Untitled Texas Attorney General Opinion ( 1984 )

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