Loren welcomes BSP's tighter rules on pawnshops

Senator Loren Legarda welcomed today the stricter guidelines imposed by the Bangko Sentral ng Pilipinas (BSP) on the operation of pawnshops, saying the new rules should help weed out fly-by-night pawnshop operators.

"The new guidelines show that the BSP takes note of the concerns aired by our people," said Loren who, last week, delivered a privilege speech at the Senate detailing the involvement of some pawnshops in duping people of their jewelries and heirlooms.

The new regulations supersede the implementing rules and regulations of Presidential Decree 114, otherwise known as the Pawnshop Regulation Act of 1973.

Loren noted that under the new rules, pawnshops are now required to maintain a minimum level of capital relative to their portfolio, while previously they were only required to have a minimum paid up capital of P100,000.

"This would ensure an exponential increase in the capitalization of pawnshops as their pledges of loans increase," the senator pointed out.

According to the BSP, the previous capital requirement for pawnshops was so miniscule that it made the industry susceptible to the entry and proliferation of fly-by-night pawnshop operators.

One other new rule which Loren lauded was the requirement for the owners and high-ranking officials of pawnshop companies to undergo background check by the central bank to ensure that they do not have derogatory records.

"Ensuring the integrity of pawnshop operators is a must because the industry has become an alternative source of credit to a large segment of the population, as correctly pointed out by the BSP," she said.

The BSP had said that it is also looking at ways to enhance consumer protection and confidence on the operations of other non-banking institutions that fall under its regulatory powers.

These other non-banking institutions performing quasi-banking functions are remittance firms, foreign exchange dealers, securities brokers and credit card companies.

"Considering that there are over eight million overseas Filipino workers, who remitted $16.4 billion in 2008, the BSP must really run through a fine-toothed comb the operations of banks, remittance firms and forex dealers," Loren stressed.

"Likewise, there had been too many public complaints on abuses allegedly committed by credit card companies and their collection agents which the BSP must address."

Among the complaints against credit card firms are hidden charges, exorbitant interest rates and the strong-arm tactics employed by their collection agents.