WASHINGTON — The Consumer Financial Protection Bureau said Monday that it has ordered Fort Knox National Company to pay more than $3 million in restitution on grounds that a subsidiary hid certain fees charged to servicemembers.

The agency alleged that Kentucky-based Fort Knox National, through its subsidiary Military Assistance Company, charged "millions of dollars" through the military allotment process by not "clearly" disclosing certain recurring fees. Fort Knox National and its subsidiary have agreed to pay $3.1 million in relief without admitting or denying the allegations.

"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, in a press release. "Today we are taking action and others should take note."

The subsidiary, Military Assistance Company (also called MAC) was one of the largest third-party processors for military allotments in the nation before its parent began winding the company down in 2014, the CFPB said.

Servicemembers would pay MAC a monthly service charge, typically between $3 and $5, in order for MAC to make monthly payments to designated creditors from a pooled account that the individual set up with MAC. The problem occurred, however, when MAC continued to charge fees against the excess funds that typically accumulated when a debt was paid off but the servicemember had not stopped the automatic paycheck deductions, the CFPB said. The fees included $5 for sending a letter to notify the servicemember of a so-called residual balance and up to a $20 recurring fee if the account was dormant with a positive balance for more than six months.

The agency alleges that MAC charged recurring fees against such residual balances from 2010 to 2014 often without the servicemember's knowledge or disclosing the amount of fees and triggers for a fee. Servicmembers also did not get a monthly statements from MAC or the bank holding their funds, the CFPB said.

"Tens of thousands of servicemembers had their money slowly drained from their accounts because they were not notified about the charges," the CFPB said. "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."

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.