June 12, 1973 

Honorable Sam Kelley, Commissioner Opinion No. H- 49 

Consumer Credit Office 

P. 0. Box 2107 Re: The application of the Texas 

Austin, Texas 78711 Pawnshop Act to transactione 

where money is Lent on 

Dear Mr. Kelley: security of pledged goods 

You have requested the opinion of this office on the following questions: 

“1. May possession be taken of ‘pledged goods, 

as that term is defined by the Pawnshop Act, ;a% 

security for a Loan without compliance with all the 

provisions of the Pawnshop Act? 

"2. Does the $2500 limitation in Sec. 12 of 

the Act mean that there is no authorization in Texas 

for a pawn transaction in excess of $2500, even 

though there is an interest charge of 10% simple 

interest per annum or less on the transaction? 

"3. May a lender making a Loan authorized 

by Chapter 4 of the Texas Credit Code ever take 

possession of ‘pledged goods, ’ as defined by the 

Pawnshop Act, as security for that ldan? ” 

The provisions of Article 5069-51, Vertion’s Texas Civil Statute’s; 

known as the Texas Pawnshop Act, relevant to your request provide as 

follows: 

“Art. 5069-51. 02 Definitions 

“The following definitions apply where such 

words appear in this Act: 

. . . 

p. 203 
The Honorable Sam Kelley, page 2 (H-49) 

“(b) ‘Pawnbroker’ - means any person 

engaged in the business of lending money 

on the security of pledged goods; or engaged 

in the business of purchasing tangible personal 

property on condition that it may be redeemed 

or repurchased by the seller for a fixed price 

within a fixed period of time. 

“(c) ‘Pledged goods’ - means tangible 

personal property other than choses in action, 

securities, or printed evidences of indebtedness, 

which property is deposited with or otherwise 

actually delivered into the possession of a 

pawnbroker in the course of his business in 

connection with a pawn transaction. 

“Article 5069-51.03 License Required 

“No person shall engage in business as a 

pawnbroker without first obtaining a license 

from the commissioner specifically authorizing 

engagement in such business. ” 

Your first question concerns “pledged goods” as defined inthe Act. 

The term includes only such goods as are deposited with or delinred to 

“a pawnbroker in the course of his business in connection with agawn 

transaction. ” Section 51.02(c). Therefore, “pledged goods” as bfined 

in the Act, are goods which are pledged and delivered in a pawnrransaction 

to someone engaged in the business of conducting such transactias [see 

Section 51.02(b)]. Consequently, possession of such pledged go& may 

be taken only in compliance with all the provisions of the Act. 

Section 12 of the Texas Pawnshop Act provides in part: 

“No pawnbroker may contract for, charge or 

receive any amount as a charge for credit in connection with a pawn transaction other than a pawn 

service charge, and no pawn service charge may 

p. 204 
The Honorable Sam Kelley, page 3 (H-49) 

exceed the charge disclosed in the pawn ticket 

or other memorandum delivered to the pledger 

. . . . [I]n no case shall the amount financed 

exceed $2,500.00. ” 

This provision clearly prohibits a pawnbroker from making a pawn 

transaction in excess of $2, 500. If a person is not a “pawnbroker” within 

the statutory definition, it places no restriction on the amount which he 

may loan. However, a person whose activities are not otherwise regulated 

may charge no more than 10% interest per annum, regardless of the amount 

of the loan. Article 5069-l. 02, Vernon’s Texas Civil Statutes. 

Your third question again concerns “pledged goods, ” defined in the 

Act as including only such goods as are deposited with or delivered to a 

pawnbroker in connection with a pawn transaction. Section 51.16 of the 

Act provides that a pawnbroker shall not “enter any pawn transaction which 

has a maturity date more than one month after the date of the transaction. ” 

Chapter 4 of the Subtitle on Consumer Credit (Article 5069-4.01 et 

seq., V. T. C. S.) is entitled Installment Loans and regulates contracts 

repayable in consecutive monthly installments, substantially equal in 

amount. Clearly then, loans authorized under Chapter 4 do not constitute 

pawn transactions regulated by the Texas Pawnshop Act and security for 

such a loan is not thereby a “pledged good” within the definition set forth 

in the Texas Pawnshop Act. 

SUMMARY 

Possession may be taken of “pledged goods, ” 

i.e., goods deposited with a pawnbroker in connection 

with a pawn transaction, only in compliance with the 

Pawnshop Act. There is no authorization for a pawn 

transaction in excess of $2, 500. Installment loans by 

others than pawnbrokers for amounts in excess of $2, 500 

are governed by Article 5069-4.01, ef~seq, V. T. C. S. 

Attorney General of Texas 

p. 205 
The Honorable Sam Kelley, page 4 (H-49) 

APPROVED: 

. 

DAVID M. KENDALL, Chairman 

Opinion Committee 

p. 206