A company aimed at preserving the financial well-being of deployed servicemembers by processing payments to creditors on the consumers’ behalf instead contributed to customers’ financial distress by charging millions of dollars in hidden fees, the Consumer Financial Protection Bureau alleges in a new complaint.

The CFPB announced today that Kentucky-based Fort Knox National Company and its subsidiary must provide $3.1 million in redress to servicemembers for allegedly unfairly and deceptively charging consumers fees for payment services.

According to the CFPB complaint [PDF], Fort Knox National Company and its subsidiary Military Assistance Company (MAC) acted as one of the largest third-party processors of military allotments – which allow servicemembers to deduct payments directly from their earnings to be used to send money home to their families and pay their creditors.

From 2010 to 2014, the CFPB alleges that Fort Knox National and MAC routinely enrolled servicemembers into its military allotment processor without adequately disclosing the fees and then charged the servicemembers without telling them.

Through the processor, servicemembers were able to set up an allotment that transferred a portion of their pay into a pooled bank account controlled by MAC. Funds from that account would then be used to make monthly payments to a creditor or family members. For that service, MAC charged servicemembers between $3 and $5.

In many occasions, excess funds accumulated in the payment accounts after the consumer’s debt was repaid, resulting in “residual” balances.

The CFPB alleges that instead of notifying consumers that their debts had been repaid, Fort Knox National and MAC routinely charged recurring, undisclosed fees against the residual balances.

The undisclosed fees included: $5 to send a letter to the servicemember about his or her residual balance; $5 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. Additionally, the company allegedly charged a fee equal to the remaining money in a servicemember’s account when the balance fell below the next round of fees.

As a result, the CFPB claims that tens of thousands of servicemembers had their money slowly drained from their accounts without any warning or disclosure from MAC. And because the 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.

CFPB Takes Action Against Military Allotment Processor for Charging Servicemembers Hidden Fees [Consumer Financial Protection Bureau]

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