From ancient times to today, the pledging of various items around the world has been shrouded in secrecy. In the modern era, some view the work of pawnshops as a form of greenbacks, while others view them as a way of saving money in a financial crisis. How legal is their work in our country?
"Encountered financial difficulties? Thinking of selling the gold and jewelry you own? You don't have to give up your valuables because we offer you a better solution!” stands on the advertising panel for the Cash help pawn shop, which has been located in the strict center of Niš for years. Cash help pawn shop, hidden enough and very accessible, has a varied clientele. It is advertised mostly through social networks, where it has gained over 1200 followers.
They place advertisements on a weekly basis and explain to those interested what they accept as a pledge for which money can be obtained. Thus, money can be obtained by pledging gold, luxury brand watches, motor vehicles, antiques, art paintings, and even technical goods such as laptops, recording and photography equipment, mobile phones, computers... For a loan, they can be "exchanged" and electric scooters, as well as motors. The popularity of military decorations from the First and Second World War is not waning, and the owners of these antiques can get a solid amount of money. An expert assessment of the object's value, mandatory signing of the contract, and complete discretion are guaranteed.
"If we don't buy the antiques, our goal is to represent clients at auctions or find a buyer through connections with international collectors," claims a Belgrade pawnshop on its website.
INTEREST, RISK AND LEGAL (NE)SECURITY
An employee of a pawnshop in Belgrade, who wished to remain anonymous, explains to Vreme what the entire process of pledging valuables looks like:
"First, a piece of jewelry, art, or anything you want to pawn is brought. The contract is concluded for one month, with a certain interest rate, so when the contract expires, the client pays the interest. Then the contract can be extended, or the full amount is brought with interest and you get your item back."
How is the amount of interest determined? "The amount of interest depends on how much money you get, that is, how much the pledged object is worth," answers the same lawyer. "The more money you pledge, the lower the interest. If the pledge is up to 1000 euros, the interest is 10 percent, when that amount is exceeded, the interest is gradually reduced."
Recently, as she says, there are more and more diverse clients - doctors, economists, retired athletes... It is worrying, according to her, that there are more and more young people among those who are in financial trouble.
The most common reason for cashing checks, he says, is that people run out of money towards the end of the month to pay bills or basic necessities. With this, they cover the payment for a vacation or a children's excursion, but also the payment of a loan if it is necessary to take money to the bank urgently.
"People decide on this form of loan because they do not trust the work of banks, they are annoyed by the heavy paperwork that is filled out if they want to take out a loan. Some people are simply embarrassed to ask for money from friends and acquaintances, and we guarantee discretion and no one will ever know that they asked us for help", says the interlocutor.
The risk is higher, but people are ready to bear it because of the gravity of the situation they are in.
"The only thing we refuse to take as a pledge is silver, because the value of silver is small, and insufficient to cover the costs of the person who turns to us for help. People bring more and more different devices, so it's not uncommon for someone to pawn a mobile phone. Antiques are always popular, but there are fewer and fewer of them. The value of the item is assessed by our experts on the spot", says the employee.
She did not, however, want to explain in depth what happens to the object while it is in the pawnshop, nor if there is any legal guarantee that the pawnshop will really return the valuable to its owner.
IN THE SHADOW OF THE LAW AND REGISTRY
Pawn shop owners and employees say their business is regular. The obligations and rights of clients are regulated by a mutual agreement, the terms of which are agreed on the spot. As a defense of the legality of their business, they cite the Law on Obligation Law, as well as the Law on Lien Law.
The Law on Pledge Law states that "the creditor acquires the right of lien by entering it in the Register of Pledges". However, considering that almost no one controls the work of pawnshops, it is questionable how many pawnshops are registered in this register, and there is no information anywhere about exactly how many entrepreneurs are engaged in this activity.
The Agency for Economic Registers (APR) is not responsible for more data on the operation of pawnshops. The Law on Business Companies stipulates that a business company or an entrepreneur has a predominant activity, and can perform all other activities that are not prohibited by law.
In the regulation related to the classification of activities, there is no activity that refers only to the work of pawnshops, but this activity is included in "other lending services, which includes financial services related to the granting of loans by non-depository institutions that are not involved in monetary intermediation ”, where the lending of funds can take different forms, such as cash loans, mortgage loans, issuing credit cards and the like.
Currently, according to the latest data from the APR, only a few entrepreneurs and companies are registered that have the word "pledge" in their business name and that list "other lending services" or "other auxiliary activities in the provision of financial services" as their activity. There are two such companies with headquarters in Leskovac, one in Sremska Mitrovica, two in Belgrade and one in Šabac.
NBS: THE WORK OF PAWN SHOPS IS NOT LEGAL
The National Bank of Serbia issued an official statement in which it is claimed that this institution is not authorized to grant consent and permits for the performance of pawn shops, to determine the conditions for the performance of these activities, as well as for the registration of these economic entities. The central bank adds that they do not supervise the operation of pawnshops, and that they do not have data on the operations of such economic entities. However, they state that the law is not favorable to the work of such companies.
"In Serbia, only banks and, under certain conditions, electronic money institutions and payment institutions, as well as special entities determined by a special law, can provide loans. For example, the Fund for the Development of the Republic of Serbia, the Fund for the Development of the Autonomous Province of Vojvodina, the Agency for Insurance and Financing of Exports of the Republic of Serbia," reads the statement of the National Bank of Serbia.
The National Bank points out that, according to current regulations, pawnshops are not authorized to provide loans, and that the Law on Banks stipulates that anyone who without a license commits to The work of the National Bank of Serbia deals with granting loans and issuing payment cards, and it is not authorized by law to do so.
BANKS HAVE A MONOPOLY IN SERBIA
Milan Kovačević, Doctor of Economic Sciences and a regular member of the Scientific Society of Economists, said in an interview with "Vreme" that he thinks it is unrealistic to expect only banks to be in charge of granting loans, and that the Serbian financial market is ruled by a bank monopoly.
"The provision of the Law, which determines that the operation of pawnshops is illegal, is not realistic. Although the National Bank of Serbia is not officially competent to control the operation of pawnshops, its duty is to control all financial transactions, and it should be called upon to control this type of business as well", says Kovačević.
He also believes that we should not run away from the possibility that some other legal entities, apart from banks, give loans, especially in a country with a weak financial market.
"Credit exists in all those transactions in which someone lent money to someone, and the work of pawnshops is nothing unusual considering that we have a limited financial market: the stock market is weak, and the entire area of banking is poorly controlled, so banks create a kind of cartel , and the price lists of bank services are almost identical", Kovačević believes.
It is crucial, as he claims, to solve that problem not only by stricter control of loans and credits, but also by better legal regulation. The situation would also, the interlocutor was clear, be further improved by the introduction of an institution that would control competition on our financial market.
And while some see pawnshops as a way to patch up holes in the budget, others call them "masked greengrocers". Whatever opinion you have about the work of pawn shops, it is only certain that those who deal with this business have their hands full.
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