Special features
Pawnbrokers have a duty to comply with the pre-contract information requirements outlined on here, but there some exceptions. •Unless the client is a ‘new customer’ (ie, s/he has not done business with the pawnbroker in the previous three years), the pawnbroker only has to inform her/him of her/his right to receive the pre-contract information free of charge on request.
•The pawnbroker’s duty to provide the client with ‘adequate explanations’ (see here) only applies to: ◦the main consequences of her/his failure to make the payments due under the agreement. Note: the requirement to explain any features of the agreement which may make it unsuitable for particular types of use does not apply to pawnbroking agreements and so there is no requirement to explain to the client that they are a short-term product, and an expensive and unsuitable method of longer-term borrowing;
◦the effects of withdrawing from the agreement, and when and how to exercise this right. Note: if the client fails to repay the loan and interest within 30 days of exercising her/his right to withdraw, the pawnbroker can retain and sell the pawned goods.
•The pawnbroker does not have to assess the client’s creditworthiness – ie, her/his ability to repay the loan (see here). •The pawnbroker does not have to supply the client with a copy of the draft credit agreement.
The pawnbroker must give the client a receipt for the goods (a ‘pawn receipt’) and must keep the goods for at least six months, during which time interest is charged on the money borrowed. The client retains ownership of the goods in the meantime. If the goods are not redeemed after six months:
•if the loan was for £75 or less and the goods were not subject to an earlier pledge which was renewed, ownership of the goods automatically passes to the pawnbroker and they can be sold;
•in all other cases, the pawnbroker can sell the goods, but may have to give the client notice of her/his intention to do so.
Unless the loan was for £100 or less, the pawnbroker must give the client at least 14 days’ notice of her/his intention to sell the goods. The client can redeem the goods at any time before the goods are sold (except if ownership has passed to the pawnbroker) by handing in the pawn receipt, and paying off the loan and accrued interest.
It is a criminal offence for a pawnbroker to refuse to redeem a pawn unless it has reasonable cause to believe that the person handing in the pawn receipt is neither the owner of the goods nor authorised to redeem them. If the client is unable to redeem the goods, s/he must renew the pledge to prevent the goods being sold. If the goods are sold, the pawnbroker must inform the client of their sale price and provide details of the costs of sale. If the client challenges the amount for which the goods were sold and/or the costs of sale, the onus is on the pawnbroker to justify the figures.