|A new law regulating pawnshops was passed Monday.
(Credit: © Mauricio Pascual)
Puerto Rico’s $30.1 million pawn industry will have to abide by a new law that went into effect this week, which among other stipulations, requires companies to be licensed to purchase metals and precious stones.
Law 23, signed by Gov. Luis Fortuño on Monday, was enacted five months after the Legislature launched a probe into the significant growth in applications submitted to the Office of the Commissioner of Financial Institutions, the industry’s regulator. The statute also amends Law 18, to authorize the OCIF to oversee the business of buying and selling of precious metals and stones in pawnshops.
By definition, pawnshops are businesses dedicated to offering secured loans to people, with personal property used as collateral. Pawnshops generally accept any item of value — vehicles, jewelry, electronics, tools, precious metals and stones — that it will keep for a certain period of time in exchange for the loan. According to the newly enacted law, that period of time cannot exceed 180 days. The person who pawns the item has that long to pay off the loan to get their property back.
The pawnshop industry is a growing contributor to Puerto Rico’s economy, generating $30.1 million in revenue in 2009, up about 16 percent from the volume generated the prior year. Nearly 282,000 transactions were completed in 2009, the latest statistics available.
Agency figures show that between 2009 and 2010, there was a 15 percent increase in the number of renewed licenses, for a total of 231 approvals. During that same period, the OCIF received 42 applications for new pawnshop operations.
“Applications for new pawnshops are what we receive the most of,” said Iris Nereida Jiménez, director of the OCIF’s regulatory department. “In many cases, they’re applications for a new branch of an existing company, that still require a new license.”
To qualify for a license to operate a pawnshop, Law 23 requires applicants to have at least $10,000 in starting capital and have a location available to do business. Would-be pawnshop operators also need to pay several fees to the Treasury Department associated with the license application.
Cutting down on illegal activity
By law, pawnshops are required to take down basic information about the origin of the goods they accept in exchange for loans, to cut down on illegal activity. Those records are usually matched with Police reports to verify whether the item has been stolen, as it is a widespread belief that a significant number of items that arrive at pawnshops are illegally obtained.
“Knowing the importance of establishing and maintaining effective controls of the pawnshop industry, this Legislative Assembly considers it necessary to establish local laws to position Puerto Rico among those jurisdictions committed to protecting citizens, tackling the problem of stolen goods and enforcing the compliance with applicable state and federal laws,” according to the new.
When it came to supervising pawnshop transactions involving metals and precious stones, the OCIF was prevented from doing the job, as it had no legal jurisdiction over that aspect of the business.
“[Through this law] we make it easier for the regulator to control the business and operations of pawnshops and give consumers greater confidence in this type of business, which will ultimately result in a bonanza for the industry,” the law stated.
Last year, a number of local government agencies presented a united front against the escalating problem of copper and precious metal theft that resulted in several raids of outlets dedicated to buying the metal without asking for evidence of its origin, as required by law. A number of arrests were conducted.