On April 20, the Consumer Financial Protection Bureau (CFPB) announced that it entered a Consent Order with a military payroll processor over allegations that the payroll processor applied hidden monthly fees against funds in servicemembers’ accounts, which were designated to pay creditors. The CFPB found that servicemembers usually contracted with the payroll processor through the help of their lender. A servicemember would then designate a creditor to receive their military payroll deductions, also known as allotments, to be applied against the servicemembers’ debt. The CFPB alleged that the payroll processor would charge monthly fees for residual funds kept in servicemembers’ accounts without disclosing those fees to servicemembers. The CFPB found that, although the allotment processing services forms disclosed some fees, prior to April 2014 the forms failed to disclose potential residual-balances fees and servicemembers’ were not otherwise notified when residual-balance fees were imposed. The CFPB alleged that this practice was unfair, deceptive, and abusive in violation of Sections 1031 and 1036 of the Consumer Financial Protection Act of 2010 (CFPA). The Consent Order enjoined the payroll processor from further violations of the CFPA by misrepresenting or imposing undisclosed fees and ordered $3,065,149.55 in equitable monetary relief.
Blog Enforcement Watch April 20, 2015