QuestionsQuestions (PRESIDENTIAL DECREE NO. 114)
It is the “Pawnshop Regulation Act.” The State policy is to regulate the establishment and operation of pawnshops on a sound and stable basis, derive optimum advantages from them as an additional source of credit, prevent/mitigate practices prejudicial to public interest, and set minimum requirements and standards for their operation.
“Pawnshop” is a person/entity engaged in lending money on personal property delivered as security; synonymous with pawnbroker/pawnbrokerage. “Pawner” is the borrower. “Pawnee” refers to the pawnshop/pawnbroker. “Pawn” is the personal property delivered as security for a loan. “Pawn ticket” is the pawnbroker’s receipt for a pawn; it is neither a security nor printed evidence of indebtedness.
“Property” includes only personal property actually delivered to the pawnshop’s control and possession. Specified chattels such as guns, knives and similar weapons whose reception in pawn is expressly prohibited by other laws/regulations are excluded.
A pawnshop may be established as a single proprietorship, partnership, or corporation.
It must (a) register with the Bureau of Commerce for a single proprietorship or with the SEC for a corporation/association, and (b) secure a license from the appropriate city or municipality where the business is located.
After being duly registered and licensed, the pawnshop must file an information sheet, under oath, with the Central Bank before commencing actual operations. Pawnshops already operating before approval must register with the Central Bank within six months from effectivity; the Central Bank provides prescribed copies upon request.
Minimum paid-in capital is P100,000 for new pawnshops. Existing pawnshops must comply within a time prescribed by the Monetary Board, but not less than three years from the date of effectivity.
For single proprietorship: only Filipino citizens may own and establish. For partnerships: at least 70% of capital must be owned by Filipinos. For corporations: at least 70% of voting capital stock (or if no capital stock, at least 70% of members entitled to vote) must be Filipino citizens.
If the foreign-owned voting stock (or non-citizens entitled to vote) exceeds 30% at the time of effectivity, it shall not be increased; it may be reduced. Once reduced, it cannot be increased thereafter beyond 30%.
By the citizenship of the individual stockholders. If a corporation owns shares in a pawnshop, citizenship of the individuals who own voting stock in that owning corporation is used to compute the percentage.
Loans may be agreed between parties but must not be less than 30% of the appraised value of the security, unless the pawner manifests in writing the desire to borrow a lesser amount.
Pawnshops may not stipulate, charge, demand, take, or receive any higher rate than allowed by the Usury Law. They may not divide the pawn to collect greater interest nor require additional insurance-premium charges for safekeeping. Additionally, they may impose a maximum service charge of P5.00 but in no case exceeding 1% of the principal loan.
They must keep a memorandum book (in ink) recording, at time of each loan/pledge: accurate description of each pawn (in Filipino/English with translation in local dialect), amount loaned, date of pawning, rate of interest, and name/residence of each pawner including nationality, sex, and general appearance. Entries cannot be altered/erased. Pawners must sign and give address; illiterate pawners imprint thumbmark with name written by competent person as witness signing.
At the time of loan/pledge, the pawnbroker must deliver a memorandum/ticket containing the substance of the record required in the memorandum book under Section 11, excluding the description of the person. No compensation of any kind may be received for the pawn ticket.
A pawner who fails to pay on the due date may redeem within 90 days from maturity by paying the principal plus interest. For computing interest due after maturity, the basis is the sum of the principal and interest earned at the time the obligation matured.
If the pawner fails to redeem within 90 days from maturity, the pawnbroker may sell/dispose of the pawn only after duly notifying the pawner on or before the end of the 90-day period, with notice stating the date, hour, and place of sale.
Yes. No pawnshop may dispose of pledged articles except at public auction in its place of business or another public place within the municipality/city limits, under a licensed auctioneer. Also, the pawnshop must publish a notice once in at least two daily newspapers printed in the city/municipality during the week preceding the sale; in remote areas without newspaper circulation, posting in conspicuous public places replaces publication. Notices must be in English and either Filipino or the local dialect and include pawnshop name, owner, address, hour, and auction date.
No pawnbroker may close or transfer within three months after expiration of any redemption period during which articles were held, or before any such article is sold/disposed in accordance with the decree. Removal/transfer within the same city/municipality may be authorized if the pawnshop publishes a notice in two local daily papers (one English and one Filipino/local dialect) for not less than three days, with the last day at least five days before removal, and posts copies in both old and new premises conspicuously during publication.
The Central Bank may issue implementing rules/regulations, require reports of condition and other needed reports, exercise visitatorial powers, and impose administrative sanctions including fines for violations of PD 114 and related Central Bank regulations.
Violations are penalized by a fine of not less than P100 and not more than P1,000 or imprisonment of not less than 30 days and not more than 1 year, or both, at the court’s discretion. If committed by a corporation/partnership/association, the penalty is imposed on the directors, officers, employees, or persons responsible for the offense, without prejudice to civil liabilities arising from the criminal offense.