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.For more information about CFPB enforcement actions, subscribe to the Banking and Finance Law Daily.
