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Wednesday 18.07.2018 | Name days: Rozālija, Roze

Economy Ministry plans to combat underground pawnshops

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On November 22, the Saeima conceptually approved a draft law, the goal of which is to limit activities of underground pawnshops. Even though the Saeima Judicial Commission previously refused the submitted amendments to the Latvian Administrative Code, this problem deserves more attention from society and legislators, believes Economy Ministry’s parliamentary Secretary Vilnis Kirsis.

Up until 2011, private crediting was either not regulated effectively or not regulated at all, and almost anyone could do it, starting from banks and auto-leasing companies, pawnshops and every possible variation of text message creditors and private persons. However, with the number of violations growing more and more, it has been decided to introduce a non-bank creditor licensing practice. It is assumed that the best way to discipline non-bank creditors is to make them “freeze” a notable sum of money, which they can easily loose if they act illegally or unfair. This is why a law and a number of accompanying rules have been developed in accordance with the Cabinet of Ministers’ regulations, which state that, from now on, the license for non-bank creditors will cost 50 000 LVL in its first purchase and 10 000 LVL for its annual renewal, says Economy Ministry representative.

“Aside from this license, which applies to all non-bank creditors, the Cabinet of Ministers has also developed a number of regulations that apply specifically to pawnshops. For example, these regulations limit the working time of pawnshops. As well as pledge requirements (in cases if the item is stolen and it would be possible to find the perpetrator), as well as mandatory video surveillance, specialized item storage compartments, pledge photos and other security requirements. The goal of all proposed changes is making this business more transparent, protect clients and reduce crime risks,” – says EM parliamentary secretary.

“However, bringing the licensing practice to life creates a situation when the pawnshop market is divided into two sides. Pawnshops with licenses and working within the borders of the law those that will try to circumvent the law – try to work underground,” – says Kirsis.

He believes it would be reasonable to increase the fine for carrying out pawnshop activities without a license from 3 000 to 10 000 LVL, so that it would be equal to the price of the license. He adds that it would also be logical to allow the Consumer Rights Protection Centre to punish perpetrators. “Nowadays, protocols about violations are compiled by the CRPS. Those are then submitted to the State Revenue Service (SRS), which then make the decision regarding the punishment. However, the decision can still be challenged at the Prosecutor General’s office. Only then it is submitted to the court. A very long procedure to say the least,” – says Kirsis. He also allows for the possibility for some violations to be registered and punished by the municipal police.

Kirsis is convinced – in order to ensure an effective method of combating underground pawnshops, it is necessary to carry out specific amendments to the Latvian Code of Administrative Violations. “Otherwise this kind of underground creditors will continue to grow and prosper, creating problems not only for clients, but also giving a bad example to those who swish to work fair in the pawnshop business,” – he said.


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