June 12, 1973 Honorable Sam Kelley, Commissioner Opinion No. H- 49 Consumer Credit Office P. 0. Box 2107 Re: The application ofthe Texas Austin, Texas 78711 Pawnshop Act to transactione where money is Lenton Dear Mr. Kelley: security ofpledged goods You have requested the opinion ofthis office onthe following questions:

“1. May possession be taken of ‘pledged goods, as that term is defined by the Pawnshop Act, ;a% security for a Loanwithout compliance with all the provisions of the Pawnshop Act? 

### "2. Does the $2500 limitation in Sec. 12of theAct mean that there is noauthorization 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 Loanauthorized 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 ofArticle 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. 203The Honorable Sam Kelley, page 2 (H-49)

“(b) ‘Pawnbroker’ - means any person engaged inthe business of lending money on the security of pledged goods; or engaged inthe business of purchasing tangible personal property on condition that it may be redeemed or repurchased by the seller for afixed price within afixed period oftime.

“(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 ofa pawnbroker inthe 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 ofhis business in connection withagawn transaction. ” Section 51.02(c). Therefore, “pledged goods” as bfined inthe Act, are goods which are pledged and delivered inapawnrransaction to someone engaged inthe 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 oftheAct. Section 12of the Texas Pawnshop Act provides inpart:

“No pawnbroker may contract for, charge or receive any amount as a charge for credit in connection with apawn transaction other than apawn service charge, and no pawn service charge may

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

exceed the charge disclosed in the pawn ticket or other memorandum delivered to thepledger

. . . .[I]nno case shall the amount financed exceed $2,500.00. ” This provision clearly prohibits a pawnbroker from making apawn transaction inexcess of $2, 500. Ifa person is not a “pawnbroker” within the statutory definition, it places no restriction ontheamount which he may loan. However, a person whose activities are not otherwise regulated may charge no more than 10% interest per annum, regardless ofthe amount ofthe 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 ofthe Act provides that a pawnbroker shall not “enter any pawn transaction which has a maturity date more than one month after the date ofthe transaction. ” Chapter 4 ofthe 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 inexcess of $2, 500 are governed byArticle 5069-4.01, ef~seq, V. T. C.S.

Attorney General of Texas

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

APPROVED: .

DAVID M. KENDALL, Chairman Opinion Committee

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