On December 19, 2016, the CFPB filed four lawsuits in federal district court against four Virginia pawnbrokers for alleged violations of the Consumer Financial Protection Act (CFPA) and the Truth in Lending Act (TILA).
All four of the Bureau’s complaints are very similar in substance and format. In each complaint, the Bureau alleges that the four companies deceived consumers by failing to disclose an accurate annual percentage rate (APR) on closed-end pawn contracts.
Each of the pawnbrokers charges consumers a finance charge on their loans. The finance charges include several fees. While fee structure and terminology varied from company to company, fees included charges such as “interest, “storage,” “appraisal, or “setup” charges. The Bureau stated that those fees are incident to the extension of credit and must be included in the calculation of the APR and finance charge disclosed to consumers. The CFPB’s complaints allege that the companies misled customers about the true annual cost of their loans because the companies did not include all of the fees and charges that were part of the loan in their APR disclosure.
For example, the Bureau alleged that Spotsylvania Gold & Pawn misstated the annual percentage rate on most of its contracts, in some cases understating the APR by “as much as half of the accurate rate.” In addition, the Bureau claims that “thousands of consumers” entered into loans with Spotsylvania and received credit agreements that did not include an accurate description of the APR as required by Regulation Z. The Bureau made nearly identical claims against the other three companies as well.
In the Bureau’s press release, CFPB Director Richard Corday said, “When consumers take out a loan, they are entitled to know the actual annual cost. We are taking action today against pawnbrokers that deceived consumers about these costs, and we will work to make sure they stop violating the law and provide relief for consumers who were wronged.”
In all four cases, the Bureau is seeking restitution for consumers harmed by the companies’ unlawful practices, injunctive relief that prevents the companies from committing future violations of TILA and the CFPB, and civil-money penalties.
The Bureau filed lawsuits against four companies, all of which are based in Virginia: Spotsylvania Gold & Pawn, Inc.; Fredericksburg Pawn, Inc.; Pawn U.S.A., Inc.; and A to Z Pawn, Inc.
Recently, Virginia has been a hotbed of enforcement activity for the CFPB. In November, the CFPB sued another Virginia financial services provider, B&B Pawnbroker, for allegedly disclosing deceptively low APRs.
Links to CFPB Complaints
Follow the links below to view the complaints filed in each respective action: