How pawning works: International laws

How pawning works: International laws

As a method of financing loans, there are understandably staunch laws in place for pawning. Read on to find what they are internationally.

There are understandably staunch laws in place for pawning, given that it is a method of financing loans. Here, we look at the difference in these laws, comparing Australia to the United States of America.

Australian law on pawnbroking

Most of the legally binding obligations for the act of pawnbroking are listed under the Second-Hand Dealers and Pawnbrokers Act 1989. The Law Handbook, a resource run by the Australian government, noted some of the key legal restrictions under this Act. These include:

• A pawnbroker can’t pawn goods from someone under the age of 16.

• Evidence of identity must be presented before a pawnbroker can accept goods for pawning.

• Accurate, complete records are to be kept for every transaction as per the more recent Second-Hand Dealers and Pawnbrokers Regulations 2008.

• Pawn tickets must be issued for each transaction listing the important information, such as names, full address, amount of money advanced and charged, and the loan period.

• Goods can be redeemed subject to loan repayment, the presentation of the pawn ticket and an ID, such as a drivers licence or passport.

There are more complex, strict laws if the loan can’t be repaid. Suffice to say, if the pawnbroker can’t reclaim the money owed by selling the goods, the borrower is obliged to pay the balance.

American law on pawnbroking

There are 14 major Federal statutes and regulations governing the pawnbroking industry in the USA, according to the National Pawnbrokers Association. These come in the form of Acts, Forms, or Safeguard Rules, each affecting the regulation of pawning.

Important ones include the Bank Secrecy Act, whereby pawnbrokers can volunteer to report suspicious activity. Another crucial one is the Truth in Lending Act, requiring the disclosure of credit terms in every transaction.

The Fair Credit Reporting Act protects confidential information, restricting the sharing of non-public information to unaffiliated parties and mandating information is disposed off carefully under the FTC Consumer Information Disposal Rule. The Equal Credit Opportunity Act is particularly useful for pawners, as it makes it illegal to discriminate based on gender, age, ethnicity, marital status and a host of other rights.