Feds Send Warnings to Companies that Target Service Members with Deceptive Advertising

military - Feds Send Warnings to Companies that Target Service Members with Deceptive Advertising
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July 20, 2015

Several companies this month received warnings from a federal regulator advising them to review their advertising for potentially misleading marketing and illegal payment options.

The Consumer Financial Protection Bureau (CFPB) sent letters this month to several companies that sell retail goods to military service members, advising them to review their websites and other advertising for potentially misleading marketing and to review other practices related to payment by military allotment.

Active-duty service members are not permitted to use allotments to pay for personal property such as vehicles, appliances, and consumer electronics. The CFPB is concerned that companies that are still advertising repayment by way of military allotment may potentially be violating federal consumer financial protection laws.

"Companies that are still advertising repayment via military allotment may be violating the law," said CFPB Director Richard Cordray.

The military discretionary allotment system allows service members to automatically direct a portion of their paycheck to financial institutions or people of their choosing. However, military personnel using the allotment system instead of other automatic payment options like ACH (Automated Clearing House) can end up losing out on certain legal protections.

To better protect service members, the Department of Defense announced changes to the allotment system last year. The updated regulations, which took effect in January, prohibit new allotments to purchase, lease or rent personal property such as vehicles, appliances and consumer electronics.

Offering service members misleading information about payment options and allowing service members to pay by allotment when prohibited by the Department of Defense regulations could violate the Dodd-Frank Wall Street Reform and Consumer Protection Act's prohibition against unfair, deceptive, or abusive acts or practices in consumer financial products or services.

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