The MILES Program was created by U.S. Bank and DFS to finance sub-prime loans to active-duty military, deducting the monthly auto loan payment directly from their military checks. The program is essentially run by DFS, while U.S. Bank provides most of the financing for the loans.
The CFPB investigation revealed that U.S. Bank violated the Truth in Lending Act and the Dodd Frank Wall Street Reform and Consumer Protection Act's prohibitions on deceptive acts or practices by:
(1) Failing to properly inform service members about fees associated with their auto loan. Servicemembers were charged a monthly fee for automatic deduction of their payments from their paycheck, but this fee was not properly disclosed to them as part of the finance charge, the annual percentage rate, and the total payments for the loans. This cost the average service member about $180 in fees over the life of the auto loan.
(2) Failing to properly disclose to service members the schedule of payments under their auto loan. Servicemembers were advised that the payments would be deducted once monthly from their paycheck, but a partial payment was deducted from their paycheck twice a month. To see the Order, click here.The CFPB investigation also revealed that DFS misrepresented the cost and coverage of add-on products financed with the MILES loans. In particular, the investigation revealed that DFS:
(1) Materially understated the cost of service contracts as being "just a few dollars" a month, when in reality the service contracts averaged about $42 a month extra.
(2) Materially understated the cost of GAP Insurance as being "just a couple cents" a day, when in reality the GAP Insurance averaged about 42 cents per day and over $100 a year.
(3) Misrepresented the coverage of service contracts as covering all expensive repairs, when the service contracts actually had many exclusions from coverage. To see the Order, click here.
While it is sad and discouraging to see active-duty military being targeted in this manner, misrepresenting the cost and coverage of add-ons in auto sales is a nationwide problem impacting consumers, whether military or not. So, if you are in the market for a car or truck, whether new or used, pay close attention to your sales contract and know exactly what you are paying for. The dealer may have added some products to your purchase that you do not know about or understand. Have a question? Ask the dealer! Many of these products are unnecessary and can cost you thousands of dollars over the life of your auto loan.
Or, already unknowingly purchase thousands of dollars in add-ons with your vehicle? Contact a consumer law attorney and they may be able to help you out of your loan or help you get some of that money back that the car dealer stealthily added into the purchase.
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