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Coming to the light: pawnshops offer lukewarm welcome to new state regulation.

The advent of state regulation in combination with the effects of the economic crisis have been catalysts to bring a business that in Bulgaria usually operated in the shadows, out into the light.

On August 31, the newly-formed Bulgarian Association of Pawnshops (BAP) had its first news conference, the topics being the new state regulations with which it has to comply, and the latest trends in supply and demand.

As with every other type of enterprise that for years has been left to operate without intervention, the pawn shop business reacted with mixed feelings towards the regulations.

Police reports frequently have named pawnshops as suspected of trading in stolen goods without sanction, and for a long time, it was felt that there was a need for proper rules.

At the same time, given the ups and downs of Bulgaria's economy in the past 20 years, Bulgarians wanting cash quickly often resorted to pawn shops, to trade in everything from family jewels, television sets, motor vehicles and even real estate. This trend has been strong in the past five years.

The result was that a number of pawnshops opened in the country, which inevitably led to some pawnshops being used in criminal schemes to rob people of their property in exchange for loans several times lower than market value of the goods.

To bring some order and rules into the business, this year the state adopted a regulation in February 2009 stipulating the way a pawnshop should function. One rule is that pawnshops can no longer accept real estate as collateral.

It took several months for the business to respond to the comprehensive set of rules decreed by the state, and on August 31, BAP, formed in April 2009 to represent the legitimate side of the business, was ready with its list.

BAP chairperson Vangel Vangelov said that BAP wanted to assist the state in finding the best possible solution regarding control of pawnshops, but there were some regulations that in BAP's view should change.

One change requested by BAP was the three per cent interest rate set by the state on loans given by pawnshops. This, he said, was insufficient for pawnshops to cover their expenses. Pawnshops were getting around the three per cent barrier by charging additional fees for their services, and this was not covered by the regulations.

The interesting detail here is that pawnshops pay taxes on these additional fees, a benefit to the public purse. In other words, the state seemed to have decided that charging additional fees is fine as long as pawnshops pay taxes on them. The result is that customers are subjected to all kinds of fees introduced by pawnshops to cover their expenses.

The answer, according to Vangelov, is that the interest rates on loans should be market-related.

Another change requested by BAP was to the requirement that only gold with a state stamp on it can be accepted at pawnshops. This excludes family jewels, for example. This, according to BAP, will cut pawnshops' incomes by 30 per cent and would have a negative effect on consumers as increasing numbers of pawnshops have stopped accepting TV sets, mobile phones and other technical equipment. The reason for this trend is that ongoing discounts at larger stores have brought prices of such goods down and gold has become the main item for which pawnshops are ready to give money. To show their members' determination to provide a reputable service, BAP--which has 82 members with a branch network of about 500 pawnshops--said that it would start publishing on its website a "blacklist" of pawnshops that tended to accept stolen goods.
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Title Annotation:BUSINESS
Author:Kostadinov, Petar
Publication:The Sofia Echo (Sofia, Bulgaria)
Date:Sep 11, 2009
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