BSP Approves New Rules for Pawnshops

Ladies and Gentlemen in the Pawnshop Industry:

MIMPSS Followers

We have been continuously receiving calls, text messages and emails from concerned people asking about “Rights of Pawners.” As a Pawnshop Consultant by profession, we make ourselves responsible to answer all questions and concerns regarding PAWN issues through having patience of educating them about the “Responsibilities and Rights” of both Pawner and the Pawnshop. 

My concern to all Pawnshops in the Philippines, it is very important that you provide all staffs a proper training not only on the appraising skills but also on the skills on all aspects of pawn operations. Customer Service Relations is very important and a plus factor. Each store branch should have at least a representative to attend and be updated of the BSP Rules and Regulations for pawnshops so as they could explain well all concerns of their pawners. 

MIMPSS is offering a FREE Consultation pertaining to pawnshop operational concerns. 

An update to all pawnshop staffs who may not be aware of some BSP Rules and Regulations, here is one good read for you.

The Monetary Board, the policy making body of the Bangko Sentral ng Pilipinas, approved on 30 April 2009 a new set of rules that will govern all pawnshops operating throughout the country.

Pawnshops have increased in number over the years and they have provided an alternative source of credit to a large segment of our population, particularly those who do not like to go to banks.

The new rules will replace the existing implementing rules and regulations of Presidential Decree No. 114 also known as the Pawnshop Regulation Act issued in 1973.

The new rules are designed to enhance consumer protection and foster confidence in the pawnshop industry by the pawning public. For instance, proprietors, partners, incorporators, directors, stockholders and officers of pawnshops must meet certain “fit and proper” standards to ensure that pawnshops are owned and run by people without any derogatory record and to promote good governance. Pawnshops will also be required to maintain a minimum level of capital or net worth in relation to their loan portfolio. The existing statutory capital of P100,000 has become too small and it is susceptible to the proliferation of “fly-by-night” operators.

Under the law, pawners have 90 days after maturity to redeem their pawned articles and pawnshops must notify their clients within the 90 day period before they can sell the pawned items in an auction. For the convenience of pawners, the new rules will require them to indicate in the pawn ticket their preferred mode of receiving the notice, whether by mail or courier to a given address, or by SMS or text through a specified mobile phone.

On the part of pawnshops, they will be required to comply with explicit “Know Your Pawner” procedures consistent with the requirements of the Anti-Money Laundering Act and to address concerns on the Anti-Fencing Law. For transparency and to minimize malpractices, pawnshops will be required to post in their premises the Acknowledgement of Registration or Authority to Operate issued by the BSP, business days and hours of the pawnshop, their interest rate and charges for loans, among others.

The new rules will take effect fifteen (15) days after publication in the Official Gazette or a newspaper of general circulation in the Philippines.

Recently, the BSP signed a Memorandum of Agreement with the Department of Interior and Local Governments on the sharing of information between BSP and the city and municipal government units to ensure that only those that have the proper business permits and registered with the BSP are transacting with the public.

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BSP approves stricter rules on pawnshops to protect consumers

MANILA, Philippines-Pawnshops will be obliged to maintain a minimum level of capital or net worth in relation to their loan portfolio as the policy-making Monetary Board approved a new set of rules on all pawnshops operating in the country.

“The existing statutory capital of P100,000 has become too small and it is susceptible to the proliferation of ‘fly-by-night’ operators,” the Bangko Sentral ng Pilipinas said.

Under the 36-year old Pawnshop Regulation Act issued in 1973, the minimum paid-in capital of any pawnshop will be P100,000.

The new rules will replace the implementing rules and regulations of Presidential Decree No. 114, which provides definite and uniform standards for pawnshop operations since these provide an additional source of credit especially for small borrowers left unserved by the banking and other financial institutions in the country.

The BSP noted pawnshops have increase over the years and have provided an alternative source of credit to a large segment of the population.

“The new rules are designed to enhance consumer protection and foster confidence in the pawnshop industry by the pawning public,” the BSP said.

Proprietors, partners, incorporators, directors, stockholders and officers of pawnshops must meet “fit and proper” standards to make sure these are owned and run by people “without any derogatory record and to promote good governance.”

Borrowers from the pawnshops will be required to indicate in the pawn ticket, or pawnbroker’s receipt for a pawn, their preferred mode of receiving the notice whether by mail or text message for their convenience.

Under PD 114, they have 90 days after maturity to redeem their personal property delivered as security for a loan while pawnshops must notify their clients within the 90-day period before they can sell the items in an auction.

The new rules will compel pawnshops to comply with the “Know Your Pawner” procedures in line with the Anti-Money Laundering Act and to address concerns on Anti-Fencing Law.

The Anti-Fencing Law imposes heavy penalties on persons who profit from robbery and theft while Anti-Money Laundering prescribes penalties against money laundering and terrorist financing.

“For transparency and to minimize malpractices, pawnshops will be required to post their premises the acknowledgment of registration or authority to operate issued by the BSP, business days and hours of the pawnshop, their interest rate and charges for loans, among others,” the BSP said.-Ruby Anne M. Rubio, GMANews.TV

Pawner Rights: The Handbook on Consumer Laws

The Handbook on Consumer Laws published by the Bangko Sentral ng Pilipinas (BSP) lays out some of the basic rights of a pawner when dealing with a pawnshop. MIM publishes them here as guidance for pawners and suggest all pawners know their rights. Also be aware that these may not be the only rights pawners have under BSP regulations.

Pawnshop Transactions

Section 4303P, MORNBFI*:

gives the right of the pawner to renew his loan for such amount and period as may be agreed upon between the pawnshop and the pawner, subject to conditions provided by the MORNBFI; it further gives the right of the pawner who fails to pay or renew his obligation to redeem his pawn ninety (90) days from the date of maturity by paying the principal amount of the loan plus the amount of interest that shall have accrued thereon

Section 4322P, MORNBFI:

requires the following information to be disclosed in the pawn ticket:

1. amount of the principal loan;
2. interest rate in percent;
3. period of maturity;
4. description of the pawn;
5. expiry date of redemption period; and
6. such other terms and conditions as may be agreed upon between the pawnshop and the pawner

Section 4323P, MORNBFI

requires the pawnshop to notify the pawner in writing on or before the expiration of the ninety (90)-day grace period:

1. that the pawn shall be sold or otherwise disposed of in the event that the pawner fails to redeem the pawn within the ninety (90) – day grace period; and
2. the date, hour and place where the sale shall take place

It further provides that the pawnshop may sell or dispose of the pawn only after it has published a notice of public auction of unredeemed articles held as security for loans in at least two (2) newspapers circulated in the city or municipality where the pawnshop has its place of business, six (6) days prior to the date set for the public auction. In remote areas where newspapers are neither published nor circulated, the publication shall be complied with by posting notices at the city hall or municipal building of the city or municipality and in two (2) other conspicuous public places where the pawnshop has its place of business.

Section 4324P, MORNBFI

requires public auctions to be held either at the pawnshop’s place of business or any public place within the territorial limits of the municipality or city where the pawnshop conducts its business

Section 4182P, MORNBFI

No pawnshop shall close or transfer its place of business within three (3) months following the maturity of any loan or pledge, or before any pawn shall have been sold or disposed of

*Manual of Regulations Non-Bank Financial Institution

Resources

1. Handbook on Consumer Laws. Bangko Sentral ng Pilipinas 13 2007. SES Consumer Affairs Unit. Page 12-13.

 

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Pawnshop owners should be ready for stricter BSP regulation enforcement

1995 BSP data shows the total number of pawnshops in the Philippines was 4,173. More recent BSP data shows that the total number of pawnshops in the Philippines rose to 14,800 in the fourth quarter of 2009 from 13,493 [1] in the first quarter of 2008. That is a spectacular rise.

But with growth comes attention. In the case of pawnshops, that attention is now coming from regulatory agencies of the Philippine Government. To put the rise in pawnshops in between the first-quarter of 2008 and the end of 2009 in perspective we may have to look beyond the numbers.

As this January 2009 philstar.com article points out, The BSP began a mapping operation of pawnshops a couple of years ago to determine the number of unregistered pawnshops in the Philippines. These BSP inspections suggested that 26 percent of all pawnshops were unregistered. So in reality, about one-quarter of the pawnshops that registered with the BSP in 2008 and 2009 may have been pawnshops that were in existence but not registered. Once the BSP inspections began many unregistered pawnshops rushed to register to avoid BSP sanctions. That may account for a portion of the rise in pawnshops in the official BSP numbers for 2009.

In addition to finding unregistered pawnshops, The BSP inspections also suggested that about one- third of pawnshops inspected “were found to have violated rules and regulations such as failure to require signature of customers in the pawnshops’ registers, which could abet fencing; failure to attend…”

Pawnshops owners would be well-advised to consider this regulatory action by the BSP as a permanent drive to not only gets fly-by-night pawnshops registered but to begin stricter enforcement of all pawnshop regulations. The BSP will now use an integrated approach with the help of other government agencies and local governments.

The Bangko Sentral ng Pilipinas (BSP) and the Department of Interior and Local Governments as well as local government units would monitor thousands of pawnshops nationwide to prevent fencing, money laundering and other criminal activities, officials said yesterday.

Pawnshop owners have now been put on notice by the BSP that stricter regulation is coming. Do not be caught unaware. Ultimately, it is the responsibility of pawnshop owners to know what the laws are that govern pawnshops and to comply with them.

Resources

1. Report on Economic and Financial Developments. Bangko Sentral ng Pilipinas. Fourth Quarter 2009

Pawnshop Malpractices never stop…unless…

Pawnshops with multiple number of branches nationwide, in reality is very hard to control over the malpractices considering the conivances having between the employees. Temptation has been  always there because  daily transactions  involves  cash and jewelry. Even though a pawnshop is computerized still things can happen in every branch causing the proprietor/proprietress a bad image  to pawners and later on will  passed on a chain reaction  to majority. One cause also ng “pag hina ng branch.”   But in all ways, computerization is one big factor to a pawnshop. Very easy to monitor daily cash position, number of daily transactions, redemptions/renewals, interests income, number of  foreclosed items/how much would it be and the discription of items to be forelosed, expenses…All these things can be monitored by the managers, branch managers and the owners even they are not always present in their busineses.  But how about the physical inventory of branches? Are  they being monitored carefully by the managers/branch managers/auditors? Here goes now the malpractices that are very usual to ALL – no exceptions – pawnshops most specially pawnshops operating in a number of years now, whose employees are working for a number of years , whom you may think has been working  honestly in  your company, would sometimes without your knowledge and awareness already been doing conivances with each other. A branch manager can conive with the vault keeper regarding foreclosed items , or an appraiser can conive with someone on pawning fake items or even do an  inside job conivance. A  very common malpractices of pawnshop employees most specially to employees that are underpaid. These causes a  BIG LOSS to a pawnshop. You must always remember that, once hired in a pawnshop from a zero knowledge, counting to at least 6 months as trainee, from a bookkeeper to a cashier and  become an appraiser, and finally completes the knowledge on the daily routine of work procedure and SOP would end up to a very big word of TEMPTATION. Because all pawnshop employees will automatically learn the pawnshop system and you can not hide to them if a branch is gaining or losing.

But there is always a solution to every problem. All this malpractices can be stopped  if a pawnshop will hire a specialist or expert in this field, to conduct a surprise audit on all the physical inventory of branches and then have it done either weekly or monthly. At least employees of each branch will be aware that there are hired professional auditors anytime. Find out which cost you higher, the big losses a month or a year , or the hiring of a professional auditor?

PINOY ENTREPRENEUR: PAWNSHOPS MAY BE RECESSION-PROOF BUT THEIR GROWTH MAY BE A WARNING SIGN OF THE ECONOMY’S HEALTH

 

Starting a Pawnshop Business

Written by Pinoy Entrepreneur, on 17-08-2008   There’s still much space for expansion in the pawnshop business in the Philippines. Jean Henri D. Lhuillier, of Cebuana Lhuillier Pawnshop Companies, recently mentioned that “there is still room for expansion in the Philippines and the company is in fact growing by an average of 3% to 5% a year.” This room for expansion is on top of the enormous growth in this industry. Pawnshops have multiplied in number in recent years and have been posting fast-paced growth in terms of operations and revenues, which gave rise to a proposal to enact a new law regulating pawnshops (the existing law is PD 114).  The figures stated in the press release in connection with that bill reveals the following very interesting details: Based on data from the Bangko Sentral ng Pilipinas (BSP), pawnshops provided a total of P10.1 billion worth of loans at the end of 2004 or almost double from the P5.5 billion worth of loans they extended in 1995. As of November last year, according to BSP, there are 11,942 pawnshops operating in the country from only 4,173 pawnshops 10 years ago or in 1995. Furthermore, pawnshops’ total assets stood at P14.6 billion at the end of 2004, from only P7.7 billion in 1995. Moreover, pawnshops consolidated capital base considerably increased from P4.2 billion in 1995 to P7.7 billion in 2004. How to register a pawnshop. A sole proprietorship, partnership or corporation may operate a pawnshop. The business entity must first be registered with the DTI (for sole proprietorship) or the SEC (for partnerships and corporations).The certificate of registration and other documents are then submitted to the Bangko Sentral ng Pilipinas (BSP). The filing/processing fee is P1,000. Of course, that does not include the filing fees for the SEC and the Mayor’s Office (for the Mayor’s Permit or business license). Provide for sufficient time up to the planned opening because papers will shuttle back and forth between the SEC and the BSP. The checklist of requirements on  how to start a pawnshop business are posted at the BSP site. Growth of pawnshops reflective of economy? Many, if not most, of us will have financial emergencies that can’t be covered by the existing savings. We borrow from relatives and friends, if we’re lucky. If not, we borrow from banks and similar financial institutions, but the lag time in processing the loan is foreign to the term “emergency”. One of the fastest way to procure money (no, not stealing), is through pawnshops. According to the same press release: “Pawnshops provide an alternative source of credit for small borrowers left unserved by banking and other financial institutions in the country, especially in cases of emergencies.” On the other hand, it could be said that the booming business reflects the current situation where the harsher economic life forces people to “pawn” properties just to have money for basic needs. Pawnshops may be one of those recession-proof businesses, but their proliferation may also be a warning sign of the economy’s health.

BSP Approved New Rules for Pawnshops in 2009

Another item from the Bangko Sentral ng Pilipinas (BSP) in 2009 that I believe deserves attention as we move into 2010 is that on April 30 the BSP approved a new set of rules to govern all pawnshops in the country.

According to the BSP, the new rules replace the existing implementing rules and regulations of Presidential Decree No. 114 also known as the Pawnshop Regulation Act issued in 1973.

The new BSP rules are designed to “enhance consumer protection and foster confidence in the pawnshop industry by the pawning public.” Some of the changes that are highlighted in the May 2009 media release are:

• proprietors, partners, incorporators, directors, stockholders and officers of pawnshops must meet certain “fit and proper” standards to ensure that pawnshops are owned and run by people without any derogatory record and to promote good governance. 

 

• Pawnshops are required to maintain a minimum level of capital or net worth in relation to their loan portfolio.  The existing statutory capital of P100,000 has become too small and it is susceptible to the proliferation of “fly-by-night” operators.

 

• pawners have 90 days after maturity to redeem their pawned articles and pawnshops must notify their clients within the 90 day period before they can sell the pawned items in an auction.  For the convenience of pawners, the new rules will require them to indicate in the pawn ticket their preferred mode of receiving the notice, whether by mail or courier to a given address, or by SMS or text through a specified mobile phone.

 

• pawnshops will be required to comply with explicit “Know Your Pawner” procedures consistent with the requirements of the Anti-Money Laundering Act and to address concerns on the Anti-Fencing Law. 

 

• For transparency and to minimize malpractices, pawnshops will be required to post in their premises the Acknowledgement of Registration or Authority to Operate issued by the BSP, business days and hours of the pawnshop, their interest rate and charges for loans, among others.

The media release also points out that the “BSP signed a Memorandum of Agreement with the Department of Interior and Local Governments on the sharing of information between BSP and the city and municipal government units to ensure that only those that have the proper business permits and registered with the BSP are transacting with the public.”

The official media release from the BSP is here.

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