The Attorney General of Texas
JIM MATTOX November 5, 1984
Attorney General
Mr. Sam Kelley Opinion No. JM-225
Supreme Court Building
P. 0.60x 12546 Cordnissioner
Austin. TX. 78711. 2546 Office of Consumer ::redit Re: What constitutes the separa-
5121475.2501 Coaunissioner tion and division of a pawn
Telex 910/674.1387
P. 0. Box 2107 transaction within the meaning
707 58 of article 5069-51.12, V.T.C.S.
Telecopier 5121475-0266
Austin, Texas
714 Jackson. Suite 700 Dear Mr. Kelley :
Dallas. TX. 752024506
2141742.6944
You have requested our opinion regarding the applicability of a
portion of article 5069-51.12. V.T.C.S.. to certain types of pawn
4624 Alberta Ave.. Suite 160 transactions. The :?ertinent portion of the statute provides:
El Paso, TX. 799052793
915/533-34s4 No pawnbroker shall separate or divide a pawn
transact01 into two or more transactions for the
JO1 Texas. Suite 700
purpose or with the effect of obtaining a total
HOUS,O~. TX. 77002-3111 pawn service charge in excess of that authorized
71312235668 for an aa.ount financed equal to the total of the
amounts f lnanced in the resulting transactions.
606 Broadway. Suite 312
V.T.C.S. art. 5069-.i:1.12.
Lubbock. TX. 794013479
608/747-5236
While the statute prohibits charging more than one service charge
for splitting tranlractions, it does not prohibit making two trans-
4309 N. Tenth. Sutte S
actions as long as 11n1y one service charge is assessed. A dispute has
McAllen. TX. 76501.16R5
5121662.4547
arisen over the meaning of what is a divjsion or separation of a pawn
transaction and whic!z transactions violate the statutory prohibition.
The pawnbrokers asso,ciation argues that “separation and division of a
2W Main Plaza, Suite 600 pawn transaction” occurs only when there is a separation or division
San Antpnip. TX. 162052797
of a single unit of collateral. For example, in its view, the pledge
51212254191
of a matched set of silverware or a rifle with attached telescopic
sight would constitute a single transaction. The opposing viewpoint
A” Equal OPPOrtuniiYl is that the statutory prohibition oo division of collateral applies
AfWnntive Action EFP~OVP~ when several items are pawned at the same time. For example, the
pledge of a watch and a ring when pawned at the same time could not be
divided into two different transactions if service charges were
assessed greater th&n the amount which might be charged if the watch
and ring secured ona! transaction.
Article 5069-51.01, et seq., V.T.C.S.. the Texas Pawnshop Act,
was enacted in 1971 and continued a long history of governmental
regulation of pawnbrokers. See Tex. Gen. Laws 1874, ch. CVII. Il. et
3, at 153, 8 H. Cammel. Laws of Texas 155 (1898); V.T.C.S. art6.
p. 1007
Hr. Sam Kelley - Page 2 (J+225)
6146-6165 (1925); V.T.C.S. art. 6165b (1963); V.T.C.S. art. 5069-1.01, r
et seq. (1967). Few of the Texas Pawushop Act ‘8 provisions are new.
The part of article 5069-51,,12 with which we are coocemed had its
roots in legislation passed in 1963 and 1967. In the first of these,
the Texas Regulatory Loan Al%, which was repealed in 1967, article
6165b. section 17(a)(7) pro%,ided in pert:
No licensee shall :induce or permit any person, or
husband and wife, to be obligated, directly or
indirectly, uoder more than one (1) loan contract f
uoder this Act at the same time for the purpose,
or with the effect, of obtaining a higher
authorized charg;e than would otherwise be
permitted by this fet. . . .
In 1967. legislation coincerned with consumer credit included the
following:
No licensee shall induce or permit any person, or
husband and wife, to be obligated, directly or
indirectly. uode:: more than one loan cootract
uoder this chapl:er at the same time for the
purpose, or with the effect, of obtaining a higher
authorized charl;e than would otherwise be
permitted by this chapter; but such limitation
shall oot apply . . . to pledged loans made
pursuant to Artici,k 3.17. . . . (Emphasis added).
V.T.C.S. art. 5069-3.15.(j). Article 5069-3.17 specifically dealt
with pawnbrokers.
Clearly, the legislature in 1963 sought to prevent lenders from
dividing a loan transaction into two or more small loans so as to earn
higher interest. Pawnbrok,rrs were apparently included as “lenders.”
Although pawnbrokers were explicitly exempted from this prohibition in
1967, the legislature reir.stated the limitation in slightly altered
form with the passage of the Texas Pawnshop Act. The obvious purpose
of thia section of the Pewcshop Act and its predecessor statute was to
prevent lenders from charg:.ng excessive fees by taking collateral and
dividing it among two or more loans instead of securing one loan.
With the passage of the 1971 Texas Pawnshop Act, this prohibition once
again applies to pawnbroker,s.
“Pawn transaction” is not defined in the Texas Pawnshop Act, but
there is no prohibitioo against allowing more than one item of
collateral to secure a loai, and article 5069-51.10 clearly indicates
that “pawn transaction” can refer to a loan secured by more than one
piece of collateral.
p. 1008
Mr. Sam Kelley - Page 3 (JM-225)
Art. 5069-51.10. favn Ticket
The pawnbroker, at the time the Pen
transaction is mtered, shall deliver to the
pledgor a memorandum or ticket on which shall be
clearly set forth the following:
(a) The name c.n.d address of the pawnshop;
(b) The name and address of the pledger and
pledgor’s description or the distinctive number
from pledger’s driver’s license or military
identification;
(c) The date of the. transaction;
(d) An identiF:ication and description of the
pledged goods, ?ncluding serial numbers if
reasonably availatze*
e-9
(e) The amourt of cash advanced or credit
extended to the p:.edgor, designated as the ‘Amount
Financed’;
(f) The amount of the pawn service charge,
designated as the ‘Finance Charge’;
(g) The total amount (the Amount Financed plus
the Finance Charg;) which must be paid to redeem
the pledged goods% the maturity date, designated
as the ‘Total of Payments’;
(h) The ‘Annu.3~1Percentage Rate,’ computed in
accordance with the regulations issued by the
Federal Reserve Board of the United States
pursuant to the Twth-in-Lending Act. Title I, Act
of May 29, 1968, Public Law 90-321.. 82 Stat. 146,
as amended;
(i) The matur::ty date of the pawn transaction;
(j) A s.tatement: to the efiect that the pledgor
is not obligated ED redeem the pledged goods, and
that the pledged goods may be forfeited to the
pawnbroker sixty days
- after the specified maturity
date. (Emphasis i;lded).
The statutory requf,renent that a tjcket be made up at the time
the pawn transaction is enl:artid into and that the ticket contain an
identification and description of the pledged goods including serial
numbers clearly implies more than one irem of collateral can be used
p. 1009
Mr. Sam Kelley - Page 4 (JFI-225)
to secure the transaction. ,+e also article 5069-51. Il. which states -7
that a pledger shall have nc, obligation to redeem goods or make any
payment on a pawn transaction. Thus, the statutory prohibition on
division of collateral app:.ies when several separate and distinct
items are pawned at the same time.
j;UMMARY
We conclude that article 5069-51.12. V.T.C.S.,
prohibits pawnbrokers from splitting pawn trans-
actions for the purpose of charging a total
1
service charge greater than the service charge on
one transaction. It does not prohibit splitting
transactions if greater service charges are not
assessed on more zhan one transaction than would
he assessed ‘on a single transaction. A single
pawn transaction ma.y be secured by more than one
item of collateral.
JIM MATTOX
Attorney General of Texas
TOMGREEN
First Assistant Attorney General
DAVID R. RlCBARDS
Executive Assistant Attorury General
RlCK GILPIN
Chairman, Opinion Committee
Prepared by Bradley Seals
Assistant Attorney General
Al’PROVED:
OPINION COMMITTEE
Rick Cilpin. Chairman
Colin Carl
Susan Garrison
Tony Guillory
Ji.m Uoellinger
Bradley Seals
Nancy Sutton
Bruce Youngblood
p. 1010