How Pawnbroking Works

Guidelines regulating pawnbrokers and secondhand sales were adopted by the California Legislature in 1982. The licensing, rate and reporting standards are overseen by the state Department of Justice through local police agencies.

The smallest loans are charged the highest interest rates, according to Denis Hooker, president of the Collateral Loan Assn., a statewide industry group. On a loan of up to $225, the rate is 2.5%; on a loan of $1,650 to $2,500, it’s 1%. For amounts greater than $2,500, the rate is not regulated.

A pawnbroker must hold your pawned item for four months plus a 10-day grace period. If the loan has not been repaid or the property has not been retrieved by then, the pawnbroker is allowed to sell the property and keep the money.

Three months is the minimum loan term, meaning that even if you pay off before that, you still pay interest for that period.

Sometimes additional fees are charged, such as for storage on large items or for the extra paperwork required on firearms.

Customers must also provide a thumbprint and personal information, including their address, driver’s license number, estimated value of the pawned item and a description of themselves. The customer must also declare in writing, under penalty of perjury, that they are the legal owner of the pawned property. The report is filed by the pawnbroker with the local police agency by 5 p.m. the day following the transaction.

A pawnbroker’s license can be checked with local police. Guidelines and rate information can be verified with the Justice Department in Sacramento: (916) 227-3249.