Consumer Financial Protection Bureau Takes Second Action Against Military Credit Services for Improper Contract Disclosures

Bureau Orders Lender to Pay $200,000 Civil Penalty

WASHINGTON, D.C. – The Consumer Financial Protection Bureau (CFPB) today sued Military Credit Services, LLC (MCS) for making loans with improper disclosures. This is the CFPB’s second enforcement action against MCS. In 2014, the CFPB, along with the states of North Carolina and Virginia, sued the company for similar violations, and the company was ordered to revise its contract disclosures in 2015. In today’s action, the CFPB ordered the company to ensure that its contracts comply with the law. It also required the company to hire an independent consultant to review its practices and to pay a $200,000 civil penalty.

“Today’s action sends a clear message that lenders cannot ignore their responsibilities under the law,” said CFPB Director Richard Cordray. “This is the Consumer Bureau’s second action against Military Credit Services for improper disclosures. We are imposing further penalties, and we will continue to closely monitor their compliance in the future.”

Military Credit Services is a Virginia-based company that extends credit to consumers through retailers nationwide and, through a commonly owned company, collects debts owed under the credit contracts. The CFPB found the company violated federal law by failing to properly disclose the terms of preauthorized transfers and interest rates on the loans it offered. Without those legally required disclosures, consumers cannot make informed decisions about important financial decisions they face.

Under the Dodd-Frank Act, the CFPB is authorized to take action against institutions engaged in unfair, deceptive, or abusive acts or practices or that otherwise violate federal consumer financial laws.

Under the terms of the CFPB order released today, Military Credit Services is required to:

  • Cease its unlawful conduct: The company is ordered to ensure that its contracts comply with applicable laws.
  • Pay for an independent review: The company must hire an independent consultant with specialized experience in consumer-finance compliance to conduct an independent review of the company’s issuance and servicing of credit. The independent report will be provided to the company and to the CFPB.
  • Pay a $200,000 civil penalty: The company must pay $200,000 to the CFPB’s Civil Penalty Fund.

The full text of the CFPB’s consent order is available here: http://files.consumerfinance.gov/f/documents/201612_cfpb_MilitaryCreditServices-consentorder.pdf

More information about the original lawsuit and resulting stipulated final judgment in 2015 is available here: http://www.consumerfinance.gov/about-us/newsroom/cfpb-and-states-take-action-against-freedom-stores-for-illegal-debt-collection-practices-against-servicemembers/ 

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The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit consumerfinance.gov.