Consumer agency warns retailers against illegal pay allotment tactics
YOKOSUKA NAVAL BASE, Japan — Several retailers that target servicemembers with pay-by-allotment advertising are receiving warnings that the Department of Defense has banned the practice.
Letters issued this month by the Consumer Financial Protection Bureau are informing the companies that they may be engaged in unfair, deceptive or abusive acts or practices, and advises them to ensure they are following the law.
The allotment ban, which took effect Jan. 1, prohibits servicemembers from allotting their future military paychecks to purchase, lease or rent personal property such as vehicles, appliances and consumer electronics. Servicemembers are allowed to make allotments for the purpose of savings, insurance premiums, mortgage or rent payments, support for dependents, or investments.
“Companies that are still advertising repayment via military allotment may be violating the law,” CFPB director Richard Cordray said in a statement. “Companies should give consumers accurate and reliable information so they can make the best decisions for their own financial situations. We will continue our work protecting servicemembers and promoting a fair and transparent marketplace for all consumers.”
The policy change came after a review of the allotment system ordered by Defense Secretary Chuck Hagel last summer when the problem was brought to light by enforcement actions by the CFPB.
The CFPB has taken aggressive action against companies that have targeted servicemembers with illegal practices. Last December, the agency, in conjunction with the attorneys general of North Carolina and Virginia, filed a consent order in federal court requiring Freedom Stores Inc., Freedom Acceptance Corp. and Military Credit Services LLC to return $2.5 million to consumers and pay a $100,000 civil penalty for using illegal tactics to collect debt from servicemembers.