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CFPB Takes Action Against Military Allotment Processor for Charging Servicemembers Hidden Fees

Servicemembers Unknowingly Paid Millions in Fees to Fort Knox National Company and Military Assistance Company

WASHINGTON, D.C. – Today the Consumer Financial Protection Bureau (CFPB) is taking action against Fort Knox National Company and its subsidiary, Military Assistance Company, for charging servicemembers millions of dollars in hidden fees. The military allotment processor did not clearly disclose various recurring fees, which could total $100 or more. Under a consent order entered into with the Bureau, Fort Knox National Company and Military Assistance Company will pay about $3.1 million in relief to harmed servicemembers.

“Fort Knox National Company and Military Assistance Company enrolled servicemembers without adequately disclosing their fees, and then charged servicemembers without telling them. As a result, servicemembers paid millions of dollars in fees, probably without even knowing it,” said CFPB Director Richard Cordray. “Today we are taking action and others should take note.”

Kentucky-based Fort Knox National Company, through its subsidiary, Military Assistance Company (also known as MAC), was one of the nation’s largest third-party processors of military allotments. The military allotment system allows servicemembers to deduct payments directly from their earnings. The allotment system was created to help deployed servicemembers send money home to their families and pay their creditors at a time when automatic bank payments and electronic transfers were not yet common bank services. Creditors, such as auto lenders, installment lenders, and retail merchants, have in recent years been known to direct servicemembers to use the system to collect payments straight from servicemember earnings.

With MAC, servicemembers would set up an allotment that transferred a portion of their pay into a pooled bank account controlled by MAC. Servicemembers would then pay MAC a monthly service charge – typically between $3 and $5 – to have MAC make monthly payments to a creditor out of the account. On many occasions, however, excess funds accumulated in the payment account, often without servicemembers’ knowledge. An excess, or “residual,” balance might occur, for example, where a debt that a servicemember owed was fully paid off but the servicemember had not yet stopped the automatic paycheck deductions.

The Bureau alleges that from 2010 to 2014, the company routinely charged recurring, undisclosed fees against these residual balances. Tens of thousands of servicemembers had their money slowly drained from their accounts because they were not notified about the charges. And, since active allotments would replenish the money in the payment account, MAC continued to take such fees in a way that servicemembers could not easily track. Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Bureau has the authority to take action against institutions violating federal consumer financial laws, including engaging in unfair, deceptive, or abusive acts or practices. According to the Bureau’s investigation, the company:

  • Failed to clearly disclose key information about costs: The company did not disclose various fees charged against a residual balance, the dollar amounts of such fees, or the circumstances under which they would be incurred. Such fees included: a $5 fee to send a letter to the servicemember about his or her residual balance; a $5 fee to send a similar letter to the servicemember’s current or past creditor; and a recurring fee of $12 to $20 if the account sat idle with a positive balance for more than six months. The company also charged a fee equal to the remaining money in a servicemember’s account when the balance fell below the next round of fees.
  • Failed to notify servicemembers it had charged fees: MAC failed to inform servicemembers when it charged them residual-balance fees. And servicemembers could not readily learn of such fees because online account information did not include fee charges. In addition, servicemembers received no monthly statements from either MAC or the bank holding their funds.

Fort Knox National Company began winding down MAC’s allotment business in 2014. Under the terms of the consent order filed today, Fort Knox National Company and MAC are required to provide about $3.1 million in relief to harmed servicemembers. Servicemembers who may be eligible for relief will be contacted by the Bureau.

A copy of the administrative consent order is available at:

Recently, the U.S. Department of Defense made reforms to the allotment system to create greater protections for servicemembers. The DoD’s statement on those reforms can be found at:

The Consumer Financial Protection Bureau is a 21st century agency that implements and enforces Federal consumer financial law and ensures that markets for consumer financial products are fair, transparent, and competitive. For more information, visit