Pawnbrokers offer cash-strapped consumers an avenue to acquire quick cash in exchange for holding possession of their valuables, sometimes stepping into the world of such things as auto-title loans. One such company is now facing the ire of federal regulators for allegedly deceiving customers about the cost of its loans. 

The Consumer Financial Protection Bureau announced Thursday that it filed a lawsuit against Virginia-based B&B Pawnbrokers, alleging the company misled consumers about the cost of its auto-title loans on more than 2,400 occasions.

According to the lawsuit [PDF], from at least Jan. 2013 to Sept. 2015 B&B disclosed an incorrect, often significantly lower, annual percentage rate on most of its contracts, leading borrowers to think the loan was more affordable than it actually was.

For example, when B&B Pawnbrokers made a $200 loan due in a month, it charged the consumer a $10 finance charge, a $10 storage fee, and a $20 processing fee.

Each fee is a finance charge that must be included in calculating the annual percentage rate, according to federal law. The sum of these fees — in this case $40 — yields an annual percentage rate of 240%. However, in a contract, B&B Pawnbrokers disclosed an APR of only 120%.

The Bureau alleges that these actions constitute violations of the Truth in Lending Act and other federal financial laws. With the suit, the CFPB seeks monetary relief to affected borrowers and unspecified penalties.

In addition to the CFPB’s recently filed lawsuit, B&B Pawnbrokers also action for violations of Virginia consumers laws in a separate pending action by the state.

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