Who Regulates Pawn Shops?

February 22, 2020 - Pawn Resources

Before I started PawnGuru, I knew I had to understand what regulations pawn shops had to follow.

Pawn shops, like any other finance-oriented business, have regulations in place that protect the consumer. I was surprised to find how strict they were.

The Process:

Most pawn shops work relatively the same way. Let’s say you decide to buy or sell an item at a pawn shop – often a laptop, an iPhone, or an instrument.

1. An employee or pawnbroker provides an estimate, guessing how much your item is worth.

2. He/She may offer to buy your item outright. You can haggle over price, but don’t expect a big change from his original offer, or:

3. You can take a loan from the broker and leave your item there as collateral

Simple as it is for you, there are a lot of rules governing the process. In particular, these are federal and state laws that pawn shops have to abide that protect consumers.

The Rules:

Federal Laws:

  • Truth in Lending Act (TILA). Disclosure of credit terms in consumer credit transactions- meaning 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
  • Internal Revenue Service rules on reporting cash transactions over $9,000

State Laws:

  • Licensing and registration. In most states, pawnbrokers must apply for a license or register with a state agency – like the state consumer protection agency or state tax department.
  • Interest rates and fees on loans are capped or limited in practically every state.
  • Records. Usually, pawn shops have to keep detailed records of everything they buy or take as collateral – serial and model numbers, brand name; precious metal type, gemstone description, etc.
  • Reporting. In some states, pawn shops 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

When you decided to buy or sell at a pawn shop, always check to make sure that it has a license to act as a broker. If you have any doubts you’re getting a fair deal (or dealing with an unauthorized shop),  please don’t hesitate to reach out. You can reach me and my team for help at help@pawnguru.com. We work hard to make sure all of our shops play by the rules, and we care deeply about your experience. We also invite you to read more about who regulates pawn shops with Brian the Pawn Nerd: Pawn Shops, Regulated.

Jordan Birnholtz

Jordan Birnholtz is the cofounder of PawnGuru. An alumnus of the University of Michigan, Jordan started PawnGuru in 2015 with Jon Polter, David Stiebel, and Jessica Zahnd. When he's not working at PawnGuru, Jordan volunteers his time to support undergraduates in building socially-responsible businesses and organizations through Optimize, a program at the University of Michigan.

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