Online Pawn Shops May Charge Excessive Interest Rates
Last Updated on January 11, 2022
Important Information
Attorneys working with ClassAction.org are no longer investigating this matter. The information here is for reference only. A list of open investigations and lawsuits can be viewed here.
At A Glance
- This Alert Affects
- Anyone who received a loan from Borro.com.
- Damages
- The loan principal (the amount of the loan) and the excessive interest on the loans; pawned items or their equivalent value.
- Company(ies)
- Borro.com and other online pawn brokers.
- Additional Details
- Borro.com allegedly does not follow state laws that protect consumers from harmful predatory practices.
Attorneys are investigating a potential class action lawsuit on behalf of consumers who received secured personal asset loans or secured collateral loans from websites such as Borro.com, and who may have been charged excessive interest rates. It’s believed that some online pawnshops, including Borro.com, are skirting state laws regulating financial loans and are charging far more interest than is permitted for pawnbroker loans.
State Laws Regulate Online Pawnbroker Loans
Most states have very specific laws governing loans issued by pawnbrokers. These laws exist to protect people against oppressive lending practices and shady dealings. Specifically, states regulate the amount of interest that pawnbrokers can charge, how the pawned item is handled, the identification of the borrower, and many other aspects of their business.
Recently, it has been alleged that pawnshops operating on the internet have begun to violate state laws. Online pawnshops often operate slightly differently to bricks-and-mortar stores, with pawned item shipped to the pawnbroker and the borrower receiving funds via a wire transfer. Companies routinely offer loans to consumers from outside the state in which the business is based. This is how they’re skirting regulations.
Personal asset loans can be secured from Borro.com using items such as high-end watches, jewelry, fine art and classic cars. These items are evaluated by the company – often in person if the goods are valued at more than $10,000 - and a loan equivalent to their value may be given. The items are then kept by the company until the loan – and any interest or associated fees – is paid off. Loans are written for a term of six months, though earlier repayment is an option. APR on these loans can be extraordinarily high, with rates of more than 50% reported.
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