On November 3, the Consumer Financial Protection Bureau (CFPB) announced that it filed suit against a Virginia pawnbroker, alleging that the pawnbroker violated the Truth in Lending Act (TILA) and Consumer Financial Protection Act (CFPA) by failing to disclose an annual percentage rate (APR) on its closed-end pawn contracts.

According to the complaint, the pawnbroker issues closed-end loans for consumers’ personal, family, or household purposes that are secured by personal property.  For each loan, the pawnbroker charges a varying “finance charge,” “storage fee,” and “processing fee.”  If the loan is not repaid by the due date, it charges a “monthly renewal fee” equal to the total of those three fees.  The complaint alleges that, although the pawnbroker disclosed an APR on its loan contracts, that term was not defined and was often understated by approximately half of the accurate rate.  The Bureau alleges that the broker violated TILA and the CFPA by failing to define the APR and finance charge, and by inaccurately disclosing the APR.

The CFPB requested that the Court enjoin the pawnbroker from committing future violations of TILA and CFPA, as well as order disgorgement and award restitution, damages, civil money penalties, and costs.