The Consumer Financial Protection Bureau (CFPB) announced Monday (Dec. 19) that it took action against four Virginia pawnbrokers for what it said was deceptive practices in terms of the actual annual costs of loans.
In a press release, the CFPB said it filed lawsuits in federal court alleging the four companies broke the law by misstating the charges associated with pawn loans. The CFPB wants the companies to stop their illegal lawsuits and wants restitutions for defrauding consumers as well as to impose penalties on the four companies.
“When consumers take out a loan, they are entitled to know the actual annual cost,” said CFPB Director Richard Cordray in the press release. “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.”
The CFPB’s lawsuits name four companies, all of which are based in Virginia: Spotsylvania Gold & Pawn, Fredericksburg Pawn, Pawn U.S.A., and A to Z Pawn. The CFPB said all four pawnbrokers charge consumers a finance charge on their loans, which is made up of several fees called appraisal, interest, storage and setup charges. The companies misled consumers by offering deceptively low annual percentage rates that didn’t reflect all those fees that were added to the loans. In a lot of cases, the companies understated the true annual percentage by as much as half of the actual cost, the CFPB said. The CFPB contends the companies violated the Truth in Lending Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act. Under the Dodd-Frank Act, the CFPB is authorized to take action against institutions engaged in unfair, deceptive or abusive acts or practices or those that otherwise violate federal consumer financial laws, the bureau said in the release.