                                             June 12, 1973


Honorable Sam Kelley,    Commissioner                     Opinion No.    H- 49
Consumer   Credit Office
P. 0. Box 2107                                            Re:    The application of the Texas
Austin,  Texas 78711                                             Pawnshop Act to transactione
                                                                 where money is Lent on
Dear   Mr.   Kelley:                                             security of pledged goods

       You have requested            the opinion of this office       on the following   questions:

                      “1. May possession   be taken of ‘pledged goods,
               as that term is defined by the Pawnshop Act, ;a%
               security for a Loan without compliance   with all the
               provisions  of the Pawnshop Act?

                      "2. Does the $2500 limitation in Sec. 12 of
               the Act mean that there is no authorization  in Texas
               for a pawn transaction  in excess of $2500, even
               though there is an interest charge of 10% simple
               interest per annum or less on the transaction?

                       "3. May a lender          making a Loan authorized
               by Chapter          4 of the Texas Credit Code ever take
               possession          of ‘pledged goods, ’ as defined by the
                Pawnshop           Act, as security for that ldan? ”

        The provisions of Article 5069-51, Vertion’s Texas Civil Statute’s;
known as the Texas Pawnshop Act, relevant to your request provide as
follows:

               “Art.   5069-51.       02 Definitions

                       “The following definitions               apply where   such
               words    appear in this Act:

                       .   .   .




                                               p.   203
The Honorable     Sam Kelley,      page 2    (H-49)




                          “(b) ‘Pawnbroker’  - means any person
                     engaged in the business   of lending money
                     on the security of pledged goods; or engaged
                     in the business of purchasing   tangible personal
                     property on condition that it may be redeemed
                     or repurchased   by the seller for a fixed price
                     within a fixed period of time.

                          “(c) ‘Pledged goods’ - means tangible
                     personal property other than choses in action,
                     securities,   or printed evidences    of indebtedness,
                     which property is deposited with or otherwise
                     actually delivered   into the possession    of a
                     pawnbroker in the course of his business in
                     connection with a pawn transaction.

                     “Article   5069-51.03     License    Required

                          “No person shall engage in business as a
                     pawnbroker without first obtaining a license
                     from the commissioner   specifically authorizing
                     engagement in such business.   ”

       Your first question concerns    “pledged goods” as defined inthe Act.
The term includes only such goods as are deposited with or delinred to
“a pawnbroker in the course of his business in connection with agawn
transaction.  ” Section 51.02(c).   Therefore,    “pledged goods” as bfined
in the Act, are goods which are pledged and delivered        in a pawnrransaction
to someone engaged in the business of conducting such transactias         [see
Section 51.02(b)].   Consequently,   possession   of such pledged go& may
be taken only in compliance    with all the provisions   of the Act.

      Section    12 of the Texas    Pawnshop       Act provides   in part:

                       “No pawnbroker may contract for, charge or
                receive any amount as a charge for credit in con-
                nection with a pawn transaction other than a pawn
                service charge,  and no pawn service  charge may




                                        p.   204
The Honorable   Sam Kelley,    page 3      (H-49)




             exceed the charge disclosed      in the pawn ticket
             or other memorandum       delivered   to the pledger
             . . . . [I]n no case shall the amount financed
             exceed $2,500.00.    ”

       This provision   clearly prohibits a pawnbroker from making a pawn
transaction  in excess of $2, 500. If a person is not a “pawnbroker”       within
the statutory definition,   it places no restriction  on the amount which he
may loan.    However,    a person whose activities    are not otherwise regulated
may charge no more than 10% interest per annum, regardless            of the amount
of the loan.  Article  5069-l. 02, Vernon’s     Texas Civil Statutes.

      Your third question again concerns   “pledged goods, ” defined in the
Act as including only such goods as are deposited with or delivered to a
pawnbroker   in connection with a pawn transaction.   Section 51.16 of the
Act provides that a pawnbroker   shall not “enter any pawn transaction   which
has a maturity date more than one month after the date of the transaction.    ”

       Chapter 4 of the Subtitle on Consumer       Credit (Article 5069-4.01 et
seq.,  V. T. C. S.) is entitled Installment  Loans and regulates contracts
repayable in consecutive     monthly installments,    substantially equal in
amount.    Clearly then, loans authorized     under Chapter 4 do not constitute
pawn transactions    regulated by the Texas Pawnshop Act and security for
such a loan is not thereby a “pledged good” within the definition set forth
in the Texas Pawnshop Act.

                               SUMMARY

                    Possession    may be taken of “pledged goods, ”
             i.e.,  goods deposited with a pawnbroker in connection
             with a pawn transaction,    only in compliance with the
             Pawnshop Act.      There is no authorization    for a pawn
             transaction   in excess of $2, 500.   Installment loans by
             others than pawnbrokers     for amounts in excess of $2, 500
             are governed by Article    5069-4.01,   ef~seq, V. T. C. S.




                                      Attorney      General   of Texas




                                      p.   205
                                                  .




The Honorable   Sam Kelley,   page 4     (H-49)




APPROVED:




DAVID M. KENDALL,        Chairman
Opinion Committee




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