B&B Pawnbrokers, Inc.

Documents in this case

• Complaint · 5 p.
• Stipulation · Mar. 2017 · 12 p.

Case summary

On Nov. 3, 2016, the Consumer Financial Protection Bureau (CFPB) took action against B&B Pawnbrokers, Inc., for deceiving consumers about the actual annual cost of its loans. In a lawsuit filed in federal court, the CFPB alleged that B&B Pawnbrokers broke the law by misstating the charges associated with pawn loans. The court entered a stipulated final judgment and order on March 1, 2017, which ordered Pawn U.S.A., Inc. to pay $29,000 in disgorgement and a $5,000 civil money penalty.

Complaint

PDF of this document (5 pages)

Page 2

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA Richmond Division

Consumer Financial Protection Bureau,

Plaintiff,

v.

B&B Pawnbrokers, Inc.,

Defendant.

CIVIL ACTION NO. __________

COMPLAINT

The Consumer Financial Protection Bureau (Bureau) alleges the following against B&B Pawnbrokers, Inc. (B&B).

Introduction 1.

The Bureau brings this action under § 1054 of the Consumer Financial Protection Act of 2010 (CFPA), 12 U.S.C. § 5564, and § 108 of the Truth in Lending Act (TILA), 15 U.S.C. § 1607(a)(6), based on B&B’s failure to disclose an accurate annual-percentage rate on closed-end pawn contracts, in violation of TILA, 15 U.S.C. § 1601, et seq., and its implementing regulation, Regulation Z, 12 C.F.R. part 1026, and § 1036(a)(1)(A) of the CFPA, 12 U.S.C. § 5536(a)(1)(A).

Jurisdiction and Venue 2.

This Court has subject-matter jurisdiction over this action because it is brought under “Federal consumer financial law,” 12 U.S.C. § 5565(a)(1), presents a federal question, 28 U.S.C. § 1331, and is brought by an agency of the United States, 28 U.S.C. § 1345. 3.

Venue is proper in this district because B&B is located, resides, and does business here. 28 U.S.C. § 1391(b)-(d); 12 U.S.C. § 5564(f).

Case 3:16-cv-00887-JAG Document 1 Filed 11/03/16 Page 1 of 5 PageID# 1 3:16cv887

Page 3

Parties 4.

The Bureau is an agency of the United States created by the CFPA and charged with regulating the offering and providing of consumer-financial products and services under federal consumer-financial laws. 12 U.S.C. § 5491(a). It has independent litigating authority, including the authority to enforce the regulations promulgated under TILA. 15 U.S.C. § 1607. See 12 U.S.C. § 5564(a)-(b); see also 12 U.S.C. § 5481(12)(O), (14) (defining “Federal consumer financial law” to include TILA).

5.

B&B is a Virginia corporation with its principal place of business in Virginia. B&B operates as a pawnbroker, issuing closed-end loans for consumers’ personal, family, or household purposes that are secured by personal property. B&B offers or provides a consumerfinancial product or service under the CFPA, 12 U.S.C. §§ 5481(5)(A), (15)(A)(i), and is thus a “covered person” under the CFPA, 12 U.S.C. § 5481(6)(A). Facts 6.

From at least March 11, 1998, through the present, B&B has operated as a pawnbroker out of its store located at 4420 Lafayette Blvd., Fredericksburg, Virginia 22408. 7.

In connection with each loan, B&B charges a “finance charge” in varying amounts depending on the size of the loan, a “storage fee,” and a “processing fee.” If a loan is not repaid by the due date, B&B charges a “monthly renewal fee” equal to the total of the “finance charge,” “storage fee,” and “processing fee.” All of these fees are incidental to the extension of credit.

8.

B&B’s loan contracts disclose the following terms with associated values in prominent boxes: “amount financed,” “finance charge,” “storage fee,” “processing fee,” “total repayment,” “annual percentage rate,” and “monthly renewal fee.” Case 3:16-cv-00887-JAG Document 1 Filed 11/03/16 Page 2 of 5 PageID# 2

Page 4

9.

B&B’s loan contracts do not include a description of the terms “finance charge” or “annual percentage rate.”

10.

From at least January 1, 2013, through at least September 2015, B&B disclosed an incorrect “annual percentage rate,” or APR, on most of its contracts, often understating the APRs by roughly half of the accurate rate.

11.

The inaccurate APRs on B&B’s contracts underrepresent the true cost of the loans made to thousands of consumers.

Count One Violations of TILA

12.

The Bureau realleges and incorporates by reference paragraphs 1-11. 13.

TILA and Regulation Z require that certain material disclosures be provided to a consumer before consummation of a loan contract. 15 U.S.C. § 1638(a)-(b); 12 C.F.R. § 1026.17(a)-(b), 1026.18.

14.

Among the required material disclosures in a closed-end credit transaction are the finance charge and APR. 15 U.S.C. §§ 1602(v), 1638(a)(3)-(4); 12 C.F.R. § 1026.18(d)-(e). 15.

The finance charge is “the sum of all charges, payable directly or indirectly by the person to whom the credit is extended, and imposed directly or indirectly by the creditor as an incident to the extension of credit.” 15 U.S.C. § 1605(a). 16.

Regulation Z requires that a contract for closed-end credit disclose the finance charge, “using that term, with a brief description such as ‘the dollar amount the credit will cost you.’” 12 C.F.R. § 1026.18(d).

17.

The APR is “a measure of the cost of credit, expressed as a yearly rate.” 12 C.F.R. § 1026.22(a)(1); see also 15 U.S.C. § 1606(a).

Case 3:16-cv-00887-JAG Document 1 Filed 11/03/16 Page 3 of 5 PageID# 3

Page 5

18.

Regulation Z requires that a contract for closed-end credit disclose the APR, “using that term, with a brief description such as ‘the cost of your credit as a yearly rate.’” 12 C.F.R. § 1026.18(e).

19.

The “finance charge,” “storage fee,” and “processing fee” charged by B&B are all incident to the extension of credit and part of the finance charge required to be disclosed to consumers and included in calculation of the APR disclosed to consumers. 15 U.S.C. §§ 1605(a), 1606(a), 1638(a)-(b); 12 C.F.R. §§ 1026.18, 1026.22. 20.

In the course of extending closed-end credit, B&B used credit agreements that did not include the brief descriptions of the finance charge and APR required by Regulation Z. 12 C.F.R. § 1026.18(d)-(e).

21.

In the course of extending closed-end credit, B&B used credit agreements that inaccurately disclosed the APR required by TILA and Regulation Z. 15 U.S.C. §§ 1605(a), 1606(a), 1638(a)-(b); 12 C.F.R. § 1026.18(d)-(e); 12 C.F.R. § 1026.22. 22.

B&B therefore violated TILA and Regulation Z. 15 U.S.C. §§ 1605(a), 1606(a), 1638(a)-(b); 12 C.F.R. § 1026.18(d)-(e); 12 C.F.R. § 1026.22. Count Two Violations of the CFPA

23.

The Bureau realleges and incorporates by reference paragraphs 1-11. 24.

B&B’s violations of TILA and Regulation Z, alleged in Count One, constitute violations of the CFPA. 12 U.S.C. § 5536(a)(1)(A).

Case 3:16-cv-00887-JAG Document 1 Filed 11/03/16 Page 4 of 5 PageID# 4

Page 6

Demand for Relief

Wherefore, the Bureau requests that the Court: 1.

enjoin B&B from committing future violations of TILA and the CFPA; 2.

award restitution;

3.

award damages or other monetary relief; 4.

order disgorgement of ill-gotten gains; 5.

award a civil-money penalty; 6.

award costs; and 7.

award additional relief as the Court may determine to be just and proper. Dated: November 3, 2016

Respectfully submitted,

ANTHONY M. ALEXIS Enforcement Director

JEFFREY PAUL EHRLICH Deputy Enforcement Director

/s/ Kara K. Miller

KARA K. MILLER (Virginia Bar No. 47821) Assistant Litigation Deputy Consumer Financial Protection Bureau 1700 G Street, NW Washington, DC 20552 Tel.: (202) 435-7825 Fax: (202) 435-7329 [email protected]

DONALD R. GORDON (D.C. Bar 482384) Senior Litigation Counsel Consumer Financial Protection Bureau 140 E. 45th St.

New York, NY 10021 Tel.: (212) 328-7011 [email protected]

Attorneys for Plaintiff Consumer Financial Protection Bureau Case 3:16-cv-00887-JAG Document 1 Filed 11/03/16 Page 5 of 5 PageID# 5

Stipulation (Mar. 2017)

PDF of this document (12 pages)

Page 7

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA Richmond Division Consumer Financial Protection Bureau, Plaintiff, V.

B&B Pawnbrokers, Inc., Defendant.

CIVIL ACTION NO. 3:16CV887 STIPULATED FINAL JUDGMENT AND ORDER The Consumer Financial Protection Bureau (Bureau) filed this civil action on November 3,2016, to obtain injunctive relief, restitution, civil money penalties, and other equitable relief against B&B Pawnbrokers, Inc. (B&B). The Complaint alleges violations of: the Truth in Lending Act (TILA), 15 U.S.C. § 1601, et seq.; its implementing regulation. Regulation Z, 12 C.F.R. pt.l026; and § 1036(a)(1)(A) ofthe Consumer Financial Protection Act of 2010 (CFPA), 12 U.S.C. § 5536(a)(1)(A), for failure to disclose an accurate finance charge and annualpercentage rate on contracts for closed-end pawn loans. The parties, by and through their respective counsel, agree to the entry ofthis Stipulated Final Judgment and Order (Order).

THEREFORE, it is ORDERED:

Case 3:16-cv-00887-JAG Document 8 Filed 03/01/17 Page 1 of 12 PageID# 27

Page 8

Case 3:16-cv-00887-JAG Document 8 Filed 03/01/17 Page 2 of 12 PagelD# 28

FINDINGS AND CONCLUSIONS

1. This Court has jurisdiction over the parties and the subject matter of this action, and venue is proper in this district.

2. The parties agree to entry of this Order, without adjudication of any issue of fact or law, to settle and resolve all matters in dispute arising from the conduct alleged in the Complaint to the Effective Date of this Order.

3. Defendant neither admits nor denies any allegations in the Complaint, except as specifically stated in this Order. For purposes of this Order, Defendant admits only those facts in the Complaint necessary to establish the Court’s jurisdiction over Defendant and the subject matter of this action.

4. Defendant waives service under Rule 4(d) of the Federal Rules of Civil Procedure and waives all rights to seek judicial review or otherwise challenge or contest the validity of this Order.

5. The relief provided in this Order is appropriate and available pursuant to §§ 1054 and 1055 of the CFPA, 12 U.S.C. §§ 5564, 5565, and §§ 108 and 128 of TILA, 15 U.S.C. §§ 1607, 1638.

6. Defendant waives any claim it may have under the Equal Access to Justice Act, 28 U.S.C. § 2412, concerning the prosecution of this action to the date of this Order.

7. Each party will bear its own costs and expenses, including, without limitation, attorneys’ fees.

8. Entry of this Order is in the public interest.

Page 9

DEFINITIONS 9.

"Affected Consumers" means consumers who entered a contract for a pawn loan from B&B between January 1, 2014, and the date of this Order. 10.

"APR" or "Annual Percentage Rate" means a measure ofthe cost of credit, expressed as a yearly rate, as described in 12 C.F.R. § 1026.22. 11.

"Defendant" means B&B Pawnbrokers, Inc. and its successors and assigns. 12.

"Effective Date" means the date this Order is entered. 13.

"Enforcement Director" means the Assistant Director for the Office of Enforcement ofthe Consumer Financial Protection Bureau, or his or her delegee. 14.

"Finance charge" has the meaning set forth in 12 C.F.R. § 1026.4(a) and is the cost ofconsumer credit as a dollar amount. It includes any charge payable directly or indirectly by the consumer and imposed directly or indirectly by the creditor as an incident to or a condition of the extension of credit.

15.

"Related Consumer Action" means a private action by or on behalfof one or more consumers or an enforcement action by another governmental agency brought against Defendant based on substantially the same facts as described in the Complaint. ORDER A.

Conduct Relief 16.

Defendant and its officers, agents, servants, employees, attorneys, and all other persons who are in active concert or participation with them and who have actual notice ofthis Order, whether acting directly or indirectly, may not violate, and must take reasonable measures to ensure that its service providers, affiliates, and other agents do not violate, TILA and Case 3:16-cv-00887-JAG Document 8 Filed 03/01/17 Page 3 of 12 PageID# 29

Page 10

Regulation Z, 15 U.S.C. §§ 1601,et seq., 12C.F.R. part 1026. Defendant, whether acting directly or indirectly, is permanently restrained from: a.

issuing consumer-finance contracts that disclose an incorrect APR; and b.

issuing consumer-finance contracts that do not fully and accurately disclose all information required by TILA and Regulation Z in the manner required, 15 U.S.C. § 1601, et seq.; 12 C.F.R. part 1026.

Nothing in this Order shall be read as an exception to this paragraph. B.

Order to Pay Disgorgement 17.

Judgment for monetary relief is hereby entered in favor ofthe Bureau and against Defendant in the amount of $29,000.00.

18.

Defendant is ordered to pay $29,000.00 within fourteen days ofthe Effective Date, in the form ofa wire transfer to the Bureau or to such agent as the Bureau may direct, in accordance with wiring instructions to be provided by counsel for the Bureau. The Bureau will deposit the payment in the U.S. Treasury as disgorgement. 19.

Defendant must relinquish all dominion, control, and title to the funds paid to the fullest extent permitted by law, and no part ofthe funds may be returned to Defendant. C.

Order to Pay Civil Money Penalties 20.

Under § 1055(c) ofthe CFPA, 12 U.S.C. § 5565(c), taking into account the factors in 12 U.S.C. § 5565(c)(3), judgment for a civil penalty is entered against Defendant in the amount of $5,000.00.

21.

This civil money penalty is imposed based on the violations of law described in the Complaint.

Case 3:16-cv-00887-JAG Document 8 Filed 03/01/17 Page 4 of 12 PageID# 30

Page 11

22.

Within fourteen days ofthe Effective Date, Defendant must pay the civil money penalty by wire transfer to the Bureau or to the Bureau's agent in compliance with the Bureau's wiring instructions. Defendant must relinquish all dominion, control, and title to the funds paid to the fullest extent permitted by law, and no part ofthe funds may be returned to Defendant. 23.

The civil money penalty paid under this Order will be deposited in the Civil Penalty Fund ofthe Bureau pursuant to § 1017(d) of the CFPA, 12 U.S.C. § 5497(d). 24.

Defendant must treat the civil money penalty paid under this Order as a penalty paid to the government for all purposes. Regardless ofhow the Bureau ultimately uses those funds, Defendant may not:

a.

claim, assert, or apply for a tax deduction, tax credit, or any other tax benefit for any civil money penalty paid under this Order; or b.

seek or accept, directly or indirectly, reimbursement or indemnification fromany source, including but not limited to paymentmade under any insurance policy, for any civil money penalty paid under this Order.

25.

To preserve the deterrent effect of the civil money penalty, in any Related Consumer Action, Defendant may not argue that Defendant is entitled to, nor may Defendant benefit from, any offset or reduction ofany compensatory monetary remedies imposed in the Related ConsumerAction becauseof the civil money penaltypaid in this action (PenaltyOffset). If the court or tribunal in any RelatedConsumerAction grants a Penalty Offset, Defendant must, within 30daysafterentryof a final ordergranting the Penalty Offset, notify the Bureau, and pay the amount ofthe Penalty Offset to the U.S. Treasury. Such a payment will not be considered an additional civil moneypenaltyand will not changethe amountof the civil money penalty imposed in this action.

Case 3:16-cv-00887-JAG Document 8 Filed 03/01/17 Page 5 of 12 PageID# 31

Page 12

D.

Default or Delinquency 26.

In the event ofany default on Defendant's obligations to make payment under this Order, interest, computed under28 U.S.C. § 1961, as amended, will accrueon any outstanding amountnot paid from the date of defaultto the date of payment,and will immediately become due and payable.

27.

Under 31 U.S.C. § 7701, Defendant must furnish to the Bureau its taxpayer identifying number, which may be used for purposes ofcollecting and reporting on any delinquent amount arising out of this Order.

E.

Reporting Requirements 28.

For five years from the Effective Date, Defendant must notify the Bureau ofany development that may affect compliance obligations arising under this Order, including, but not limited to: a dissolution, assignment, sale, merger, or other action that would result in the emergence of a successor company; the creation or dissolution of a subsidiary, parent, or affiliate that engages in any acts or practices subject to this Order; the filing ofany bankruptcy or insolvency proceeding by or against Defendant; or a change in Defendant's name or address. Defendant must provide this notice at least 30 days before the development or as soon as practicable after learning about the development, whichever is sooner. 29.

Within 21 days ofthe Effective Date, Defendant must designate and provide to the Bureau at least one telephone number and an e-mail, physical, and postal address as points of contact that the Bureau may use to communicate with Defendant. 30.

Within 90 days ofthe Effective Date, and again one year after the Effective Date, Defendantmust submit to the Enforcement Directoran accurate written compliance-progress report ("Compliance Report"), that, at a minimum:

Case 3:16-cv-00887-JAG Document 8 Filed 03/01/17 Page 6 of 12 PageID# 32

Page 13

a.

describes in detail the Defendant's compHance with this Order; and b.

attaches a copy of each Order Acknowledgment obtained under Section F ofthis Order, unless previously submitted to the Bureau. F.

Order Distribution and Acknowledgement 31.

Within seven days ofthe Effective Date, Defendant must submit to the Enforcement Director an acknowledgment ofreceipt ofthis Order, sworn under penalty of perjury.

32.

Within 30 days ofthe Effective Date, Defendant must deliver a copy ofthis Order to each of its board members and executive officers, as well as any persons with responsibilities related to the injunctive reliefdescribed in Section A ofthis Order, whether they are managers, employees, service providers, or other agents and representatives. 33.

For five years from the Effective Date, Defendant must deliver a copy ofthis Order to any business entity resultingfrom any change in structure referred to in Section E, any future board members and executive officers, as well as to any managers, employees, service providers, and other agents and representatives who will have responsibilities related to the injunctive relief described in Section A of this Order, before they assume their responsibilities. 34.

Defendantmust secure a signed and dated statement acknowledging receipt ofa copy ofthis Order, ensuring that any electronic signatures comply with the requirements ofthe E-Sign Act, 15 U.S.C. § 7001,et seq., within 30 days of deliveryofthe Order, from all persons receiving a copy ofthis Order under this Section. Case 3:16-cv-00887-JAG Document 8 Filed 03/01/17 Page 7 of 12 PageID# 33

Page 14

G.

Recordkeeping 35.

Defendant must retain, for at least five years from the Effective Date, all documents and records necessary to demonstrate full compliance with each provision of this Order, including:

a.

all documents and records pertaining to the Affected Consumers. b.

all consumer finance contracts.

36.

Defendant must make the documents identified in Paragraph 35 available to the Bureau within 30 days upon the Bureau's request. H.

Notices 37.

Unless otherwise directed in writing by the Bureau, Defendant must provide all submissions, requests, communications, or other documents relatingto this Order in writing, with the subject line, '''Consumer Financial Protection Bureau v. B&B Pawnbrokers, Inc. File No. 2016-1663-02" and send them by email to Enforcement Compliance@,cfDb.gov and contemporaneously either:

a.

by overnight courier (not the U.S. Postal Service) to: Assistant Director for Enforcement Consumer Financial Protection Bureau ATTENTION: Office of Enforcement 1625 Eye Street, N.W.

Washington D.C. 20006; or b.

by first class mail to:

Assistant Director for Enforcement Consumer Financial Protection Bureau ATTENTION: Office of Enforcement 1700 G Street, N.W.

Washington D.C. 20552.

Case 3:16-cv-00887-JAG Document 8 Filed 03/01/17 Page 8 of 12 PageID# 34

Page 15

I.

Cooperation with the Bureau 38.

For five years from the Effective Date, Defendant must cooperate fully with the Bureau in this matter and in any investigation related to or associated with the conduct described in the Complaint. Defendant must provide truthful and complete information, evidence, and testimony. Defendant must require its officers, employees, representatives, or agents to appear for interviews, discovery, hearings, trials, and any other proceedings that the Bureau may reasonably request upon 14 days written notice, or other reasonable notice, at such places and times as the Bureau may designate, without the service of compulsory process. J.

Compliance Monitoring 39.

For five years from the Effective Date, for purposes ofcompliance monitoring, the Bureau may communicate directly with Defendant and Defendant may, at its election, have counsel present during such communications and may consult with counsel prior to responding to such communications.

40.

For five years from the Effective Date, Defendant must permit Bureau representatives to interview any employee or other person affiliated with Defendant who has agreed to such an interview. The person interviewed may have counsel present. 41.

Nothing in this Order limits the Bureau's lawful use of compulsory process under 12 U.S.C. § 5526 and 12 C.F.R. § 1080.6.

42.

For five years from the Effective Date, Defendant agrees to be subject to the Bureau's supervisory authority under 12 U.S.C. § 5514. Consistent with 12 C.F.R. § 1091.111, Defendant may not petition for termination of supervision under 12 C.F.R. § 1091.113. 43.

The Bureau releases and discharges Defendant from all potential liability for law violations that the Bureau has or might have asserted based on the practices alleged in the Case 3:16-cv-00887-JAG Document 8 Filed 03/01/17 Page 9 of 12 PageID# 35

Page 16

Complaint, to the extent such practices occurred before the Effective Date and the Bureau knew about them as ofthe Effective Date. Notwithstanding this release, the Bureau may use the practices alleged in the Complaint in future enforcement actions against the Defendant or its affiliates to establish a pattern or practice of violations or the continuation ofa pattern or practice of violations or to calculate the amount of any penalty. This release does not preclude or affect any right ofthe Bureau to determine and ensure compliance with the Order or to seek penalties for any violation ofthe Order.

K.

Retention of Jurisdiction 44.

The Court shall retain jurisdiction ofthis matter for purposes of construction, modification, and enforcement of this Order.

IT IS SO ORDERED.

Ij j 2017.

Dated this I day of JohnA. Gibney. Ji;

UNITE Case 3:16-cv-00887-JAG Document 8 Filed 03/01/17 Page 10 of 12 PageID# 36

Page 17

Consented and agreed to: FOR THE CONSUMER FINANCIAL PROTECTION BUREAU: ANTHONY M.ALEXIS Assistant Director for Enforcement JEFFREY PAUL EHRLICH Deputy Assistant Director for Enforcement K. MILLER (VSB No. 47821) Assistant Litigation Deputy DONALD R. GORDON (D.C. BarNo. 482384)' Senior Litigation Counsel Consumer Financial Protection Bureau 1700 G Street, NW Washington, DC 20552 E-mail: kara.miller@c^b.gov Tel.: (202) 435-7825 Fax:(202)435-7329 Attorneys for Plaintiff Consumer Financial Protection Bureau ^Admitted pro hac vice.

Case 3:16-cv-00887-JAG Document 8 Filed 03/01/17 Page 11 of 12 PageID# 37

Page 18

FORDEFENDANl;

By:

ROBERT J. BARLOW The Law Offices of Robert J. Barlow, P.L.C. 3516 Plank Road, Suite 104 Fredericksburg, VA 22407 Tel.: 540-548-4120 Fax: 540-548-4123 Attorney for Defendant B&B Pawnbrokers, Inc.

Case 3:16-cv-00887-JAG Document 8 Filed 03/01/17 Page 12 of 12 PageID# 38