Pawnbroking has existed since the Ancient Greek and Roman Empires. When the economy gets tight, pawn shops become even more popular, so what’s the attraction? Pawning items is a quick way to get some cash, but be sure you become familiar with some of the rules pawn shops must follow:
First, how it works:
- A Pawnbroker estimates the value of the item you bring before them
- They may offer to buy your item outright, and you are welcome to haggle over price
- Don’t expect a huge change from their initial offer
- You can take a loan from the broker and leave your item there as collateral
- If you sell your item, the pawnbroker will try to profit by selling it for more than what he paid you
- If you opt for a loan, you have a predetermined amount of time to repay it, sometimes one or two months, possibly longer
- If you don’t repay it, the pawnbroker can sell your item for any price they want
Pawn Shops must follow Federal Laws:
- Each state has their own set of rules and regulations for this business
- USA Patriot Act – Designed to stifle terrorism-related activities, and for you it means you can’t do any business with a pawnbroker unless you have a government-issued picture ID, like a driver’s license, and you may have to give a fingerprint
- Truth in Lending Act (TILA) – The pawnbroker has to explain to you clearly and in writing all of the terms of your loan, such as interest rate, fees, etc.
- Federal Trade Commission (FTC) Safeguard and Privacy Rules to protect your personal information – including your name, address, phone number, and bank and credit card account numbers, etc.
- Federal firearm laws, including record-keeping and background check requirements for buyers/sellers
- IRS rules on reporting cash transactions over $10,000
- Each state has its own set of laws to regulate pawn shops
- In most states, pawnbrokers must apply for a license or register with a state agency, such as the state consumer protection agency and state tax department
- Some jurisdictions require pawnbrokers to have a license for the municipality where they do business
- Interest rates and fees on loans are capped or limited in practically every state, however, you can generally expect to pay anywhere from 3% to 25% in interest on your loan and on top of that, most states let pawnbrokers charge a service fee in money (like $10) or interest (20 percent), each month
Usually, pawnshops must keep detailed records of everything they buy or take as collateral, including serial and model numbers, brand name; precious metal type, gemstone description, etc.
In some states, pawnshops have to give reports of their purchases to local police to help identify stolen goods. In other states, a shop has to honor your request to check their inventory for stolen goods if you give it a police report on your stolen property
For Your Records:
Pawnbrokers must give you a ticket if you take out a loan that shows what item you pawned, how long you have to repay and how much you have to repay. In some states, you’re automatically granted a grace period (usually 15 to 30 days) after your loan period expires. You have that additional time to pay your loan and reclaim your property before the shop can sell your item.
Ready to visit a Pawn Shop?
Do your due diligence, be sure it’s a reputable, licensed shop. Ask to see their license, check with the state agency in charge of licenses, and check with your local Better Business Bureau (BBB). You can even check out sites like Yelp or Google Reviews to see what other customers have to say about their experience.
Keep your pawn ticket if you take out a loan. If you lose it, you can’t get your property back. In some states, you may be able to file a report with the pawnshop to stop someone else from using your ticket.
If you can’t pay back your loan in time, ask the pawnshop for a time extension. Be prepared to pay more fees and interest.
Pawnshops can be an ideal solution for anyone who needs quick cash or has valuables they no longer want or need. If you play by the rules, you can get exactly what you need without a problem.
Questions for Your Attorney
What can I do if a pawnshop loses or damages my property before I can reclaim it?
Is my credit rating damaged if I don’t repay a pawnshop loan?