MANILA, Philippines – The Bangko Sentral ng Pilipinas (BSP) has tightened the rules governing pawnshops as the industry plays an important role in building a more inclusive financial system and protecting the welfare of financial consumers.
The central bank’s Monetary Board has approved a new supervisory framework governing pawnshops as part of a series of reforms instituted by the BSP to promote a more responsive regulatory environment for the industry and other non-bank financial institutions.
Under the new rules, the BSP shall put high regard on the fitness and propriety of the pawnshop operators, including its incorporators, directors, partners and officers, by focusing on their integrity, market reputation, competence and financial capacity.
The new rules also require the pawnshop operators to adopt the applicable BSP Regulations on Financial Consumer Protection mandating the disclosure of the effective interest rate of the loan, including the charges on the transaction to their customers.
Pawnshops are also mandated to inform the customers about the policy on insurance of pawned items, maturity date and grace period in cases when the customer failed to redeem the loan.
The new framework requires the adoption of the network-based approach wherein pawnshop operators are only required to submit a notification to the BSP for the establishment and operation of pawnshop offices instead of the usual approval from the BSP prior to its operation.