BSP issues warning against pawnshops

REPORT FROM BUSINESSWORLD The Bangko Sentral ng Pilipinas (BSP) is cracking down on pawnshops, classified as nonbanks with quasi-banking functions, amid a recent spate of complaints against unscrupulous pawnshop operators. BSP Deputy Governor Nestor A. Espenilla, Jr. said the central bank had received reports of violations of Presidential Decree (PD) 114 or the law governing pawnshops, including failure to disclose the interest rate and other charges levied on pawners. There were also reported incidences of pawnshops auctioning off pawned items prior to the expiration of the 90-day loan maturity, he added. "The most we can do is cancel the registration of pawnshops for violation of PD 114," Mr. Espenilla told reporters. The central bank issued a warning on Wednesday urging the public to deal only with pawnshops that have a current business or mayor’s permit. Pawnshops may collect interest rate and other charges, including service charge equivalent to 1% of the principal loan but not higher than P5. "However, other charges such as insurance and storage fees in the safekeeping of pawns should not be collected from the pawners," the central bank said. It also ordered pawnshops to issue a pawn ticket indicating the terms and conditions of the loan. "Bear in mind the date of maturity of the obligation. A pawner has 90 days from the maturity of the loan to redeem the pawned item," the central bank said. The pawner should be notified before a pawned item is sold in a public auction within the 90-day period, after which the public auction of the pawned item can take place, it added. In a related development, the BSP and Securities and Exchange Commission (SEC) also warned the public against schemes involving foreign currency trading transactions. "Any solicitation to engage in foreign currency trading and to commit funds for this purpose should be considered with extreme care and caution," regulators said in a separate statement. The public was advised to stay away from opportunities that sound too good to be true. The public should also avoid a company that guarantees large profits or those that promise little or no financial risk. "In many cases, these claims tend to be false. Normally, the higher the promised return, the higher the risks involved." — MEIC/BusinessWorld