Tighter transparency rules cover pawnshops—BSP
The Bangko Sentral ng Pilipinas said pawnshops, like banks, are required to adopt the enhanced transparency rules on interest rates charged to customers.
In one of its latest circulars, the BSP said pawnshops were covered by the updated implementing guidelines for the Truth in Lending Act. The coverage of more financial institutions will ensure the stability of the entire financial sector, officials said.
The recently released guidelines require financial institutions to properly disclose the interests and other fees they charge on borrowing customers. In the case of credit-card loans, banks must attach to the customers’ monthly billing statements information sheets on interest rates and fees.
Circular 787-2013, which the BSP issued last week, requires pawnshops to stamp on the pawn tickets they issue to customers all relevant information on the effective interest rates they charge, including how the said interest was computed.
They may also attach to the pawn ticket a separate sheet containing information on the effective interest rate.
The BSP said this rule was good for one year. It said that after one year, when pawnshops have already disposed all the existing pawn tickets in their inventory, they would be required to use the newly prescribed standard form for disclosure to customers of interest rate and other related information.
“The Monetary Board allowed pawnshops, for a period of one year, to stamp on their existing inventory of pawn tickets, or print on a separate sheet of paper to be attached on pawn tickets, information about their effective interest rates,” the BSP said in the circular.
Officials said the enhanced guidelines for the Truth in Lending Act were meant to help prevent a financial crisis similar to what had happened in advanced economies.
Pawnshops are considered vital players in the country’s financial sector. They help individuals meet their immediate needs for short-term cash.
The pawnshop industry in the Philippines has a network of nearly 17,000. Of these, about 10,000 are engaged solely in the pawning business. The others also operate auxiliary businesses, such as money changing, remittance facilitation and bills payment facilitation.