VietNamNet Bridge – Pawn shops have been sprouting up to meet the demands of those seeking short-term loans. However, these places are also becoming the playground for violations of social security, according to the Police of Ha Noi.

A pawn shop open late into the night on Dang Dung Street in Ha Noi's Hoan Kiem District. Increasing numbers of pawn shops have been opening to satisfy demand for short-term loans. (Photo: VNS)

Most people usually bring their possessions to pawn shops to get small, short-term loans in exchange, sometimes to play the illegal lottery, Van added.

Le Ngoc Thang asked her sister to give to him VND14 million (around US$670) to get his motorbike Nouvo back from the pawn shop. He pawned his item in a Dang Dung Street pawnshop for a month.

His sister gave the shop owner VND14 million and had to pay an additional VND2.1 million($100) for interest at the rate of VND5,000($0.24) per day for every VND1 million ($48). "If she didn't help me, my motorbike could have been put for sale," Thang said.

There are many streets known as "pawn-shop street" like Dang Dung,

Lang, De La Thanh, Luong The Vinh, Cau Giay, Xuan Thuy and Mai Dich and they are always busy, according to the Criminal Police Department of Ha Noi.

Ngo Van Ky, a customer of pawn shops in Me Linh District, said that the interest rates at pawn shops are 10 to 20 times higher than at commercial banks, usually about VND4,000 to VND5,000 per day ($0.2 -$0.24) for every VND1 million. Ky shared that such loan rates were the cause of his worry. In the end, he could not get his items back because the owner said that he had violated the payment schedule.

According to Phu Hung, owner of a pawn shop in Cau Giay Street, each customer gets a short-term loan of about 50 to 75 per cent of the item's value. They can get their items back any time before the deadline by repaying the loan plus the interest. They can also pay the interest and keep the item at the pawn shop.

"We really help people who need short-term money," Hung added.

Van said that pawning activities have joined hands with various kinds of crime such as robbery, gambling as well as illegal debt recovery.

Tran Minh Hai, deputy head of Truc Bach Ward's Police, said that inspection teams often check pawn shops periodically; however, it is very difficult to control all activities in the service.

Lawyer Pham Thanh Binh from Hong Ha Law Company said that the Government has been delaying in issuing documents to control pawn shop activities and loose regulation have negatively impacted society.

"These actions are similar to black-credit activities; it is a form of usury," Binh said.

"Obviously, we cannot control how high the lending rate of a pawn shop is. So the loose management of this service has led to the loss of huge amounts of personal income tax", he added.

"On the other hand, a business registration certificate of pawn service is quite easily to acquire. Under current regulations, individuals or enterprises having enough conditions to open pawnshops go to the district's economic department or Department of Planning and Investment, to request a business license and certificate of eligibility for social security," Binh explained.

Binh said that many pawn shops had fake business licenses or operated many shops at the same time to profit.

The sanctioned levels of trading a customer's property without legal papers or contract, sometimes property of unknown-origin, are only from VND2 million to VND15 million ($95-$710), according to Government Decree 73 issued in 2010.

"These penalties are nothing compared to the profits earned from pawn services. It is not strict enough to admonish pawnbrokers", Binh complained.

To manage the business more tightly, the authorities need to have a clear processes and strict business licensing conditions, according to Hai.

Besides, the banking system should expand its services, such as offering legal mortgage so that the social safety would be reinforced and the negative effects of pawn services would be limited, Binh suggested.

VietNamNet/Viet Nam News