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.
"Enactment of this bill into law would be disastrous for consumers and municipalities, not to mention unfair to competitors," said Elwood, a vocal critic of changes allowing payday lenders to operate as an industrial loan and thrift. "Cities could lose the ability to license and regulate Pawn America's pawn shops." Consumers could be forced to pay more for Pawn America's loans and forfeit their pawned items sooner. Competitors would still operate under the pawn shop law."