Regulations and Operations of Pawnshops in the Philippines

Pawnshop operator

A person or a juridical entity authorized by the Bangko Sentral to engage in pawnshop business.

Pawnshop business

The business of lending money on personal property that is physically delivered to the control and possession of the pawnshop operator as loan collateral.

Pawnshop office

The area where the pawning business is conducted.

Pawner

The borrower from a pawnshop.

Pawnee

The pawnshop or pawnbroker.

Pawn

The personal property delivered by the pawner to the pawnee as security for a loan.

Pawn ticket

The pawnbroker's receipt for a pawn.

Property

Only such personal property which can be physically delivered to the control and possession of the pawnee.

Fitness and propriety

Considerations for the application to operate a pawnshop business, including integrity/probity, market reputation, competence, and financial capacity.

Classification of Pawnshop Operator License A

Basic pawnshop business with not more than ten (10) offices.

Classification of Pawnshop Operator License B

Basic pawnshop business with more than ten (10) offices and with or without BSP-registered corollary business activities, excluding remittance operations.

Classification of Pawnshop Operator License C

Basic pawnshop business with more than ten (10) offices and with BSP registered corollary business activities including remittance operations.

Classification of Pawnshop Operator License D

Virtual pawnshop operators or those engaged in pawnshop business through electronic pawning (e-pawning) which refer to systems and processes that enable customers to pawn their personal property through electronic channels.

Minimum paid-in capital A

₱100,000.

Minimum paid-in capital B

₱1,000,000.

Minimum paid-in capital C

₱50,000,000.

Minimum paid-in capital D

₱50,000,000.

Maximum borrowings

Shall not exceed fifty percent (50%) of total borrowings to pledged loans, and shall not be from more than nineteen (19) creditors.

Management requirements

Any person can be a proprietor, partner, director, or officer of pawnshops provided he/she has undergone a briefing on pawnshop regulations and the Anti-Money Laundering Law (AMLA), and must not be included in the BSP Watchlist.

NBI Clearance

An NBI clearance shall also be required for any newly elected/appointed director, president, manager or officer-in-charge and newly accepted partner or director of pawnshops.

Business Days and Hours

Pawnshops shall be open for business at least five (5) days a week and for at least six (6) hours a day.

Business Hours Posting

The business hours and business days shall be posted conspicuously at all times within the premises of the pawnshop.

Pawning Operations

A pawnshop shall extend a loan only if such is secured by personal property that could be physically delivered to the control and possession of the pawnshop.

Ownership Verification

Before accepting articles as pawn, the pawnshop must ascertain whether the pawner is the true and absolute owner of the article offered as pawn.

Standard of Diligence

In the conduct of business, a pawnshop shall be guided by the standard of diligence that is expected of 'a good father of a family.'

Acceptable Security

Only personal property that is capable of being physically delivered to the control and possession of the pawnshop shall be accepted as security for loans.

Prohibited Chattels

Certain specified chattels, such as guns, knives, or similar weapons, whose reception in pawn is expressly prohibited by other laws, decrees, or regulations, shall not be accepted by pawnshops as security for loans.

Liability for Lost Items

The pawnshop shall be liable for any pawned item lost or destroyed arising out of its negligence, fault, delay in delivery or willful violation of the loan agreement.

Prohibited Actions by Operators

Pawnshop operators shall not use pawned articles for themselves or allow employees to use said articles for any purpose without the express consent or authority of the pawner unless continued use is necessary to preserve the pawn.

Re-pledging Prohibition

Pawnshop operators shall not re-pledge/re-pawn the pawned article.

Disclosures Requirement

Pawnshops shall post conspicuously at the pawnshop's premises an abstract containing the following: Interest Rates, Ninety (90)-Day Grace Period, and Insurance.

Interest Rates Disclosure

The annual effective interest rate in percent, specifying therein if such interest rate is yearly or monthly, as well as other charges, if any, to be paid by the pawner.

Ninety-Day Grace Period

A pawner has ninety days from maturity date to redeem the pawn by paying the principal and interest.

Insurance Policy Disclosure

The pawnshop's policy regarding the insurance of pawned items.

Renewal of Loan

No loan shall be renewed or its maturity date extended unless a new pawn ticket shall be issued indicating the new term of the loan agreed upon by the pawnshop and the pawner.

Right of Pawner to Redeem Pawn

A pawner who fails to pay or renew his loan with a pawnshop on the date it falls due shall have ninety (90) days from the date of maturity of the loan within which to redeem the pawn by paying the principal amount of the loan plus the amount of interest that shall have accrued thereon.

Interest Calculation Post-Maturity

The amount of interest due and payable after the maturity date of the loan shall be computed upon redemption based on the sum of the principal loan and the interest earned as of the date of maturity.

Shorter Redemption Period

In case of pawned article that is subject to quick obsolescence, i.e., electronic gadgets, the pawner and the pawnee may agree on a shorter redemption period but the same shall not be less than thirty (30) days.

Money Service Businesses (MSBs)

Are financial entities that provide services such as currency exchange, money transfers, and payment processing.

Categories of MSBs

Stand-alone MSBs (SA-MSBs) include foreign currency exchanges, remittance agents/companies, remittance and transfer companies, electronic money issuers (EMIs), pawnshops, check cashers, money order issuances/redemption, bill payment services, digital eCommerce/payment processors, peer-to-peer lending/crowdfunding platforms, and virtual currency exchanges (VCEs).

Functions of MSBs

Facilitating remittances, money changing & foreign exchange dealing, promoting financial inclusion, promoting interoperability and development of payment systems, and supporting financial stability.