Focus on the Law: Pawnbrokers

By Sharon Frankenberg,
Attorney at Law

In Tennessee anyone, whether a person, firm or corporation, who wants to establish or conduct a pawnbroking business is required to be licensed.  The licensing requirements may be found in Tennessee Code Annotated Sections 45-6-205 through 208.  Among other things, an applicant must be of good moral character;  have at least $75,000 in net assets readily available for use exclusively in conducting the business;  and not have a prior felony conviction within the previous 10 years which directly relates to the duties and responsibilities of a pawnbroker or otherwise make the applicant presently unfit for a pawnbroker’s license.

Under the state statute (T.C.A. Section 45-6-204) a licensed pawnbroker has many powers, including the power to make loans on real estate, stocks and personal property;  deal in bullion, stocks and public securities;  purchase merchandise for resale from dealers and traders;  purchase tangible personal property under a buy-sell agreement from individuals as a pawn transaction on the condition that it may be redeemed or repurchased by the seller at a fixed price within a fixed time not to be less than 60 days;  make loans on the security of pledged goods as a pawn or pawn transaction;  and make over-the-counter purchases of goods which the seller does not intend to buy back.  These goods purchased over-the-counter by the pawnbroker must be held for a period of not less than 20 business days before offering the merchandise for resale.

Pawnbrokers must maintain detailed records of each and every pawn transaction or buy-sell transaction.  The records must include identifying information about the seller or pledgor.  A copy of these records must be delivered to the appropriate law enforcement agency within 48 hours following the day of the transactions.  This enables law enforcement to locate items which may have been reported stolen, investigate the situation and potentially return stolen items to their rightful owners.

When a pawnbroker makes a “loan of money” transaction, he or she makes a loan on the security of pledged goods, takes a written bailment of those goods as a security lien for the loan, charges interest and fees authorized in the statute, and specifies certain terms of redemption with the implied power of sale on default.  One of the critical terms of redemption includes a maturity date on the transaction.  The pawnbroker must retain possession of the pledged goods for 30 days after the maturity date of the pawn transaction.  Pledged goods not redeemed by the pledgor on or before the maturity date set out on the pawn ticket may still be redeemed by the pledgor during this 30 day period but the pledgor must pay the originally agreed redemption price (interest, fee and loan amount) plus the payment of the additional interest and fee for the period following the original maturity date.  If the pledgor fails to redeem the pledged goods within 30 days after the maturity date of the pawn transaction, the pledgor forfeits all right, title and interest to the pledged goods.  The title to the pledged goods then passes to the pawnbroker who may dispose of them as he sees fit.

Unlike the unfortunate pledgors featured in the television show “Hardcore Pawn,” pledgors in Tennessee are protected by statute from forfeiture of their rights when they lose a pawn ticket.  The law permits them to promptly (before the lapse of the final redemption date) make an affidavit for such loss, describing the pledged goods which takes the place of their pawn ticket.

 

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