U.S. Bancorp (USB) and a nonbank partner have agreed to pay $6.5 million to settle charges that they misled members of the U.S. military about the fees charged on auto loans.

The Minneapolis bank and its partner deceived borrowers about the cost of the loans in violation of federal law, the Consumer Financial Protection Bureau said in an order released Thursday.

Under the terms of the order, U.S. Bancorp and Dealers' Financial Services, a third-party service provider in Lexington, Ky., will reimburse more than 50,000 active-duty members of the military who obtained loans from the Military Installment Loans and Educational Services program.

U.S. Bancorp has agreed to pay $3.2 million, and DFS has agreed to pay $3.3 million as part of the settlement.

The two companies established the so-called MILES program in 2001. It lets members of the military repay loans through a system that deducts payments directly from borrowers' paychecks.

U.S. Bancorp failed to tell borrowers about a monthly processing fee that totaled $180 over the term of a typical five-year loan, the CFPB charged.

The bank also allegedly misled service members about a bi-weekly payment schedule that created a lag between the timing of deductions and credits to their accounts. The delay caused borrowers to incur as much as $75 in additional interest over the terms of their loans.

The CFPB accused DFS of misleading borrowers about costs of vehicle maintenance contracts, product benefits and insurance costs.

Tom Joyce, a U.S. Bancorp spokesman, said in an email the company apologizes "for any confusion this program may have caused our customers."

"We take seriously the CFPB's concerns regarding these disclosures and certain marketing materials used in conjunction with the MILES program," Joyce added.

A spokesperson for DFS could not immediately be reached.