Pawn Companies Sued for Allegedly Deceiving Consumers About Loan Costs
Four pawnbrokers are accused of disclosing misleading annual percentage rates
The Consumer Financial Protection Bureau (CFPB) has filed lawsuits against four Virginia pawnbrokers for allegedly deceiving consumers regarding the actual annual costs of loans.
The Bureau claims that the companies misstated the charges that were associated with pawn loans. The agency wants to stop their illegal practices, obtain restitution for the consumers they harmed, and impose penalties on them.
"When consumers take out a loan, they are entitled to know the actual annual cost," said CFPB Director Richard Cordray. "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 following four companies are named in the lawsuits: Spotsylvania Gold & Pawn, Inc.; Fredericksburg Pawn, Inc.; Pawn U.S. A., Inc.; and A to Z Pawn, Inc.
Each of these companies charges customers a finance charge on their loans. This charge is made up of several fees that the pawnbroker calls, for example, "appraisal," "interest," "storage," or "setup" charges. According to the CFPB, the four companies misled their customers about the costs of their loans. They did this by providing low annual percentage rates that deceived consumers because they did not include all the fees and charges included with the loans. In many cases, the actual cost of the loan was as much as 50 percent higher than the rates the companies provided.
The CFPB claims that these practices broke two laws: the Truth in Lending Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Dodd-Frank Act gives the CFPB the power to take action against any institutions using unfair, deceptive, or abusive acts or practices or that break federal consumer financial laws in any other way.
In the complaints that it has filed against the pawnbrokers, the CFPB hopes to stop their illegal practices, get relief for consumers in the form of money, and impose penalties on the companies.