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                          The Attorney              General              of Texas
                                              August        22,   1978
    JOHN L. HILL
    Attorney General


                       Honorable Sam Kelley                              Opinion No. H-1231
                       Consumer Credit Commissioner
                       Office of Consumer Credit Commissioner            Re: Whether banks which take
                       P. 0. Box 2107                                    physical possession of tangible
                       Austin, Texas 78768                               personal property    as collateral
                                                                         for loans are required to comply
                                                                         with the provisions of the Texas
                                                                         Pawnshop Act.

                       Dear Mr. Kelley:

                              You have requested our opinion as to whether the Texas Pawnshop Act,
                       artic?e 5069-51.01, e; seq.,, V.T.C.S., is applicable to state banks which take
                       physlcal possesslon o tangible personal property as collateral for loans.

                             The Pawnshop Act prohibits any person from ” engag[ingl in business as
                       a pawnbroker without first obtaining a license from the [Consumer Credit1
                       Commissioner.”     V.T.C.S. art. 5069-51.03. “Pawnbroker” is defined as “any
                       person engaged in the business of lending money on the security of pledged
                       goods,” and “person” includes every “corporation . . . or any other legal entity
                       however organized.”    V.T.C.S. art. 5069-51.02. We have been advised that a
                       borrower occasionally secures a large loan from a bank by pledging valuable
                       jewelry or a rare coin collection.    As a rule, such collateral  is held in the
                       physical possession of the bank and in those instances, you ask whether the
                       bank must qualify as a “pawnbroker.”

                              Under the Banking Code, a state bank is empowered to ‘lend money
                       with or without security at interest.”        V.T.C.S. art. 342-301(a).     In its
                       statement of purpose, the Banking Code provides:          “This code provides a
                       complete system of laws governing the organization, operation, supervision
                       and liquidation of state banks. . . .” V.T.C.S. art. 342-101 (emphasis added). In
                       Robertson v. State, 406 S.W.2d 90 (Tex. Civ. App. - Fort Worth 1966, writ
                       ref’d n.r.e.1, the court held that, by virtue of this statement     of purpose, a
                       provision of the Texas Business Corporation Act regarding cumulative voting
                       is not applicable to the election of directors of a state bank:

                                   Surely the Legislature has in plain words with clear
                                   meaning spelled out its intent that the operation of




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Honorable Sam Kelley     -   Page 2    (R-1231)



            state banks shall be controlled by the ‘complete’ provisions
            of the Texas Banking Code, subject to such future legislation
            as may be enacted by it for the ‘regulation of such banking
            institutions.’

406 S. W.2d at 94.

        Although we need not determine the outer boundaries of the Robertson
doctrine, we believe the court’s language in Robertson requires the conclusion that
the Pawnshop Act is not applicable to state banks. A number of restrictions which
the statute places on pawnshops are not present in the Banking Code, and are
contrary to banking practice. A pawn loan, for example, may not exceed the sum
of $2,500, whereas no limitation is placed on the amount of a secured loan made by
a state bank. V.T.C.S. art. 5069-51.12. See Attorney General Opinion H-49 (1973).
 The pledgor in a pawn loan has no personal obligation to repay the amount
borrowed, while one who borrows from a bank assumes personal liability for
repayment.      V.T.C.S. art. 5669-51.U. Finally, the default of a pawn loan transfers
title to the pledgee, regardless of the amount of money originally paid to the
pledgor, whereas a bank, following default, must account to the debtor for any
amount which exceeds the amount of the loan, plus an additional amount for
 interest, costs, and attorneys fees.    It is our opinion, therefore, that the Texas
Pawnshop Act is not applicable to state banks which under normal banking
practices take physical possession of tangible personal property as collateral for
loans.

      You also ask whether lenders regulated by chapter 3 of article 5069, other
than state banks, must comply with the provisions of the Pawnshop Act if they take
physical possession of tangible personal property as collateral for loans. Unlike the
Banking Code, chapter 3 of article 5069 does not purport to furnish a “complete
system of laws” governing the transactions       described therein.    Thus, it would
appear, absent some other statute, that any lender which is regulated under chapter
3 of article 5069, must also comply with the provisions of the Pawnshop Act if it is
“engaged in the business of lending money on the security of pledged goods.”

                                      SUMMARY

            The Texas Pawnshop Act, article           5069-51.01, et seq.,
            V.T.C.S., is not applicable to state banks which under normal
            banking practices      take physical possession of tangible
            personal property as collateral for loans, but it is applicable
            to other lenders regulated by chapter 3 of article 5069,
            absent some other statute.




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Honorable Sam Kelley   -       Page 3   (K-1231)




                                             Attorney   General of Texas

APPROVED:




C. ROBERT HEATH, Chairrian
Opinion Committee




                           ,




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