Are Pawn Shops Regulated – The Real Answer!

Brian McCracken


Pawn shops follow regulations as set by their local and state laws.
Okay now here is a really interesting question because there’s a few ways of looking at this.
On the surface, asking if pawn shops are regulated seems like it should be given a really straight forward answer.
That having been said, digging a little deeper, this question can have a couple different angles involved and therefore it may not be as simple to answer as you might think.
First of all, yes pawn shops are regulated. Basically every state that I know of has some kind of pawnbroker related laws and application process that must be approved by local and sate governments for the pawn shop to operate.
In addition, individual counties or cities may have their own sets of laws and regulations that apply to the pawn industry as well.
But how far does this regulation really go and what does it lay out exactly?
Pawn shops are regulated by state laws that govern how they operate to some degree.
The Normal Reach Of Pawn Shop Regulations
When we are talking about the average set of laws around the country, we are typically talking about them regulating things like:
Who Can Own A Pawn Shop – In most states, felons can not own pawn shops. Additionally, there may be other background checks and financial requirements for owning a pawn shop.
How Pawn Records Must Be Maintained – In some states, all records must be maintained for years in numerical order for regular inspection.
How Pawn Transactions Should Be Reported To Law Enforcement – In some states reporting must be done electronically, while in others paper records are preferred. Additionally, who those reports are sent to can vary on a state by state basis.
The Amount Of Interest Pawn Shops Can Charge On Loans – This is the amount of money that a pawn shop can charge you for making a loan with them and varies somewhere between 1-25% depending on the state.
Any Additional Fees That Pawn Shops Can Charge – Some states allow pawn shops to charge storage fees, or ticket fees.
How Long Pawn Shops Much Hold Onto Items Before Selling Them – This is also something setup by the states. In some states a pawn shop might only have to hold onto something for 30 days while in others it might be 6 months.
That having been said, there are also plenty of things that pawn shops don’t regulate to any degree. For instance:
How Much Pawn Shops Have To Pay You For Items – How much an individual pawn shop pays you for a given item is completely up to the pawnbroker and is not regulated by state law. This allows for competitiveness in the market and for the consumer to shop around for the best deal.
What Items Pawn Shops Take In – Not all pawn shops accept the same types of merchandise and there are no laws stating that a pawn shop has to take anything in particular.
Who Pawn Shops Have To Work With – If pawn shops have a poor history with a customer they can opt to no longer offer their services to that individual. This is normally only true when the customer in question has been caught trying to sell stolen items to the pawn shop in the past.
What Other Services Pawn Shop Provide – Pawn shops can provide all sorts of services, from check cashing to bill payment. There is nothing in the laws that force a pawn shop to offer any one set of services to their customers which allows each individual pawn shop to serve their local customers in the best ways possible.
So you see, pawn shop are regulated, but they aren’t completely controlled by the states. There is still a large degree of variance in how any two pawn shops can operate and that’s really as it should be.
Like anything int the free market, when you have differences between two competing businesses then the customer will almost always win because they can choose based on who provides to best deal or the best service.
How Strict Are Pawn Shop Regulations
Pawn shops are regularly inspected by the state and local officials to make sure that they are operating within compliance of the law.
If a pawn shop is found to be operating outside of the laws in it’s area they will be subject to heavy fines, penalties, and potentially losing their license to operate a business or worse yet, a lawsuit.
With all of this in mind, pawn shops are careful to operate strictly within the confines of the laws in their area.
Do Pawn Shops Follow The Regulations
While I am sure there are some variances and occasional discrepancies, pawn shops that I’ve worked with always do their best to operate strictly by the letter of the law in ever scenario and aren’t going to be willing to bend the rules for anyone.
This is an industry that is very aware of what common perceptions of it may be in because of that, they are very protective over their businesses and its reputation. Pawnbrokers are normally very ethical and moral individuals and aren’t willing to risk their character for a few quick bucks by doing something that they shouldn’t.
With that in mind, I’ve actually seen a few surprising scenarios pop up where it’s actually law enforcement that attempts to operate outside of the law when dealing with pawn shops occasionally. I know this might seem like something that’s strange to hear, but just as there are laws that govern how pawn shops operate, there are also laws that protect these businesses as state licensed entities which deal in second hand merchandise.
This can mean anything from law enforcement making broad and vague requests for information that doesn’t pertain to a case (in other words, fishing) or attempting to confiscate items that they don’t have claim to or justification for doing so. This is particularly true in a state like Ohio where there is pre-established case law protecting a pawnbroker’s right to the items that they purchase during the course of business.