Quick and easy loans offered by more than 2,000 pawnshops throughout the country are set to be subject to greater regulation after the legislature yesterday passed a bill that will effectively cap interest rates at 30 percent.
With support from lawmakers from both parties, the bill passed by the legislature will also set limits on the number of times a person can be charged a fee associated with borrowing money from a pawnshop.
Under the revision to the Pawnshop Management Act (當舖業法), maximum interest rates will be lowered from 48 percent, or 4 percent a month — which was called excessive — by 18 percent, to 30 percent annually.
In addition, pawnshop operators will only be allowed to charge a 5 percent borrowing fee once per year, fixing a regulatory loophole that saw large numbers of operators charging the fee every month, effectively pushing annual interest rates above 100 percent.
The limits prescribed by the final bill are more strict than the original proposal raised by Democratic Progressive Party (DPP) Legislator Huang Wei-cher (黃偉哲), which would have capped rates at 36 percent.
His proposal attracted controversy last month after it was revealed that Huang and some Chinese Nationalist Party (KMT) lawmakers who expressed support for the bill had received threatening telephone calls urging them to reconsider.
It also followed a report in the Chinese-language Next Magazine that alleged up to 33 former lawmakers had received bribes from pawnshops in 2001.
The Nov. 16 article said the group of lawmakers had originally agreed to work on a proposal that would have cut pawnshop interest rates to about 24 percent over three years. However, when the final bill was passed, interest rates stayed at 48 percent.
The magazine said that this was because pawnshop owners had pooled up to NT$18 million (US$602,000) in payments for the 33 lawmakers, with one prominent legislator receiving up to NT$4 million in bribes. Police have since opened an investigation into the allegations.
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