The bureau alleged that U.S. Bank and an F&I services provider, Dealers' Financial Services of Lexington, Ky., didn't properly disclose fees and the full cost of add-on products such as service contracts and gap insurance.
The loans were made under a program called Military Installment Loans and Educational Services, or MILES, which allows service members to have car payments deducted directly from their paychecks. The program is run by DFS, an affiliate of Minneapolis-based U.S. Bank, which provides most of the financing for the loans.
"The MILES program failed to properly disclose costs associated with repaying auto loans through the military allotments system and the expensive auto add-on products sold to active-duty military," CFPB Director Richard Cordray said in a statement today. "We will continue our work to ensure that service members are treated fairly,"
Congress exempted new-car dealers from oversight by the bureau, with the exception of buy-here, pay-here dealerships that finance their own loans. However, F&I products sold by dealers come from institutions that fall under the bureau's jurisdiction.
"The dealers obviously are the folks actually selling the car," Kent Markus, assistant director for enforcement at the bureau, told reporters today, "but they do that in conjunction with the ones who were making these products available."
A spokesman for the National Automobile Dealers Association declined to comment.
U.S. Bank, which will reimburse service members about $3.2 million, and Dealers' Financial Services, which will pay them about $3.3 million, did not admit fault.
Cordray told reporters today that the bureau did not levy monetary penalties against the companies because they cooperated with the investigation.
In a statement, U.S. Bank said it takes the bureau's concerns seriously.
"At U.S. 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," U.S. Bank spokesman Tom Joyce said in an e-mail.