Pawnbrokers Act could draw legal problems

Pawnbrokers have sought amendment to a recently-signed law regulating the pawnshop business on the island, including lowering the $500 license fee and clarifying vague provisions that could lead to potential legal dispute.

In a letter to members of the Legislature, the CNMI Pawnbrokers Association considered the new fee imposed under Public Law 11-65 as “extremely high” in light of the intent by the government to police the industry.

Eric S. Smith, legal counsel for the group, said the amount of $500 for a police powers license is more than it costs to issue such license and monitor activities of pawnshops.

Pawnbrokers believed their rate is higher compared to license fees assessed to other businesses, particularly when lawmakers only sought the increase to be able to have sufficient funds for regulating the industry and not to generate revenues for the Commonwealth.

The Legislature must reduce the fee “especially in this economic climate in which all businesses are impacted by a downward spiraling economy that seems to be coupled with higher government fees and taxes,” Smith said.

Signed into law in February, the Pawnbrokers Act of 1998 sponsored by Rep. Melvin Faisao aimed to curb the mushrooming of pawnshops on the island without sufficient regulations to safeguard the public and the government’s interest.

Both the Commerce secretary and Public Safety commissioner are delegated with authorities to implement the regulations, including enforcement powers to see whether existing pawnshops comply with the law.

But pawnshop owners claimed the broad powers granted to the Commerce secretary, such as sole discretion to issue the license, are open to abuse as there is no objective standard by which to determine who are qualified to set up their business.

“Although the Association feels there is no problem with this section for the foreseeable future, this broad powers of the Secretary without imposing any standards on the basis that he is to use to grant or deny an application for a pawnshop license could lead to unnecessary dispute,” Smith said.

Likewise, pawnbrokers are confused over the condition put in place by legislators in which they must ensure that goods or property used as collateral to secure loan are not stolen.

The term “diligent inquiry” inserted in the provision is too vague and does not conform to objective judgment by either the authorities or the business owners, according to the legal counsel.

“However, if the licensee is required to obtain information not readily available to some licensees but is common knowledge to the public or law enforcement, the licensee may be held to a much higher standard in the operation of his business to avoid receiving stolen property,” he pointed out.

The group has also asked the Legislature to cut the period between two to three months within which pawnshops are allowed under the law to hold off any sale of pawned item, saying a minimum of 120 days in frozen assets is too long.

The law is “well thought-out and appropriate” for the public and the business interests of the CNMI, according to Smith, but “all legislation, whether new or amended, need time to work out things and resolve problems.”