ACM deals with too high an interest rate of Dutch pawnshop

The Netherlands Authority for Consumers and Markets (ACM) has imposed an order subject to periodic penalty payments on pawnshop ‘t Pandjeshuis Vos in the southern Dutch city of Eindhoven. This pawnshop charged too high an interest rate and used too short a loan term. The latter is the term within which the loan must be repaid. With the order, ACM forces the pawnshop to adjust its interest rate and loan term in order to have them comply with the current rules on pawnshops. If it fails to do so, the pawnshop must pay the periodic penalty payments. Anita Vegter, Member of the Board of ACM, explains: “In order to protect pawnshop customers, who are often in a vulnerable position, against high interest rates and unreasonable loan conditions, ACM keeps an eye on pawnshops, both the bigger ones as well as the smaller ones, and will take action if necessary.”

ACM recently established that the Eindhoven-based pawnshop now complies with the rules. Over the next few months, ACM will continue to monitor pawnshops actively.

What happened?

‘t Pandjeshuis Vos used to charge its customers an interest rate of 15 to 20 percent per month for pawn loans. The pawnshop additionally charged EUR 5 in administrative fees, whereas pawnshops are required to include these costs in their interest rates. Furthermore, customers had to reclaim their items or extend their loans within one month, whereas the statutory minimum is two months. From July 1, 2015, the maximum interest rate that pawnshops are allowed to charge their customers was lowered from 9 percent to 4.5 percent per month. In addition, pawn loans must have a minimum loan term of two months.

What are pawnshops?

Consumers can take jewelry or other items to a pawnshop or jeweler, who will keep these items. In return, consumers receive a loan. If they want to reclaim their items, they have to repay the loan they received, plus an interest fee.