The CFPB announced that it has sued four Virginia-based pawnbrokers in lawsuits filed in a Virginia federal district court for alleged violations of the Truth in Lending Act and the Consumer Financial Protection Act in connection with closed-end “pawn” loans made by the companies.  The defendants are: Spotsylvania Gold & Pawn, Inc.; Fredericksburg Pawn, Inc.; Pawn U.S.A., Inc.; and A to Z Pawn, Inc.

Each of the complaints allege that the defendant charged various fees, such as fees for “interest,” “storage,” “service,” “appraisal,” and “setup,” that were part of the finance charge and therefore required to be included in the calculation of the annual percentage rate.  While each of the complaints allege that the defendant violated TILA and Regulation Z by inaccurately disclosing the APR, only one complaint (against A to Z Pawn, Inc.) alleges that the finance charge was also inaccurately disclosed in violation of TILA and Regulation Z.

The complaint against Spotsylvania Gold & Pawn, Inc. also alleges that the company’s disclosures violated TILA and Regulation Z by failing to include the brief description of the APR required by TILA and Regulation Z.  (Regulation Z requires the term “APR” to be described as “the cost of your credit as a yearly rate.”  The complaint alleges that the company’s contracts described the APR as “[c]ost of your credit interest (only) per year.”)

The CFPB alleges in the complaint that the alleged TILA and Regulation Z violations constitute violations of the CFPA.  The CFPB cites to 12 U.S.C. Section 5536(a)(1)(A) which provides that it is unlawful for “any covered person…to offer or provide to a consumer any financial product or service not in conformity with Federal consumer financial law, or otherwise commit any act or omission in violation of a Federal consumer financial law.”  In the complaints, the CFPB seeks unspecified monetary relief, injunctive relief, and penalties.

Last month, the CFPB announced that it had filed a lawsuit in a Virginia federal district court against another Virginia-based pawnbroker, B&B Pawnbrokers, Inc., for similar alleged TILA and CFPA violations.