What you need to know about pawnshops (First of Two Parts)

TO SAY that pawnshops have mushroomed all over the country is an understatement.

Despite the presence of a variety of banks, pawnshops still play an important role in the economy by “lending” to people who would otherwise fail to qualify for bank loans.

Pawnshops are popular among Filipinos who are in quick need of money because loans are granted without the need for a credit investigation. The collateral or the pawned item is the sole basis for granting the loan.

However, most of us may still be in the dark about how pawnshops actually conduct their business. In an effort to answer related questions, the Bangko Sentral ng Pilipinas came out with a primer on Frequently Asked Questions on Pawnshops.

I am reprinting the contents of the primer to help financial consumers who want to know more about pawnshop operations.

Frequently Asked Questions on Pawnshops:

What administrative steps or procedure should be followed in opening a pawnshop?

A person who wishes to establish a pawnshop must:

* register his business name with the Department of Trade and Industry (DTI);

* secure a pawnbroker’s license or permit from the local government of the city or municipality where the pawnshop is to be located;

* register with the Bangko Sentral ng Pilipinas before commencing business operations.

What are the maximum rates of interest that a pawnshop/pawnbroker can charge on its pledge loans?

Effective January 1, 1983, interest rates shall not be subject to any ceiling prescribed under or pursuant to the Usury Law, as amended. However, the interest rate that a pawnshop/pawnbroker may collect on its pledge loans must be indicated on the face of the pawn ticket.

Can pawnshops collect interest in advance?

* Yes, provided that the amount of interest collected in advance does not exceed the equivalent for the agreed maturity period of the loan. For loans with maturities of more than one (1) year, advance interest shall not exceed the interest equivalent for one (1) year.

* Besides interest, what other charges or fees can a pawnshop/pawnbroker collect on its pledged loan transactions?

* In addition to interest, a pawnshop can collect service charges equivalent to 1 percent of the principal loan but in no case exceeding five pesos (P5.00).

* Can a pawnshop collect 2 percent liquidated damages on overdue loans (loans unsettled despite the lapse of the 90-day grace period)?

* Yes, provided there is a stipulation to that effect printed at the back of its pawn tickets, duly approved by Bangko Sentral.

* If the pawnshop fails to notify a pawner within the 90-day grace period and sells the pawn in a public auction, can it be held liable for the disposition of the pawn?

* Yes, the pawnshop is liable for its failure to send the required notice. An administrative case may be filed with the Bangko Sentral and, simultaneously, a criminal and/or civil case with the proper court.

(To be continued next week)

Note: You may email us at totingbunye2000@gmail.com. Past articles may be viewed at http://speakingout.ph/speakingout.php.