Mortgages, consumer leases and other finance products

A ‘pawnbroker’ is defined in section 3(1) of the Second-Hand Dealers and Pawnbrokers Act 1989 (Vic) (‘SHDP Act’) as a person who carries on the business of advancing money on the security of pledged goods. 

The laws that apply to pawnbroking also apply to ‘buy-back’ arrangements where a pawnbroker buys the goods from the consumer, and gives the consumer the right to re-purchase the goods (s 3(2) SHDP Act).

The provisions of the NCC (ss 76–81) that allow the re-opening of unjust transactions apply to loans from pawnbrokers (s 6(9) NCC). Otherwise, the NCC does not apply to the provision of credit by a pawnbroker ‘in the ordinary course of a pawnbroker’s business (being a business which is being lawfully conducted by the pawnbroker)’ (s 6(9)). 

However, if the pawnbroker has not complied with the SHDP Act, it is arguable that the business isn’t being lawfully conducted and accordingly, the NCC does apply. This assists the consumer, because a breach of the SHDP Act only leads to a penalty, and is of little benefit to the consumer. The significance of the breach is likely to be relevant.

Otherwise, regulation 2B(1)(c) of the ASIC Regulations 2001 (Cth) confirms that the provision of credit by a pawnbroker is a financial product for the purposes of the ASIC Act 2001 (Cth) (‘ASIC Act’). This suggests that the unconscionable conduct and misleading or deceptive conduct prohibitions in the ASIC Act, rather than the Australian Consumer Law, apply to pawnbroking.

Under the SHDP Act, a pawnbroker must be registered (s 5) and have a notice displayed so it is clearly visible to the public from outside the premises. The notice must show the maximum amount charged weekly and monthly by the pawnbroker, and state that in special circumstances a higher amount may be charged (s 23).

A pawnbroker must require from everyone attempting to pawn goods evidence as to the person’s identity. A pawnbroker must not accept goods for pawn from someone under 16 (s 23(1) SHDP Act).

A pawnbroker must keep accurate and complete records about every transaction in the form and containing the information required by the Second-Hand Dealers and Pawnbrokers Regulations 2008 (Vic) (‘SHDP Regulations’). Details that must be recorded include details of the goods pawned, full name and address of the borrower, the amount of money advanced on the goods, the charge for the loan and the period of the loan.

A pawn ticket must be issued in the form of Schedule 2 of the SHDP Regulations. The pawn ticket must include the amount of the loan, charges, and the period of the loan. This must be given to the consumer with a notice in the form of Schedule 3 of the SHDP Regulations. This notice includes information about redeeming goods, charges and sale of unredeemed goods.

Goods may be redeemed by paying the outstanding amount of the loan and producing the pawn ticket and a driver licence or other identification as set out in the SHDP Regulations. Goods may be redeemed after the expiry of the period of the loan if the pawnbroker hasn’t disposed of them.

Once the period of the loan expires and the goods are not redeemed, the pawnbroker must offer the goods for sale as soon as practicable.

If pawned goods are sold, the pawnbroker can deduct from the proceeds of sale any money the consumer owes and the reasonable costs of selling the goods. If the amount of money left over from the sale is $10 or more, the pawnbroker must send the consumer a notice within 14 days of sale advising that the consumer can claim the money (s 23A SHDP Act). 

The consumer is entitled to make a claim to the residual proceeds of the sale within 12 months after the sale of the goods. It is illegal for the pawnbroker not to pay this money to the consumer once a request is made (s 23A(5) SHDP Act). If the pawnbroker does refuse to make payment, the consumer may apply to the Magistrates’ Court for an order compelling the pawnbroker to pay.