Uploaded User files goes straight to sites/default/files/ directory.

I would greatly appreciate it if someone can tell me how do I get users to upload files into their own /u% directories as set up in the IMCE profile configuration?

When a user click on the Media button they get the option to upload a media file. The file uploads fine, but goes straight to the sites/default/files/ directory and not the predefined u% (user directory which is automatically created.

I have now spent two whole days on this issue and I have searched everywhere through the documentation, I have hit a wall here.

If anyone knows how the get this working, I would greatly appreciate it.

Thanks