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. Last Updated: 07/27/2016

Duma Takes Step toward Regulation of Pawnshops

A new bill aimed at tightening regulation of the pawnbroking industry and improving the image of pawnshops as legitimate lending institutions passed in a first reading in the State Duma on Friday.

"The proposed law is intended to protect the rights of people who pawn their valuables," Konstantin Shipunov, one of the sponsors of the bill, said while presenting it Friday.

Pawnshops are currently regulated by the Civil Code, which details rights on lending money in exchange for collateral.

As a guard against money laundering, pawnshops are no longer permitted to accept shares and bonds as security.

The new bill also makes it illegal for pawnbrokers to engage in other types of business apart from pawnbroking.

But restricting the scope of business activities will complicate the duties of pawnbrokers, said Yelena Popova, deputy director of MosgorLombard.

"Services such as cleaning or repairing jewelry or mothballing fur coats proscribed by the new law are an indispensable aspect of our business," Popova said.

The bill also envisions a limit of 180 days on pawnbrokers' loans and requires them to notify defaulting clients in writing before putting pledges up for sale.

The legislation would also protect clients from fraud by requiring pawnshops to pay clients the difference between the appraisal value of pledges and the sale price, if the sale price is higher.

Some 2 million Russians use pawnshop services every year, Shipunov said.

There are an estimated 3,000 pawnshops nationwide, which issue around 500,000 small loans each year, some charging upward of 100 percent in annual interest.