Recently, the CFPB and the Virginia Attorney General took action against a pawnbroker for alleged violations that included breaking down the consumer’s finance charge into subcategories which did not add up to the total finance charge or APR disclosed, obtaining a Consent Order against the pawnbroker that was entered in federal district court.
The CFPB alleged that the pawnbroker violated the Truth in Lending Act (TILA), the Consumer Financial Protection Act (CFPA), the Virginia pawnbroker statutes, and the Virginia Consumer Protection Act (VCPA) by breaking down the finance charge into four subcategories that, when added together, did not match the total “finance charge” disclosed. The CFPB also alleged that the pawnbroker disclosed an understated APR.
In Virginia, for a one-month pawn loan of $100, the pawnbroker may charge the following: (a) interest in the amount of $5; (b) a storage fee of $5; and (c) a service/electronic fee of $3. The Virginia Attorney General alleged that the pawnbroker charged an excessive interest rate and imposed a “clerical fee,” which is not specifically authorized by Virginia statutes. Furthermore, the pawnbroker allegedly increased the service/electronic fee as the loan amount increased, which is not allowed by Virginia statute.
The Consent Order requires the pawnbroker to pay: (1) $5,000 in civil penalties; (2) $17,638.61 in disgorgement; (3) more than $57,000 in restitution; and (4) $6,225.75 in reimbursement to Virginia for attorneys’ fees.
The Complaint may be found at: http://files.consumerfinance.gov/f/documents/201702_cfpb_Woodbridge-Gold-Pawn-complaint.pdf.
The Consent Order may be found at: http://files.consumerfinance.gov/f/documents/201702_cfpb_Woodbridge-Gold-Pawn-stipulated-final-judgment.pdf.