Regulating The Establishment And Operation Of Pawnshops

Case Overview and Summary

SUMMARY OF PRESIDENTIAL DECREE NO. 114

Title: Regulating the Establishment and Operation of Pawnshops

Declaration of Policy (Section 2):
- Regulate pawnshops to place their operation on a sound and stable basis as an additional source of credit.
- Prevent practices prejudicial to public interest.
- Lay down minimum requirements and standards for establishing and operating pawnshops.

Definitions (Section 3):
- "Pawnshop" refers to an entity engaged in lending money on personal property as security.
- "Pawner" refers to the borrower from a pawnshop.
- "Pawnee" refers to the pawnshop or pawnbroker.
- "Pawn" is the personal property delivered by the pawner as security for a loan.
- "Pawn ticket" is the pawnbroker's receipt for a pawn, not a security or evidence of indebtedness.
- "Property" includes only personal property delivered to the pawnshop, excluding prohibited items like weapons.

Form of Organization (Section 4):
- A pawnshop may be established as a single proprietorship, partnership, or corporation.

Registration and Licensing (Section 5):
- Register with the Bureau of Commerce (single proprietorship) or Securities and Exchange Commission (corporation or association).
- Secure a license from the appropriate city or municipality.

Registration with Central Bank (Section 6):
- File an information sheet with the Central Bank before commencing operations.
- Existing pawnshops must register within 6 months of the Decree's effectivity.

Capital Requirement (Section 7):
- Minimum paid-in capital of P100,000 for new pawnshops.
- Existing pawnshops must comply within 3 years from the Decree's effectivity.

Citizenship Requirement (Section 8):
- Single proprietorships must be owned by Filipino citizens.
- Partnerships must have at least 70% Filipino ownership.
- Corporations must have at least 70% Filipino-owned voting stock.
- Existing foreign ownership exceeding 30% cannot be increased.

Amount of Loan (Section 9):
- Agreed upon by parties, but not less than 30% of the appraised value of the security unless the pawner desires a lesser amount.

Interest Rates (Section 10):
- Cannot exceed the rate allowed by the Usury Law.
- Cannot divide the pawn to collect greater interest or require additional insurance premiums.
- Maximum service charge of P5 or 1% of the principal loan, whichever is lower.

Maintenance of Records (Section 11):
- Keep a memorandum book with accurate records of each pawn, including description, loan amount, date, interest rate, and pawner's details.
- Pawner must sign and provide address.

Pawn Ticket (Section 12):
- Issue a signed memorandum or ticket containing the substance of the record, excluding the pawner's description.
- No compensation for the ticket.

Redemption (Section 13):
- Pawner can redeem the pawn within 90 days from maturity by paying the principal and interest.
- Interest after maturity is computed on the sum of principal and interest at maturity.

Disposition of Pawn on Default (Section 14):
- If not redeemed within 90 days, the pawnbroker may sell the pawn after notifying the pawner.

Public Auction (Section 15):
- Pawns must be sold at public auction by a licensed auctioneer.
- Notice must be published in newspapers or posted in public places.
- Notice must include pawnshop details, date, and time of auction.

Closing and Removal of Business (Section 16):
- Cannot close or transfer within 3 months after the redemption period or before disposing of pawns.
- Removal within the same city/municipality requires published and posted notices.

Central Bank Authority (Section 17):
- Issue rules and regulations.
- Require reports from pawnshops.
- Exercise visitatorial powers.
- Impose administrative sanctions and fines for violations.

Penalties (Section 18):
- Fine of P100 to P1,000 or imprisonment of 30 days to 1 year, or both, for violations.
- If committed by a corporation/partnership, penalties apply to responsible directors, officers, or employees.

Matters Not Covered (Section 19):
- Existing laws not in conflict with this Decree shall apply.

Separability Clause (Section 20):
- If any provision is held invalid, the other provisions shall remain in effect.

Effectivity (Section 21):
- This Decree takes effect immediately.