Reader question: What is my recourse if pawn shop reneges on interest promise?
He had no control over lockdown, says customer
A Sowetan Money reader is livid that a well known pawn chain is charging him interest after they assured him he will not be charged for the lockdown period.
A Sowetan Money reader is livid that a well known pawn chain is charging him interest when they assured him they would not for the time when the entire country was shut down due to the Covid-19 pandemic. He writes:
Q: At the end of February I faced some unexpected financial shocks and was forced to pawn my television and laptop at Cash Crusaders to get me through to the end of March.
However, due to the Covid-19 lockdown level 5 kicking in before the end of March, I was unable to take the items out of pawn, but I contacted the branch and was told I would only be able to retrieve my items once lockdown regulations ease. They also said I would not be charged interest for the additional time my items were in holding as the situation was not in anyone’s control.
I even offered to pay the amount that would have been due at the end of March to secure my items until I was able to collect. Again, I was reassured that no additional interest would be charged.
However, when I collected in May after lockdown eased to level 3, I saw I was indeed charged interest for the time my goods were stuck in pawn due to level 5 lockdown.
Is the service provider allowed to do this and what recourse do I have to dispute the additional interest charged?
A: In response to our reader’s question, the National Credit Regulator explains that a pawn transaction is an agreement in terms of which a credit provider advances money or grants to a consumer and at the same time takes possession of goods given as security by the consumer.
The NCR says a credit provider who enters into a pawn transaction with a consumer must specify by when the agreement ends, must at its own risk and until the end of the credit agreement retain possession of the goods provided as security, and must deliver the goods held as security to the consumer upon payment of the settlement value under the agreement at any time up to and including the date on which the agreement ends.
Depending on the circumstances of each case, and against the background of the national lockdown due to the coronavirus pandemic, some consumers may not have been able to timeously comply with their contractual obligations under a pawn transaction. The NCR’s view is that consumers should not be penalised for failing to comply with their contractual obligations due to the national lockdown.
Frank Magwegwe, certified financial planner and founder of Thrive Financial Wellness, says the starting point in any dispute is the legal agreement that was signed between the two parties that governs the transaction.
“Unless there’s a clause in the agreement pertaining to unforeseen circumstances that makes it impossible for a client to be able and willing to fetch their goods, the promise to not charge additional interest was an act of goodwill outside the agreement,” Magwegwe says.
He says you, as the consumer will have to check with the service provider’s customer service if there is a record of the promise to understand the pawn shop’s reason for reneging on the promise.
“In my view, the service provider is allowed to charge interest as per the agreement irrespective of lockdown regulation. Unless there’s a clause that caters to circumstances as described by the client,” he says.
Depending on the availability of evidence of the promise not to charge interest and the outcome of discussions between the parties on the reneging on the promise, you can approach the Credit Ombudsman.
You can also complain to the NCR at firstname.lastname@example.org.
* Send your questions to email@example.com.