CFPB Assistant Director for Servicemember Affairs Holly Petraeus has issued a statement applauding changes to the military discretionary allotment system announced last week by the Department of Defense (DoD).
The military discretionary allotment system allows servicemembers to automatically direct a portion of their paycheck to financial institutions or others of their choosing. Effective
January 1, 2015, active duty service members will no longer be able to make allotments for the following types of purchases: (1) vehicles, such as automobiles, motorcycles and boats;
(2) appliances or household goods, such as furniture, washers and dryers; (3) electronics, such as laptops, tablets, cell phones and televisions; or (4) other consumer items that are tangible and moveable. The change does not affect existing allotments, military retirees or DoD civilians.
In her comments, Ms. Petraeus noted that “the CFPB has taken multiple actions to enforce the law against entities whose businesses were largely premised on receiving payments from servicemembers, often through the military allotment system.” Among such actions was the CFPB’s lawsuit against USA Discounters, a retailer that operates a chain of stores near military bases and offers financing for purchases through retail installment sales contracts, which involved charges of an alleged fee scam. The August 2014 consent order required
USA Discounters to make refunds to servicemembers of more than $350,000 and pay a $50,000 civil money penalty.