Updated January, 2018
Primary Federal Statutes and Regulations Applicable to the Pawn Industry
1. Internal Revenue Service Form 8300 – This IRS form must be filed if a person or company engaged in a trade or business receives more than $10,000 in “cash” in either a single transaction, or in related transactions. The definition of “cash” includes currency or coins, cashier’s checks, bank drafts, and money orders, or any combination of them, with face values of less than $10,000.
2. Bank Secrecy Act – This statute requires financial institutions to keep records and file reports that are determined to have a high degree of usefulness in criminal, tax, and regulatory matters, including ‘suspicious activity reports’ (SAR’s), and to establish both pawn customer identification and anti-money laundering programs. All three basic BSA requirements remain voluntary for the pawn industry.
3. U.S. Office of Foreign Asset Controls’ “Specially Designated Nationals” Regulations – Numerous statutes and regulations, enforced by OFAC, prohibit U.S. persons from doing business with individuals and organizations listed on the “Specially Designated Nationals” list (“SDN”), which OFAC publishes online. These statutes and regulations also require U.S. persons to block transactions and keep assets they received from individuals and organizations on the SDN list, report blocked transactions to OFAC and hold blocked assets until OFAC gives permission to the U.S. person to return the assets.
4. USA PATRIOT Act – This statute added pawnbrokers to the category of “financial institutions” that are subject to the Bank Secrecy Act for some purposes. A proposed regulation imposing anti-money laundering, customer identification and suspicious activity reporting programs has been pending for more than 10 years.
5. U.S. Financial Crimes Enforcement Network’s “Precious Metals Dealers” Rule – This regulation requires dealers in precious metals, stones, or jewelry to implement anti-money laundering policies and procedures, perform risk assessments and internal compliance monitoring; designate a compliance officer; conduct ongoing personnel training; undergo independent compliance reviews and risk assessments. These compliance policies & procedures, risk assessments, compliance monitoring reports, training plans, and audit results should all be in a written form that federal and state agency personnel can see. These requirements start when a $50,000 annual sales threshold is met, except for the sale of property previously held as collateral in pawn transactions.
6. Truth in Lending Act – This statute requires disclosure of credit terms in consumer credit transactions. TILA requirements are explained in detail in FRB/CFPB Regulation Z.
7. Gramm-Leach-Bliley Financial Services Modernization Act of 1999 (GLBA) – This statute’s Title V grants consumer financial privacy protections to customers of “financial institutions”, which includes pawnbrokers. It requires credit providers to disclose consumers’ privacy rights and protect the privacy of “non-public personally identifiable information” obtained from consumers, subject to limited exceptions.
8. FTC/CFPB Privacy Regulations – This regulation implements GLBA’s consumer financial privacy protection requirements; requires financial institutions to provide customer notices and compliance with certain limitations on disclosure of nonpublic personal information to third parties, including federal and state agencies.
9. FTC/CFPB Safeguards Regulation – This regulation explains and implements GLBA provisions that require financial institutions to have measures in place to keep customers’ nonpublic personal information secure.
10. Fair Credit Reporting Act & Fair and Accurate Credit Transactions Act of 2003 (FCRA & FACTA) – These statutes limit the ability of “consumer reporting agencies” to share consumers’ nonpublic personal information received from financial services providers with third parties, including federal and state agencies, except under certain circumstances. FACTA requires financial service providers to dispose of consumer information with care.
11. FTC Consumer Information Disposal Rule – This regulation implements and explains FACTA’s “safe disposal” requirements for sensitive consumer information, including any contained in reports received from consumer reporting agencies.
12. FTC Red Flag Regulation – This regulation requires development of programs and procedures to identify possible identity theft cases.
13. Equal Credit Opportunity Act – This statute makes it unlawful for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction, on the basis of race, color, religion, national origin, sex, marital status, or age.
14. Servicemembers Civil Relief Act of 2003 – This statute limits interest rates and charges assessable on military personnel for credit transactions entered into prior to their active duty status, and provides specified remedies to service members if creditors do not adjust the rates and charges.
15. Military Lending Act & Department of Defense MLA Expanded Regulation – The statute and regulation set the maximum interest, charges and fees in most consumer credit transactions to a Military Annual Percentage Rate of 36 percent for active-duty service members and their dependents. This MAPR cap applies to pawn transactions entered into after October 3, 2016. Only active-duty service members and their dependents are eligible for benefits under this statute and regulation.
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