $5 – to have MAC make monthly payments to a creditor out of the account. On many occasions, however, excess funds accumulated in the payment account, often without servicemembers’ knowledge, the CFPB said. An excess, or “residual,” balance might occur, for example, where a debt that a servicemember owed was fully paid off but the servicemember had not yet stopped the automatic paycheck deductions.
The Bureau alleged that from 2010 to 2014 the company routinely charged recurring, undisclosed fees against these residual balances. Tens of thousands of servicemembers had their money slowly drained from their accounts because they were not notified about the charges, the CFPB said. “
And since active allotments would replenish the money in the payment account, MAC continued to take such fees in a way that servicemembers could not easily track,” the CFPB said.