June 12, 1973
Honorable Sam Kelley, Commissioner Opinion No. H- 49
Consumer Credit Office
P. 0. Box 2107 Re: The application of the Texas
Austin, Texas 78711 Pawnshop Act to transactione
where money is Lent on
Dear Mr. Kelley: security of pledged goods
You have requested the opinion of this office on the following questions:
“1. May possession be taken of ‘pledged goods,
as that term is defined by the Pawnshop Act, ;a%
security for a Loan without compliance with all the
provisions of the Pawnshop Act?
"2. Does the $2500 limitation in Sec. 12 of
the Act mean that there is no authorization 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 Loan authorized
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 of Article 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. 203
The Honorable Sam Kelley, page 2 (H-49)
“(b) ‘Pawnbroker’ - means any person
engaged in the business of lending money
on the security of pledged goods; or engaged
in the business of purchasing tangible personal
property on condition that it may be redeemed
or repurchased by the seller for a fixed price
within a fixed period of time.
“(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 of a
pawnbroker in the 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 of his business in connection with agawn
transaction. ” Section 51.02(c). Therefore, “pledged goods” as bfined
in the Act, are goods which are pledged and delivered in a pawnrransaction
to someone engaged in the 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 of the Act.
Section 12 of the Texas Pawnshop Act provides in part:
“No pawnbroker may contract for, charge or
receive any amount as a charge for credit in con-
nection with a pawn transaction other than a pawn
service charge, and no pawn service charge may
p. 204
The Honorable Sam Kelley, page 3 (H-49)
exceed the charge disclosed in the pawn ticket
or other memorandum delivered to the pledger
. . . . [I]n no case shall the amount financed
exceed $2,500.00. ”
This provision clearly prohibits a pawnbroker from making a pawn
transaction in excess of $2, 500. If a person is not a “pawnbroker” within
the statutory definition, it places no restriction on the amount which he
may loan. However, a person whose activities are not otherwise regulated
may charge no more than 10% interest per annum, regardless of the amount
of the 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 of the
Act provides that a pawnbroker shall not “enter any pawn transaction which
has a maturity date more than one month after the date of the transaction. ”
Chapter 4 of the 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 in excess of $2, 500
are governed by Article 5069-4.01, ef~seq, V. T. C. S.
Attorney General of Texas
p. 205
.
The Honorable Sam Kelley, page 4 (H-49)
APPROVED:
DAVID M. KENDALL, Chairman
Opinion Committee
p. 206