A new fraudulent scheme has been identified in the pawnshop market

Pseudo-pawnshops, under the guise of providing services for storing citizens’ property, actually issue loans secured by it, the Central Bank has found out. In such gray segments, there is no limitation on the full cost of the loan, and the grace period when the pawnshop does not have the right to sell unclaimed items is not observed. The scheme is called “keepers” and is fundamentally different from the usual “thrift stores”. According to preliminary estimates, about 2% of small pawnshops have already switched to it.

The Bank of Russia reported that it had identified a fraudulent scheme in the pawnshop market. Under the guise of providing services for storing the property of citizens, companies actually issue loans secured by it, replacing the relevant contracts.

Interest on such loans can significantly exceed the values ​​​​established for legal market participants. The transferred property is not subject to insurance (this is mandatory for pawnshops). In addition, there is no guarantee that the illegal immigrant’s client will be paid money when selling the item (pawnshops are required to return the difference between the sale amount and the amount of the consumer’s obligations), the Central Bank says.

The scheme was called “guardians”. It differs from the usual commissions and schemes of purchase agreements with repurchase, confirms Alla Khrapunova, an expert of the Popular Front project “For Borrowers’ Rights”. “Companies offered a person the service of storing an item, and to ensure the safety of the item, the company paid the person a security deposit. He had to pay this payment at the time of returning the item, along with interest for storage. That is, supposedly the person did not come for money, but simply to give away his thing for safekeeping,” she says. “Many people had doubts about the economic essence of the security deposit.” According to Ms. Khrapunova, it was precisely the absence of the economic meaning of the security payment that was the prerequisite for the scheme to be recognized as an illegal pawnshop activity.

The Central Bank is already adding information about the “custodians” to the list of companies with signs of illegal activity. For each identified illegal immigrant, information is sent to law enforcement agencies. The companies themselves may be subject to administrative liability, and their managers – to criminal liability, the Bank of Russia explains. Over the current year, 371 companies were included in the list for various types of violations (in 2022 – 493, in 2021 – 382). In total, as of November 13, there were 1,891 pawnshops in the register of the Bank of Russia.

According to Lyudmila Gribok, Chairman of the Board of the Regional Association of Pawnshops, about 2% of small participants in the pawnshop market have already become “custodians”. The appearance of “custodians” in the pawnshop market is associated with a high regulatory burden – the introduction of the UAP (unified chart of accounts) and OSBU (industry accounting standards), GIIS DMDK (state integrated information system of precious metals and precious stones), she explains. “Not every small pawnshop can bear the costs of their implementation,” emphasizes Mrs. Gribok.

Legal pawnshops often lose competition to such “custodians” and “commission shops”, as they are forced to bear “a huge regulatory burden, as a result the market goes into the shadows,” says Artem Evstratov, co-founder of the First Jewelry Pawnshop.

In these gray segments, there is actually no regulation that protects the consumer: the limit on the full cost of the loan is not observed, there is no grace month when the pawnshop does not have the right to sell unclaimed items, emphasizes Aleksey Lazutin, chairman of the board of the National Association of Pawnshops.

Meanwhile, market participants note, consumers often do not understand the difference between an official and a gray pawnshop. According to Mr. Lazutin, in order to reverse the trend of growing fraud in the market, it is necessary to liberalize regulation of the segment, at least by easing restrictions on the full cost of loans.

Polina Trifonova