Wednesday, April 6, 2005 | 9:34 a.m.
Customers of pawnshops were dealt a harsh blow by the Nevada Senate last week. It voted 12-9 to allow pawnshop operators to charge their customers any interest rate they want. Current state law prohibits pawnshops from charging more than 10 percent.
We strongly urge the Assembly to reject this bill. Most customers of pawnshops are poor and in dire need of immediate cash. They bring in a personal item and the pawnshop holds it as collateral against a loan. The item is returned only after the loan is repaid, with interest.
Pawnshops were reclassified by the state as financial institutions in 2003, an act that raised their taxes. Other financial institutions in Nevada, however, including banks and payday loan companies, are not constrained by any state laws from charging whatever interest the market will bear. The pawnshops argue that this is not fair. If they are indeed financial institutions, they say, then their interest rates should likewise not be capped.
A majority of the senators bought this argument, agreeing that an inequity was created in 2003. Perhaps, then, pawnshops should go back to being classified as retail businesses, exempting them from the tax increase. Certainly, doing away with the interest-rate cap is wrong. An inequity should not be corrected on the backs of the poorest of the poor.
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