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Getting Money

Page 7: Using Pawnbrokers.

An alternative to bank loans for people with no credit history?

Please read on.

Pawning is just another way of borrowing money. You leave something valuable (the pawn) as security with a pawnbroker and you receive a loan. When you pay off the loan and charges, you get the item back.

It can be a means of raising cash, which may be difficult to get elsewhere. Your credit rating does not have to be assessed nor your references checked. On the other hand, you may pay more interest than to a bank or building society.

There are rules to protect you. Pawnbrokers must have consumer credit licences from the Office of Fair Trading. Standard documents must be used and strict procedures followed. The rules differ slightly if you borrow more than £25. If you are uncertain about anything to do with your pawn agreement, you can get advice from your local citizens advice bureau, law centre or trading standards department of your local authority.

Making the agreement

When you pawn an item you will be asked to sign a credit agreement. You must be given your own copy. You will also be given a pawn-receipt. In most cases the credit agreement and the pawn-receipt are combined in one document. Keep this - it is proof that you own the item. Do not sign the agreement unless you understand all the terms and conditions.

Please read on.

Getting the item back

You can get your item back at any time by giving up your pawn-receipt and paying what you owe under the agreement. This is known as redeeming.

You normally have six months in which to do this, although the pawnbroker may agree to a longer period when you make the agreement. A pawnbroker can refuse to redeem a pawn only if there is good reason, for example, if you do not present your pawn-receipt, or the pawn-receipt does not belong to you and you do not have the borrower's permission to redeem the pawn.

In England, Wales and Northern Ireland you may be entitled to compensation if the pawnbroker keeps your pawn without good reason. In Scotland, if a pawn is found to be unreasonably retained, stolen or obtained by fraud, the courts can order it to be returned to the owner.

If you lose your pawn receipt

Tell the pawnbroker so that no one else will be able to use your receipt. There is a procedure which allows you to get your goods back by paying what you owe and signing a statement that you have lost your pawn-receipt. If the amount borrowed is over £25, you will have to sign the statement before a Commissioner for Oaths or Justice of the Peace or Notary Public. A local solicitor would normally be able to undertake this function, but is entitled to charge a fee.

If you cannot redeem

If you cannot pay what you owe by the deadline and the amount you borrowed was £25 or less, the pawnbroker will keep your pawn.

If you borrowed more than £25, then the pawnbroker is entitled to sell the pawn to recover the debt you owe. The pawn remains your property until it is sold, but the loan remains outstanding and interest will continue to be charged.

If the pawn is sold If the pawnbroker decides to sell the pawn you can still redeem it until it is sold. If the amount you borrowed was more than £50, you must be given 14 days written notice before the sale goes ahead. The notice should state the asking price for the item and give details of when, how and where it will be sold.

Within 20 working days of the pawn being sold, the pawnbroker must send you a notice telling you the price for which it was sold and the sale costs. If the item fetches more than you owe under your agreement, including the sale costs, the surplus belongs to you. But you should not sit back and wait for the pawnbroker to send it to you. If there is a surplus you must claim it. If the pawnbroker then fails to pay you promptly, you may be entitled to claim interest.

If, on the other hand, the pawn is sold for less than you owe, you will be liable to pay the difference.

If you are unhappy with the price

If you think that the pawn could have been sold for a better price or that the sale costs are unreasonable, raise the matter with the pawnbroker. Bear in mind that the second-hand value of goods, even jewellery, is generally much less than an insurance valuation and the price paid when new. Also, if the pawn was sold at public auction, the price obtained will normally be deemed fair for legal purposes, however low it may be. If you remain dissatisfied, you can challenge the pawnbroker in court using the small claims procedure. The pawnbroker will have to prove to the court that the price was fair and the sale costs were reasonable. The small claims procedure is designed for claims up to £3,000 (£750 in Scotland) and is informal and easy to use. You do not have to go to a solicitor, and only very limited costs can be awarded against you even if you lose.

You can get advice, leaflets explaining court procedure and help filling in the forms from your local Citizens Advice Bureau or Consumer Advice Centre, see the MoneySurgery Contacts Page. Leaflets are also available from any County Court (Sheriff Court in Scotland).

Extra time to pay

If you cannot redeem your item and you do not want your pawn to be sold, the pawnbroker may agree to renew your loan. You will usually be asked to pay the interest that has built up. You must be given another agreement (a modifying agreement). This will be very similar to the original agreement, unless you change the article you have pawned or add another item.

Extra terms

You may come across some unfamiliar terms when you use a pawnbroker, such as:

  • Realisation: when the pawnbroker sells your pawn to recover a debt you cannot pay.
  • Renewal: when the pawnbroker gives you more time to pay off your loan.
  • Redemption Period: the period during which you can redeem your pawn.

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