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EIGHTEENTH CONGRESS
REPUBLIC OF THE PHILIPPINES
Second Regular Session

‘a BY a
HOUSE OF REPRESENTATIVES vip INDEX:

Introduced by Representative Rufus B. Rodriguez
House Bili No. 9332

EXPLANATORY NOTE

Presidential Decree No. 114, or the "Pawnshop Regulation Act” was enacted last January 29,
1973 or almost 50 years ago.

Pawnshops provide an additional source of credit especially for small borrowers left unserved by
the banking and other financial institutions in the country. Before PD 114, there is no specific iaw
in the Philippines that governs pawnshop establishments, particularly providing definite and
Uniform standards for their operation. This is the main reason why PD 114 was enacted.

However, PD 114 is no longer responsive to present conditions. Further, many pawnshop
operators take advantage and abuse their clients with the number 1 complaint being high, or even
exorbitant, interest rates.

In view of the foregoing, immediate approval of this measure is earnestly requested.

RUFYS B. RODRIGUEZ


EIGHTEENTH CONGRESS )
REPUBLIC OF THE PHILIPPINES }
Second Regular Session

HOUSE OF REPRESENTATIVES

Introduced by Representative Rufus B. Rodriguez

House Bill No. 9332

AN ACT
AMENDING PRESIDENTIAL DECREE NO. 114 REGULATING THE ESTABLISHMENT AND
OPERATION OF PAWNSHOPS, AND FOR OTHER PURPOSES

Be it enacted by the Senate and House of Representatives of the Philippines in Congress
assembled:

SECTION 1. Short Title. — This Act shall be known as the “Pawnshop Regulation Act."

SEC 2. Definition of Terms -

(A) "Pawnshop" means any person, partnership, association, or corporation lending money on
the deposit or piedge of personai property, or who deais in the purchase of personal property on
the condition of selling the property, or who deals in the purchase of personal property on the
condition of selling the property back again at a stipulated price, other than choices in action,
securities, or printed evidence of indebtedness; and shall be synonymous and may be used
interchangeabiy, with pawnbroker or pawn brokerage.

(B) "Pledger" means the person who delivers personal property into the possession of a
pawnbroker as security for a loan unless such person discloses that the person is or was acting
for another; and in such event “piedger" means the disciosed principal.

(C) "Property" shall include only such personal property as may actually be delivered to the control
and possession of the pawnshop; Provided, however, that certain specified chattels such as guns,
knives and similar weapons whose reception in pawn is expressly prohibited by laws or
regulations shall not be included.

(0) "Person" means an individual, firm, association, a limited liability company, a partnership, a
joint stock association, a trust or a corporation.

SEC 3. Registration and Licensing —

No person or entity shall engage in business as a pawnbroker, act as a pawnbroker, or
advertise, transact, or soiicit business as a pawnbroker except as authorized by this Act and
without first obtaining a license from the Department of Trade and Industry (DT!) or the Securities
and Exchange Commission (SEC), respectively.

Application for a pawnbroker's license shall be submitted on a form prescribed by the
appropriate government agency and must inciude ail information required by said agency.

SEC 4. Requirement of registration with the Bangko Sentral ng Pilipinas — Any individual,
corporation or association duly registered and licensed to engage in the pawnshop business shall
file an information sheet, under oath, with the Bangko Sentrai ng Pilipinas (hereinafter referred to
as "BSP") before commencement of actual operations; Provided, however, that pawnshops duly


licensed and operating before the approval of this Act shall, within six (6) months from the date of
effectivity of the same, register with the BSP. For this purpose, the BSP shall furnish pawnshops,
upon request, with necessary copies of the prescribed information sheet.

SEC 5. Capital. — The minimum paid-in capital of any pawnshop which may be established after
the effectivity of this Act shall be Fifteen Mion Pesos (P'15,000,000.00); Provided, however, that
pawnshops established and in operation prior thereto shall comply with the minimum
capitalization required under the provisions of this section within such time as may be prescribed
by the Monetary Board.

SECTION 6. Citizenship Requirement. — Upon the effectivity of this Act, only Filipino citizens
may establish and own a pawnshop organized in the form of a single proprietorship; Provided,
however, that in the case of a partnership, at least seventy percent (70%) of its capital shall be
‘owned by Filipino Citizens. Provided, further, that in the case of a corporation, at least seventy
percent (70%) of the voting capital stock shall be owned by citizens of the Philippines, or if there
be no capital stock, at least seventy percent (70%) of the members entitled to vote, shall be
citizens of the Philippines. The percentage of foreign-owned voting stock or non-citizens entitled
to vote in any domestic pawnshop existing prior to the effectivity of this Act, if such percentage is
in excess of thirty percent (30%) of the voting stock or members entitled to vote of the
pawnshop shall not be increased but shall be reduced, and once reduced, shall not be increased
thereafter beyond thirty percent (30%) of the voting stock, or number of members entitied to vote,
of the pawnshop.

The percentage of foreign-owned voting stocks in any pawnshop shall be determined by
the citizenship of the individual stockholders in that pawnshop. In the case of corporations owning
shares in a pawnshop, the citizenship of the individual owners of voting stock in such corporations
shall be the basis of computing the percentage.

SEC 7. Issuance of License. — Upon the filing of the application and the payment of the license
fee, if the DTI or the SEC, as the case maybe, shall find the financial standing, competence,
business experience, and character of the applicant are such that the business will be operated
honestly, fairly, and efficiently and that the convenience and needs of the public exist for the
operation of such business in the community wherein such applicant propose to operate, its shall
issue and deiiver a license to the applicant, which license shaii authorize the applicant to engage
in the business of pawnbroking. Such license shall remain in effect until itis surrendered, revoked,
or suspended.

SEC 8, Denial. — if the appropriate agency denies the appiication, it shall notify the applicant of
the denial and return the sum paid by the applicant as a license fee. The agency may hold a public
hearing if the department considers the hearing necessary.

SEC 9, Non-Transferability. — The license shail not be transferable or assignable. More than one
(1) place of business may be maintained under the same license.

SEC 10. Change of place of business. — Whenever a licensee changes its place of business to
another location, the licensee shaii give written notice to the appropriate government agency. The
license hall request approval to add or change one (1) or more business locations.

SEC 11. Suspension or Revocation of License. —The DTI or the SEC shall, upon ten (10)

days notice to the licensee stating the contempiated action and in generai the grounds therefor,
and upon reasonable opportunity to be heard, suspend or revoke, by written order, any license
issued under this Act if it shall find that


(A) The licensee has failed to pay the annual license fee or comply with any ruling or
requirements of the appropriate government agency;

(B) The licensee has violated any provision of this Act or any rule made by the appropriate
government agency; or

(C) Any fact or condition exists which, if it had existed at the time of the original appiication for
such license, would have warranted the appropriate government agency in refusing originally to
issue such license.

SEC 12. Pre-Existing Obligation. - No revocation or suspension or surrender of any license shall
impair or affect the obligation of any pre-existing lawful contract between the licensee and any
borrower.

‘SEC 13. investigative Power. — For the purpose of discovering violations of this Act and securing
information necessary for the enforcement of this Act, the appropriate government agency may
investigate any licensee or person that it suspects to be operating without a license and in violation
of this Act.

‘SEC 14. Books, Accounts and Records. —

(A) The license shall keep and use in his business such books, accounts, and records as will
enable the DTI or SEC to determine whether the licensee is complying with this Act and with the
rules and regulations made pursuant to this Act. Every licensee shall preserve such books,
accounts, and records, inciuding cards used in the card system for at ieast two (2) years after
making the final entry on any loan recorded therein. The books and records of the licensee shall
be kept so that the pawnbroking business transacted may be readily separated and distinguished
from any other business in which the licensee may be engaged.

(B) if a pawnbroker, in the conduct of the business, purchases an article from a seller, the
purchase shall be evidenced by a bill of sale properly signed by the seller. All bills of sale must
be in duplicate and must recite the following separate items:
(1) Date of bill sale;
(2) Amount of consideratior
(3) Name of pawnbroker;
(4) Description of each article sold;
(6) Signature of seller; and
(6) Address of selier.

(C) If a pawnbroker, in the conduct of the business, purchases an article from a seller on the
condition of selling the property back at a stipulated price, the transaction shall be evidenced by
a bill of sale properly signed by the seller. Ali such bilis of saie must be in duplicate and state the
information provided in subsection (B) and must also contain the following information:

(1) Date of resale.

(2) Amount of resale.

(D) The originai copy of the bili of sale shali be retained by the pawnbroker. The second copy
shall be delivered to the seller by the pawnbroker at the time of sale. The heading on all bills of
sale forms must be in boldface type.

(E) Each licensee shail maintain a record of control indicating the number of accounts and vaiue
of all outstanding pawnbroking receivables. Each licensee shall maintain a separate record of
transactions subject to subsection (C).


SEC 15. Amount of Loan. — Pawnshops may grant such amount of loans as may be
agreed upon between the parties; Provided, that the amount of loan shall, in no case, be

less than thirty percent (30%) of the appraised value of the security offered for the loan unless
the pledger manifests in writing the desire to borrow a lesser amount.

SEC 16. Rates of interest. —

(A) No pawnshop shall directly or indirectly stipulate, charge, demand, take or receive any
rate higher than twelve percent (12%) per annum. It shall be unlawful for a pawnshop to
divide the pawn offered by a pledger in order to collect greater interest and/or to require
the piedger to pay an additional charge as insurance premium for the safekeeping and
conservation of the article pawned.

In times of national emergencies, including state of calamities or pandemics, no
pawnshop shall directly or indirectly stipulate, charge, demand, take or receive any rate
higher than six percent (6%) per annum.

(B) Interest shall not be deducted in advance, neither shall the pawnbroker induce or permit
any borrower to spot up or divide any loans for the purpose of evading any provision of
this chapter.

(C) If a pawnbroker charges or receives interest in excess of that provided for in this section,
or makes any charges not authorized by this Act, the pawnbroker shall forfeit the principal
and interest and return the piedge upon demand of the piedger and surrender of the pawn
ticket without the principal or interest. If such excessive or unauthorized charges have
been paid by the pledger, the pledger may recover the same, including the principal, if
paid, in a civil action against the pawnbroker.

(D) in addition to the loan finance charge authorized by this Act, a pawnbroker may charge,
contract for, and receive a fee not to exceed one-fifth (1/5) of the principal amount of the
loan per month or any fractional part of a month for servicing the pledge that may include
investigation of the title, storing, providing security, appraisal, handling, making daily
reports to iocai enforcement officers, and for other expenses and costs associated with
servicing the pledge.

SEC 17. Submission of Report. — Each licensee shall, annually on or before June 1, file a report
with the appropriate government agency, giving such relevant information as they may require
concerning the business and operations during the preceding year of each licensed place of
business conducted by such licensee. Such report shall be made under oath and shall be in the
form prescribed. The appropriate government agency shall annually make an analysis and a
recapitulation of such reports, which shali be a matter of public record. The appropriate
government agency may impose a fee of Two Hundred Pesos (P200.00) per day on any annual
report that is not received by June 1

SEC 18. Maintenance of Record. —
(A) Every pawnbroker shall keep a record in Filipino or English, with corresponding
translation in the local dialect of every pawn, that must include the following:
1. The name and address of the pledger, or where the pledge is made by a person acting as
agent for a disclosed principal, the names and addresses of principal and agent;
The date of the transaction;
The amount of the loan;
The article or articles pledged;
The seriai number of the ioan;

ALON


6. The date on which each loan was paid in full, renewed, or unredeemed;

7. An itemization of principal, interest and additional fees collected;

8. The total of all charges collected.
(B) Other methods of recording data, such as electronic or computerized methods, may be used
provided written print-outs or hard copies of the required data are readily available. The record
keeping system of a licensee shall be made available for examination. The appropriate
government agency shall determine the sufficiency of the records and whether the licensee has
made the required information reasonably available.

SEC 19. Signature and Thumbprint. — The pawnbroker shaii at the time of making a joan or
purchase require the signature and right thumbprint of the pledger on all pawn tickets, bills of sale,
or ledger cards retained by the licensee. If the person is unable to write, the person shall sign by
mark. In such event the pawnbroker shall record on the signature card such information as will
enabie the pawnbroker to identify the person in case of the loss of the ticket. if the person does
not have a right thumb, any other existing finger may be used. However, a clear print must be
obtained.

SEC 20. Pawn Ticket. — The pawnbroker shall, at the time of making a ioan, deliver to the pledger
or the pledger’s agent a memorandum or ticket on which shall be legibly written or printed:

(A) The name of the pledger;

(B) The name of the pawnbroker and the place where the pledge is made;

(C)The articies or articles pledged;

(D)The amount of the loan;

(E) The date of the transaction;

(F) The serial number of the loan;

(G) The sum of the interest as provided in this Act;

(H)The amount of interest;

(I) The amount of charge and principal due at maturity; and

(J) A pawnbroker may insert in such ticket any other terms and conditions not inconsistent with
this chapter. However, nothing appearing on a pawn ticket shali relieve the pawnbroker of the
obligations to exercise reasonable care in the safekeeping of the article pledged with him.

‘SEC 21. Ticket holder. — The holder of such ticket shall be presumed to be the person entitled
to redeem the piedge, and the pawnbroker shail deiiver the piedge to the person presenting the
ticket, upon payment of the principal, interest and charge.

‘SEC 22. Mail. — When a ticket, instead of being presented in person, is sent to the pawnbroker
by mail, accompanied with a money order for the total amount due and a reasonabie fee for
shipping and handling, the pawnbroker may securely pack and forward the pledge to the pledger
in accordance with the remitter’s instructions. If the remittance is insufficient to cover the amount
due, the pawnbroker shall either notify the remitter of the amount of the deficiency or send the
piedge subject to the payment of shipping charges by the consignee. The pawnbroker’s liability
for the pledge shall cease upon delivery of the pledge to the carrier or his agent.

‘SEC 23. Presentation of Ticket before Maturity. — Upon presentation of the pawn ticket prior to
maturity and the payment of accrued interest and charge the tender of not less than P50.00 of
the principal balance, the pawnbroker shall accept the same, showing due credit of principal
payment on pawn ticket, together with the amount of unpaid principal balance, or issue a new
ticket for the reduced amount. Future interest charges and charge shall be computed on the
unpaid principai baiance.


SEC 24. Lost, Destroyed or Stolen Ticket. — If a ticket is lost, destroyed, or stolen, the pledger
shall so notify the pawnbroker in writing. Before delivering the collateral or issuing a new ticket,
the pawnbroker shall require the pledger to make an affidavit of the alleged loss, destruction or
theft of the ticket. Upon receipt of such affidavit, the pawnbroker shall permit the pledger either to
redeem the loan or to receive a new ticket upon the payment of accrued interest and charges,
and the pawnbroker shall incur no liability for so doing, unless the pawnbroker had previously
received written notice of any adverse claim. The pawnbroker may collect reasonable fee for
reissuing the pawn ticket or affecting the affidavit along with the current lawful charge for notary
fee.

SEC 25. Alteration of Tickets. — The alteration of a ticket shall not excuse the pawnbroker who
issued it from liability to deliver the pledge according to the terms of the ticket as originally issued,
but shail relieve the pawnbroker of any other liability to the pledge or holder of the ticket.

‘SEC 26. Liability for Loss. — A pawnbroker shall be liable for the loss of a pledge resulting from
the pawnbroker's failure to exercise reasonable care in regard to it, but the pawnbroker shall not
be liable for the loss of a piedge which could not have been avoided by the exercise of reasonable
care. The burden of proof to establish due care shall be upon the pawnbroker.

SEC 27. Redemption. — The pledger who fails to pay his obligation on the date it falls due may,
within ninety days from the date of maturity of the obligation, redeem the pawn by payment of the
principal of the debt with interest: Provided, however, that for the purpose of computing interest
due after the maturity of the obligation, the basis shall be the sum of the principal of the obligation
and interest earned at the time the obligation matured.

SEC 28. Disposition of Pawn on Defauit of Piedger. — A pawnbroker may sell an article pawned
after the expiration of ninety (90) days from the maturity of the loan in accordance with the
preceding section, provided that not less than ten (10) days before making the sale, the
pawnbroker gives notice to the pledger by mail addressed to the address of the pledger as shown
‘on the pawnbroker's records notifying the person that uniess the person redeems the articie within
ten (10) days from the date of the mailing, the article becomes the property of the pawnbroker
and subject to sale. The pawnbroker becomes the owner of all unredeemed pledges held for one
hundred eighty (180) days after the maturity of the loan and no notice need be made to the
piedger.

SEC 29. Public Auction of Pawned Articles. — No pawnbroker shall sell or otherwise dispose of
any article or thing taken or received in part or pledge except at public auction in his place of
business as such pawnbroker or in any other public place within the territorial imits of the
municipality or city where the pawnshop has its place of business, under the control and direction
of an auctioneer with license duly issued by the corresponding authorities, nor shall any such
atticle or thing be sold or disposed of unless said pawnbroker has published a notice once in at
least two daily newspapers printed in the city or municipality during the week preceding the date
of such sale. In remote areas where the newspapers are neither published nor circulated notice
by newspaper publication shall be substituted by posting notices in conspicuous public places
within the territorial limits of the city or municipality where the pawnshop has its place of business.
Said notice, whether pubiished or posted, shali be in Engiish, and either in Filipino or in the iocal
dialect, and shall contain the name of the pawnshop, its owner, address of the establishment,
hour, and date of the auction sale.

SEC 30. Lien on Piedges. — A pawnbroker has first lien on aii piedges for the amount of his oan,
interest and charges except:


(A) When the property that constitutes the pledge is stolen or converted property; or
(B) Where a prior lien exists under another statute.

‘SEC 31. Delivery of Pledge upon Surrender of Ticket. — A pawnbroker shall not be required to
deliver a pledge except upon surrender of the ticket, unless the ticket be impounded or its
negotiation enjoined by a court.

‘SEC 32. Multiple Claims. — If more than one (1) person shall claim the right to redeem a pledge,
the pawnbroker shail incur no liability for refusing to deliver the pledge until the respective rights
of the claimants shall have been adjudicated. If no action be brought against the pawnbroker by
either party within the period for which the pawnbroker is required under this Act to hold the
pledge, or within thirty (30) days after notice of an adverse claim, the pawnbroker may proceed
to sell the pledge subject of adjudication of the parties’ rights.

SEC 33. Prohibition. —

(A) No pawnbroker shall:

(1) Receive any pledge or make a purchase from a person under eighteen (18) years of age; or
(2) Receive any pledge or make a purchase of property that the pawnbroker believes or should
have reason to believe is stolen property acquired as result of a crime.

(B) No pawnbroker shall purchase personal property or any other thing of value agreeing to sell
the same hack to the seller at a price other than the original price, at a total charge, rate of interest,
discount, or other remuneration in excess of the rate chargeable under this Act.

SEC 34. Ciosing and Removal of Business Period. — No pawnbroker shall close or transfer his
place of business within three (3) months after the expiration of the period for which any article or
thing shall have been taken or received by him at his place of business in pawn or pledge, or
before any such article or thing shall have been sold or otherwise disposed of in accordance with
the provisions of this Act; Provided, however, that removal or transfer of a pawnbroker's piace of
business from one place to another within the territorial limits of the same city or municipality may
be authorized on condition that the pawnbroker shall publish a notice of such removal in two local
daily newspapers, one in English, another in Filipino or in the local dialect, for a period of not less
than three (3) days, the last day of which shail take piace five (5) days before the removal, stating
in the notice the date of removal, the address of the premises to be vacated and of the premises
to which the pawnshop will transfer, and that he shall likewise post in a conspicuous place in both
premises one copy of the notice in English and another in either Filipino or the local dialect during
the period of its publication in the said iocal papers.

SEC 35. Grant of Authority to the Bangko Sentral ng Pilipinas. - The BSP is hereby authorized:
(A) To issue rules and regulations to implement the provisions contained herein;

(B) To require from pawnshops reports of condition and such other reports necessary to
determine compliance with the provisions of this Act;

(C) To exercise visitorial powers whenever deemed necessary; and

() To impose such administrative sanctions including the imposition of fines for violations of this
Act and regulations issued by the BSP in pursuance thereto.

violations of this Act and regulations issued by the BSP in pursuance thereto.

SEC 36. Penalties. — A fine of not less than Five Thousand Pesos (P5,000.00) and not more
than Thirty Thousand Pesos (P30,000.00) or imprisonment for not less than thirty days and not
more than one (1) year, or both, at the discretion of the court, shall be imposed for violations of
the provisions of this Act and its implementing rules and regulations; Provided, that if the violation


is committed by a corporation, partnership or an association, the penalty provided for in this Act
shall be imposed upon the directors, officers, employees or persons therein responsible for the
offense, without prejudice to civil responsibilities arising from the criminal offense.

SEC 37. Separability Clause. — if any provision or part hereof, is held invalid or unconstitutional,
the remainder of the law or the provision not otherwise affected shall remain valid and subsisting.

SEC 38. Repealing Clause. — Any law, presidential decree or issuance, executive order,
administrative order, rule or regulation contrary to, or inconsistent with the provisions of this Act
is hereby repealed, modified or amended accordingly.

SEC 39. Effectivity Clause. — This Act shall take effect fifteen (15) days after its
publication in at least two (2) newspapers of general circulation.

Approved,