On February 2, 2017, the Consumer Financial Protection Bureau (CFPB) and the Attorney General for the Commonwealth of Virginia (Virginia AG) announced the filing of a complaint and a stipulated consent order in the United States District Court for the Eastern District of Virginia against a Virginia-based pawn broker for allegedly deceiving consumers about the actual cost of loans. The proposed consent order would require the pawnbroker to pay $79,000 in consumer relief and civil penalties.
According to the CFPB and Virginia AG, the pawnbroker issued loans secured by personal property, but charged consumers fees on the loans, including “maintenance,” “interest,” “storage,” and “clerical.” The pawnbroker also allegedly disclosed deceptively low annual percentage rates (APRs) which did not reflect all fees.
The Complaint alleged that by failing to incorporate these charges into their APR disclosures, the pawnbrokers did not provide an accurate description of the APR, as required by the Truth in Lending Act (TILA), 15 U.S.C. § 1601 et seq., and TILA’s implementing regulation, Regulation Z, 12 C.F.R. pt. 1026. The loans also allegedly violated section 1036(a)(1)(A) of the Consumer Financial Protection Act of 2010 (CFPA), 12 U.S.C. § 5536(a)(1)(A), Virginia’s pawnbroker statutes, and the Virginia Consumer Protection Act (VCPA), Va. Code Ann. § 59.1-196, et seq. Under the stipulated consent order, the company would be required to pay over $56,000 in restitution to approximately 1,000 consumers, forfeit over $17,000 in ill-gotten gains, pay $5,000 to the CFPB’s Civil Penalty Fund, and pay over $6,000 to the Commonwealth of Virginia in attorneys’ fees. The order also implements various reporting, recordkeeping, and compliance monitoring requirements on the pawn broker.
In December, the Virginia AG took similar action against another pawnbroker. For coverage of that action, read the CFEW’s blog post here.