Thursday, November 17, 2016

CFPB charges pawnbroker misled consumers with low rate

By Andrew A. Turner, J.D.

The Consumer Financial Protection Bureau has filed an enforcement action in federal court against B&B Pawnbrokers, Inc. for deceiving consumers about the cost of its pawn and auto title loans because it did not include storage fees or processing fees in the finance charge. The CFPB’s lawsuit seeks to end B&B Pawnbrokers' illegal practices, obtain restitution for victims, and impose penalties.
“When consumers take out a loan, the lender by law must tell them the terms, including the actual annual cost of the loan,” said CFPB Director Richard Cordray. “B&B Pawnbrokers deceived consumers about what that true cost was.”

The CFPB alleges that Virginia based B&B Pawnbrokers misled its customers about the cost of its loans in more than 2,400 contracts. Specifically, the CFPB alleges that B&B Pawnbrokers unlawfully disclosed a misleadingly low annual percentage rate that did not reflect all of the fees and charges tacked on to the loan, which grossly understated the cost to consumers.
For example, when B&B Pawnbrokers made a $200 loan due in a month, it charged the consumer a $10 finance charge, a $10 storage fee, and a $20 processing fee. Each fee is a finance charge that must be included in calculating the annual percentage rate. The sum of these fees, $40, yields an annual percentage rate of 240 percent. B&B Pawnbrokers disclosed an annual percentage rate of only 120 percent.

The bureau’s complaint alleges that B&B Pawnbrokers' actions violated the Truth in Lending Act and Consumer Financial Protection Act and seeks monetary relief, injunctive relief, and penalties.
Virginia has a pending action against B&B Pawnbrokers for violations of the Virginia Consumer Protection Act, and the CFPB coordinated with Virginia in its investigation.

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