Republic of the Whilippines
HOUSE OF REPRESENTATIVES

Quezon City

EIGHTEENTH CONGRESS.
Second Regular Session

HOUSE BILL NO. 8527

Introduced by HON. LUIS RAYMUND “LRAY” F. VILLAFUERTE, JR.

AN ACT
REGULATING PAWNSHOP ESTABLISHMENTS AND OPERATIONS

The Constitution, Article Il, Section 5 provides:

The promotion of the general welfare is essential for the enjoyment by all
people of the blessings of democracy.

Pawnshops provide an additional source of credit especially for small borrowers left
unserved by banking and other financial institutions in the country.

PD. No. 114, a.k.a. the “Pawnshop Regulation Act,” governs pawnshop establishments
and provides definite and uniform standards for their operation. However, the law is no
longer responsive, given the growing complexities of the pawnshop business.

Henee, this bill seeks to lay down amended requirements and standards that will place
the operation of pawnshops on a sound and stable basis, deriving the optimum

advantages from them as an additional source of credit and preventing, as far as
practicable, practices prejudicial to the interests of the public.

Al

LUIS RAYMUND/“LRAY” F./VILLAFUERTE, JR.

V


Republic of the Philippines
HOUSE OF REPRESENTATIVES

Quezon City

EIGHTEENTH CONGRESS
Second Regular Session

HOUSE BILL NO. _* cEBY

introduced by HON. LUIS RAYMUND “LRAY” F. VILLAFUERTE, JR.

AN ACT
REGULATING PAWNSHOP ESTABLISHMENTS AND OPERATIONS

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 “Pawnbroking Regulation Act.”
SECTION 2. Definitions. — in this Act, unless the context otherwise requires —

(A) “Pawnshop” means any person, partnership, association, or corporation lending
money on the deposit or pledge of personal property, or who deals 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 interchangeably, with pawnbroker or pawnbrokerage.

(8) “Pledge means the person who delivers personal property into the possession of a
pawnbroker as security for a loan.

(C) “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 “pledger” means the disclosed principal.

(0) “Property” shall include only such personal property as may actually be delivered to

ind 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.

(E) “Person” means an individual, firm, association, a limited liability company, a


partnership, a joint stock association, a trust or a corporation.
SECTION 3. Registration and Licensing. —
(A) No person or entity shall engage in business as a pawnbroker, act

or advertise, transact, or solicit business as a pawnbroker except
chapter and without first obtaining a license from the department.

@ pawnbroker,
‘ed by this

(8) Application for a pawnbroker's license shall be submitted on a form prescribed by the
appropriate agency and must include all information required by said agency.

(C) Any person or entity desiring to engage in the pawnshop business shall register with
the Securities and Exchange Commission (hereinafter referred to as the “Commission”)
and secure a license from the appropriate city or municipality having territorial jurisdiction
over the place of establishment and operation.

SECTION 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 Sentral
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.

SECTION 5. Capital. — The minimum paid-in capital of any pawnshop which may be
established after the effectivity of this Act shalll be Fifteen Million Pesos (P15,000,000.00);
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 entitled 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.

SECTION 7. Issuance of License. — Upon the filing of the application and the payment of
the license fee, if the commission shall find the financial standing, competence, bu:
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 deliver a license to the applicant, which license shall
authorize the applicant to engage in the business of pawnbroking, Such license shall
remain in effect until it is surrendered, revoked, or suspended.

SECTION 8. Denial. If the appropriate agency denies the application, 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.

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

SECTION 10. Change of place of business. - Whenever a licensee changes its place of
business t to another location, the licensee shall give written notice to the department. The
ie ai to add or change one (1) or more bu: S locations.

SECTION 11. Suspension or revocation of license. - The commission shall, upon ten (10)
days notice to the licensee stating the contemplated action and in general 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 commission;

(8) The licensee has violated any provision of this Act or any rule made by the
commission; or

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

SECTION 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.

SECTION 13. Investigative Power. — For the purpose of discovering violations of this Act
and securing information necessary for the enforcement of this Act, the
investigate any licensee or person that it suspects to be operating without a license and



in violation of this Act.
SECTION 14. Books, Accounts and Records. —

(A) The license shall keep and use in his business such books, accounts, and records Kod
will enable the comi jetermine whether the coi
and with the rules made by the commission pursuant to this Act. Every licensee shall
preserve such books, accounts, and records, including cards used in the card system for
at least 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 apawnbroker, 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 consideration.

(3) Name of pawnbroker.

(4) Description of each article sold.

(5) Signature of seller.

(6) Address of seller.

(C) Ifa 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. All such bills of sale must be in
duplicate and recite the information in subsection (B) and must also contain the following
information:

(1) Date of resale.

(2) Amount of resale.

(D) The original copy of the bill of sale shall 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 shall maintain a record of control indicating the number of accounts
and dollar value of all outstanding pawnbroking receivables. Each licensee shall maintain
record of transactions subject to subsection (c).

SECTION 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 pawner manifests in wri fe to borrow a lesser amount.

SECTION 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 pawner in order to collect greater interest
and/or to require the pawner to pay an additional charge as insurance premium for the
safekeeping and conservation of the article pawned.

(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 shail forfeit the
principal and interest and return the pledge upon demand of the pledger 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 local enforcement officers, and for other expenses and costs
ated with servicing the pledge.

SECTION 17. Submission of Report. — Each licensee shall, annually on or before June 1,
file a report with the commission, giving such relevant information as the commission
may reasonably require concerning the business and operations during the preceding
calendar 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 by the commission.
The commission shall annually make an analysis and a recapitulation of such reports,
which shall be a matter of public record. The commission may impose a fee of Two
Hundred Pesos (P200.00) per day on any annual report that is not received by June 1.

SECTION 18. Maintenance of Record. —

(A) Every pawnbroker shall keep a record in ink, 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;
(2) The date of the transaction;
(3) The amount of the loan;
(4) The article or articles pledged;
(5) The serial number of the loan;
(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 dota ere readlly
available. The record keeping system of a licensee shall be available for
examination. The commission shall determine the sufficiency of the is and whether
the licensee has made the required information reasonably available.

SECTION 19. Signature and Thumbprint. - The pawnbroker shall at the time of making a
loan 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 enable 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.

SECTION 20. Pawn Ticket. — The pawnbroker shall, at the time of making a loan, 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 articles 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 shall
relieve the pawnbroker of the obligations to exercise reasonable care in the
safekeeping of the article pledged with him.

SECTION 21. Ticket holder. — The holder of such ticket shall be presumed to be the
person entitled to redeem the pledge, and the pawnbroker shall deliver the pledge to the
person presenting the ticket, upon payment of the principal, interest and charge.

SECTION 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
reasonable 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 pledge 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.



SECTION 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 principal balar

SECTION 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.

SECTION 28. 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 shall relieve the pawnbroker of any other liability to the
pledge or holder of the ticket.

SECTION 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 pledge 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.

SECTION 27. Redemption. — The pawner 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.

SECTION 28. Disposition of Pawn on Default of Pawner. — 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
post office address of the pledger as shown on the pawnbroker’s records notifying the
person that unless the person redeems the article 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 pledger.


SECTION 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 limits 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
authorities, nor shall any such article 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 published or posted, shall be in English, and
either in Filipino or in the local dialect, and shall contain the name of the pawnshop, its
owner, address of the establishment, hour, and date of the auction sale.

SECTION 30. Lien on Pledges. — A pawnbroker has first lien on all pledges for the
amount of his loan, 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.

SECTION 31. Delivery of Pledge upon Surrender of Ticket. — A pawnbroker shall not be
to del jge except upon surrender of the ticket, unless the ticket be

impounded or its negotiation enjoined by a court.

SECTION 32. Multiple Claims. — If more than one (1) person shall claim the right to
redeem a pledge, the pawnbroker shall 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.

SECTION 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) Re any pledge or @ purchase of property that the p.
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 back 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.


SECTION 34. Closing 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 place 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 shall take place 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 local
papers.

SECTION 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 nece:
determine compliance with the provisions of this Act;

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

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

SECTION 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.

SECTION 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.

SECTION 38. Repealing Clause. — Any law, presidential decree or issuance, executive
order, letter of instru ive order, rule or regulation contrary to or
inconsistent with the provi ore of this Act is hereby repealed, modified or amended
accordingly.



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

Approved,