October 3, 2016 the Department of Defense will be adding pawn shops to the list of lenders that must supply financial protection to members of the armed forces and their dependents. This is the Military Lending Act and it is now the law of the land.  So what does this mean?  How does it apply to the average pawn shop customer?

First Off…Thank You For Your Serving Our Country

If you are not currently active duty, reserve, National Guard, or dependent of one, then nothing changes for you. However, if you are one of the selected few that wear a uniform for our service, thank you.  The world of pawn loans is getting better for you.

The Department of Defense is enforcing protections, capping the amount of interest a pawn shop charges.  Currently in Texas, lending under $1,340.00 has interest rates between 240% – 180% per year. Some shops like Heritage Jewelry and Loan charge a discounted 120% per year. Therefore, even at those rates, it can still be an expensive proposition.  So the DoD is changing these rules and capping the rates to 36% per year.

So this is a big win for the folks that are currently serving in the military. Helping out when times are stressful is the ongoing goal of the program.  However. as the customer will need to have an understanding of what you need to be doing so as not to miss out.  The following must be done by the pawn shop at the time of the pawn loan.,  If they don’t you are entitled to compensation. But remember these are for NEW LOANS starting October 3. Nothing prior to that date falls into the protected class.

What You Need To Do

When getting a new loan or renewing an old loan,  inform the pawn shop that you are in the military, or a dependent of a person in the military. Some pawn shop’s will try to make you show your military ID, but this isn’t necessary.  However, the pawn shop will need to have your social security number to enter it into a federal database to check if you are eligible for coverage.  Generally, you will fill out a piece of paper that will request all of your personal details, like date of birth, full name, and social security number and sign it.

Once you have done all of this, you need to inspect your pawn ticket to make sure that the pawn shop has given you the correct 36%APR or 3% per month.  If you don’t see it on the ticket, don’t sign it.  Don’t settle for excuses from the pawn shop owner, they MUST give you our your dependents the new lower rate.

Do They Have To Give Me A Loan

So as you can imagine, it is a big shock to most pawn shops to have to reduce their interest rate this much.  So the first question that most people want to know, ” can the pawn shop refuse to lend me money because I am in the military?”

The quick answer is yes.  Currently, in Texas, the military and their dependents are not considered “protected class” so a pawn shop can use that as means to discriminate.   Many of my fellow pawn shop owners have said that they are either not going to lend to persons in the military  or just lend a very minimal amount for their items.  So be prepared, some pawn shops might not lend their “normal” amounts to you if you qualify for the lower rate.

What Are My Protections 

This is the most important part of the entire blog post that needs to be understood.  A pawn shop can’t make you sign a piece of paper allowing the charging of normal rates. In other words, they can’t make you waive your interest rate. There is no way of releasing them from liability if they accidentally charge you too much interest.  There are no protections for the pawn shop, only the military lender.  So don’t let someone try to bully you telling you something different.

If you feel that you are getting taken advantage of, please contact you local command. They will be able to help you with filing a formal federal complaint.  The fines the pay shops are paying for this is incredibly high.

Pawning items is sometimes a necessary part of military life.  With the correct procedures and policies it can be a very affordable alternate to traditional lending.