newsnews

Federal Law Could Put Pressure On Pawn Shops

By
Published: March 31, 2009

COLUMBUS, Ohio -- With the struggling economy, many people are turning to pawn shops for short-term help.

The interest rates can be high, but NBC 4’s Marshall McPeek reported there is some potential protection for consumers.

A bill in the U.S. Senate would limit the interest creditors can charge. It’s very similar to Ohio’s payday lending law, but it’s written more broadly and would include pawn shops.

Most anything can be found at pawn shops, where people trade in their goods for cash. If they repay the loan and interest, they can get their items back.

Ohio Revised Code limits pawn brokers to charging 5 percent per month – potentially 60 percent each year.

The Senate Bill, which is called the Protecting Consumers From Unreasonable Credit Rates Act of 2009, would limit that number to only 36 percent.

“It would be cost prohibitive. We could not continue to stay in business, which could result in, essentially, the loss of thousands of dollars, thousands of jobs, thousands of businesses closing,” said Lou Tansky, of the Ohio Pawnbrokers Association.

The Ohio Pawnbrokers Association said a pawn shop’s overhead is pretty high because they’re holding physical possessions, training employees to appraise the merchandise and writing contracts.

It’s not the paper that other creditors old.

Tansky said that cutting the businesses to 3 percent per month would put them out of business.

“Our clients would have no place to go to fulfill the need to get a short-term loan to help them make it through to the end of the week,” Tansky said.

The federal legislation claims that 15 states already have laws that protect borrowers from high-cost payday loans and credit and state laws would prevail when they provide better protection for consumers.

Ohio has a payday lending law, but the federal proposal –- if it passes -– may override because it has a tighter limit.

For additional information, stay with NBC 4 and refresh nbc4i.com -- Where Accuracy Matters.
To submit a story idea or news tip, e-mail stories@nbc4i.com.
MORE: NBC 4 Local News | Local Crime News
NBC 4 SPORTS: Sports News, Video
NBC 4 POLITICS: Headlines, Interactives & Video