Meet Janet. Janet is a 34 year old employed, single mother of two toddlers Ė Tyler, 5, and Alex, 3, earning a modest salary of $1,200 a month. Unfortunately, Tyler is suffering from appendicitis and needs surgery to have his appendix removed right away. Janetís salary isnít enough to cover her current monthly expenses as well as the medical expenses incurred due to Tylerís condition; so she decides to pawn her vehicle to get the extra money she needs for her son.
Janet visits a Belize City pawn shop and pawns out her 2006 Ford Escape, which is valued at $16,000 on her insurance policy. She settled for the $3,000 maximum that the pawn shop offers for vehicle pawns which must be paid back within a month at a 25% interest rate. The pawn shop also made Janet aware that there is a two-month grace period before she is served by the police to repossess the vehicle.
Tyler is now recovering well after surgery. But after paying all his medical bills, Janet didnít have enough to cover her total pawn repayment within the two-month period. Now, the pawn shop is taking her vehicle away. What can she do to get her vehicle back?
Legal Advice by Estevan Perera Ė Attorney-at-Law
According to the Belize law, Janet should challenge the Pawn Shop at the Magistrate Court based on the following grounds:
1. The loan agreement appears to violate section 26(1) of the Money Lenders Act and, as such, can be challenged in the Magistrateís Court.
Section 26(1) of the Money Lenders Act states that the lender cannot charge interest in excess of 48% annually (4% monthly). Because Janetís agreement states that the monthly interest is 25%, the Magistrate may deem the loan agreement illegal or the Magistrate may reduce the interest rate considerably so that it becomes compliant with the Act.
2. Section 24 of the Money Lenders Act states that if the borrower should go to court with evidence that proves the interest charges in respect to the amount of the loan are excessive, or if the penalties are harsh and unconscionable, the court may relieve the borrower of any excess payments.
Since the Pawn Shop wants to keep Janetís vehicle, she needs to inform them that she is aware of her rights as a borrower and does not permit them to sell her vehicle because of non-payment. It is illegal for the Pawn Shop to keep a vehicle valued at $16,000 in exchange for a $3,000 loan. They would be unjustly enriching themselves. The proper procedure for the Pawn Shop to be able to get back their payments from the borrower would be to auction the vehicle for its true market value and then take the money owed to them (including interest) and return the balance to Janet.
There are several provisions made in the Money Lenders Act that protects lenders from these Pawn Shops and Small Money Lending businesses.The Guardian