On November 3, the CFPB filed a lawsuit in Virginia federal district court against B&B Pawnbrokers, Inc. (“B&B”) for allegedly deceiving consumers about the actual annual cost of its loans.

B&B operates in Fredericksburg, Virginia and offers closed-end pawn and auto title loans. In the complaint, the Bureau alleged that B&B violated the Truth in Lending Act (TILA) and the Consumer Financial Protection Act (CFPA). “From at least January 1, 2013, through at least September 2015, B&B disclosed an incorrect ‘annual percentage rate,’ or APR, on most of its contracts, often understating the APRs by roughly half of the accurate rate.” B&B also failed to include a description of the terms “finance charge” or “annual percentage rate” in its loan agreements.

More specifically, the CFPB alleged that B&B disclosed deceptively low annual percentage rates that did not reflect all of the fees and charges in connection with loans, and grossly understated the cost of loans to consumers.

For example, when making a $200 loan due that must be repaid in a month, B&B charged the consumer a $10 finance charge, $20 processing fee, and a $10 storage fee. Each of those fees is a finance charge that must be included in the APR calculation. B&B disclosed an annual percentage rate of only 120% (presumably, B&B only accounted for the $10 finance charge when calculating the APR). However, if B&B calculated the APR properly by considering the processing and storage fees, B&B should have disclosed the actual APR of 240%.

According to the Bureau’s press release, the Bureau believes that B&B “misled its customer about the cost of its loans in more than 2,400 contracts.”

The Bureau’s complaint against B&B seeks restitution, damages and other monetary relief, a civil-money penalty, and injunctive relief (i.e., an order enjoining B&B from committing future violations of TILA and the CFPA). The Commonwealth of Virginia has a pending action against B&B for violations of the Virginia Consumer Protection Act, and the CFPB coordinated with Virginia in its investigation.