Bill on pawnshops passed to protect consumers’ interests
- By Misheel Lkhasuren -
- Nov 07,2022
During its plenary session on November 4, Parliament adopted the bill on the regulation of money lending, submitted by the government, in order to manage pawnshops.
As of today, there are about 1,000 pawnshops in Mongolia but very few of them pay taxes. Therefore, the law was developed with eight chapters to regulate the activities of pawnshops and protect the interests of consumers. It sets specific requirements for money lending operators and provides regulations for registration and control, according to lawmakers. The newly-approved law also disallows pawnshops to sell collaterals.
According to the Authority for Fair Competition and Protection of Consumers’ inspections in 2020, more than 900 pawnshops were found to be making some kind of violations, including operating without a license, valuing collaterals at up to 80 percent below market value and charging high interest and high overdue payment.
Parliamentarian G.Amartuvshin informed that the law will regulate issues such as taking citizens’ assets as collateral at low prices and giving out one-day loans with high interest rates.
In accordance with the law, it is forbidden to collect interest on loans in advance. It also prohibits the process of selling stolen jewelry as collateral, he said.
Lawmaker D.Tsogtbaatar underscored that the financial market, especially the activities of small businesses, is regulated by the Civil Code alone. Therefore, there were problems such as consumers not being able to value their assets properly and lending money at excessively high interest rates. The government has set the goal of reducing interest rates and improving legislation to support SMEs within the framework of its Action Plan for 2020 through 2024, he noted.
“With the adoption of the law, the problem of arbitrarily setting loan interest has been solved. A working council to ensure the implementation of the law will be established under the Financial Regulatory Commission and all industry representatives will be included in the council. The council will set the maximum interest rate. In this way, pawnshops will set their interest rates in a transparent manner,” D.Tsogbaatar explained.
In order to simplify the registration process, the Financial Regulatory Commission will register pawnshops with income above a specified amount. If their income is below a certain level, they will be registered in rural areas, according to the law.
The legislator added, “The control system and rights are given to the Financial Regulatory Commission. We have found that there are many cases of theft of collateral in the process of mortgage loan operations. Therefore, the regulations necessary to make this activity understandable and clear are included in the law. The government did not block or stifle the activities of enterprises.”