                                   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




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