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Judge: Pawnshop Interest Rates “Unconscionable”
Tue, February 7, 2017
Pawnshops are a thriving enterprise in Belize - and their customer base is mostly comprised of the poor and those who can least afford to pay high interest rates. Yet, invariably, high risk credit carries the highest interest rates, and now a Supreme Court Judge has said "enough."

Justice Sonya Young issued a judgement yesterday against an Orange Walk based enterprise: Payday Advance and EZ Loans Pawning saying that they had taken advantage of their customer, Janine Vega. Vega made two loans from the company in 2012, the first for $2,500 and the other for a thousand dollars. Security for the lions were Vega's titles to two properties in the Orange Walk District totaling 30.4 acres.

Vega only paid back eleven hundred dollars, and failed to make any other payments. So, the owners of the pawn business Laura and Julio Blanco, enforced the security and transferred the land into their names.

But, Vega took them to court, where her lawyers Steve Perrera and Kevin Arthurs claimed that the rate of interest was illegal, and that the tickets detailing the terms of the loan were inadequate.

First, the judge found that the pawnshop increased the rate of interest once the loan went into default, which is illegal.

And then she noted that the rate of 10 percent per month the-pawnshop charged amounts to 120 percent per annum. the judgement states quote, "any interest charged which exceeds 48 percent per annum is excessive and the transaction is harsh and unconscionable….the Defendants have not convinced me that the rate of interest is anything but excessive. On such a finding the transaction is deemed to be harsh and unconscionable."

That's a major declaration since such usurious rates and even higher are common at pawnshops across Belize. And then the pawn tickets, which gives the particulars of the loan, did not include the annual rate of interest, or the penalty rate. The judge concluded, "This Court therefore finds that what has been presented as the written record of the money lender's contract falls far short of what is...required."

And so, the judge ruled decisively in favor of Vega, stating, quote, "The loan agreements and the security given are all unenforceable...The Defendants are directed to transfer the property back to the Claimant forthwith."

As we said, its a major judgment since pawnshops countrywide often appear to be a law unto themselves and the judge noted, quote, "jurisprudence on this area of the law is of great importance to the Belizean society...a determination of this matter may have far reaching repercussions."

So, the takeaway from this one is that in this case, the Pawn shop loaned $3,500.00 BZE Dollars at 120% per year and when the Claimants could not pay the loan, the Pawn Shop owners decided to keep the property for themselves and transferred the 30 Acre property into the name of the Pawnshop. Now, the judge has ordered them to return it. The landmark judgement also makes it so that persons in Belize who are victims of such loans can challenge it in court if the loan was received and their security illegally confiscated within the past 6 years. We note that the judgement can still be appealed.

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