Don’t pawn cars, regulator warns
ALEXANDRA – Credit regulator concerned about the increasing pawning of cars.
The National Credit Regulator is concerned about the increasing number of consumers who pawn their motor vehicles for loans.
This was said by Nthupang Magolego, a senior legal advisor at the regulating body. Magolego said while it was legal to pawn assets for loans, she cautioned consumers against pawning their motor vehicles due to the high risk of losing them to pawnbrokers, if they failed to repay the loans within the agreed period.
She said pawn brokers were allowed to keep consumers’ pawned assets as security and to return them to the consumer once the loans were repaid. “But if a loan is not repaid, the pawnbroker can sell the asset and use the proceeds of the sale to settle the loan,” she said.
Magolego advised consumers to read the pawnbroker’s credit agreement carefully to avoid signing agreements that transferred ownership of their pawned assets to pawnbrokers before they defaulted.
“The pawned asset only serves as security for the loan and can only be sold if the consumer has not paid back the loan,” Magolego stressed, adding that the pawnbroker kept the pawned asset at their own risk. She added that in addition to the loan the consumers must pay back, some pawnbrokers also levied illegal fees such as storage charges, resulting in very expensive loans.
She advised, “A pawn transaction should be a short-term credit. The interest which the pawnbroker can charge is limited to 5 per cent per month on the first loan and 3 per cent per month on subsequent loans in one calendar year. Also, pawning assets should ideally be used for small amounts of loans for small assets like cellphones and laptops.”
Details: Lebogang Selibi 011 554 2722
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