Editorial: Pawn shop bill ignores key questions

Republican legislators are pushing a bill that would give Minnesota's biggest pawn shop operators special treatment -- potentially allowing them to lift limits on charges and other restrictions that come with pawn transactions.

There are also unanswered concerns about whether the legislation would allow big pawn operators to circumvent local regulation and opt out of law enforcement systems for tracking stolen goods.

Unfortunately, this not-ready-for-prime-time legislation has passed the Minnesota Senate and was poised last week to be taken up by the House. Gov. Mark Dayton should veto the current bill if it lands on his desk.

The legislation is often referred to at the Capitol as the "Pawn America" bill. Minnesota-based Pawn America, owned by Brad Rixmann, a major GOP donor, would indeed be one of the main beneficiaries of the changes championed by state Sen. Dave Thompson, R-Lakeville.

If passed, the legislation would allow certain pawn shop operations -- ones with enough financial resources to qualify as an "industrial loan and thrift" type of bank -- to charge different and higher fees for pawn loans. It would also allow them to be regulated under state banking law instead of under a pawn shop law that's designed to protect consumers.

The Senate bill calls for fees for "transporting, storing, securing, insuring, and maintaining the collateral for the loan." And while advocates have emphasized that the changes are directed at big-ticket items, such as boats or all-terrain vehicles that are sometimes pawned, the legislation's scope doesn't narrow by the item's size or value.

Smaller, more typically pawned items such as watches or rings would also likely be covered, according to an analysis by Ron Elwood, a supervising attorney with Legal Services Advocacy Project in St. Paul.

University of Minnesota Law School Prof. Prentiss Cox also had concerns about how broadly written the law is.

On Thursday, Rixmann said the proposed changes would streamline regulation for his stores and would allow consumers to more conveniently access the range of financial services provided by Pawn America's various operations. He said the chain will continue to comply with municipal regulations and will continue to participate in law-enforcement tracking systems.

At a bare minimum, the legislation should be overhauled to prevent operators with less-honorable intentions from taking advantage of potential loopholes. It's very troubling that Thompson, the bill's main champion, did not know this week whether the bill would allow big pawn operations to opt out of stolen-goods tracking. Minnesota law-enforcement organizations said this week that they're still trying to answer that question.

Pawn shops provide options for consumers who need quick loans and can't go through mainstream banks. This bill is written too broadly and has too many unanswered questions to allow an easy determination about whether it would serve both consumers and the industry well.

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