We received a member query after the Autumn Magazine was sent to the printer, so rather than wait until the Winter edition we wanted to share this as soon as possible. The details are as follows:
Q. As a pawnbroker do we need to issue annual customer statements if an agreement term reaches 12 months.
A. in short – yes, our legal advisors Walker Morris LLP confirmed that:
“Pawnbrokers are required to issue a statement irrespective of whether interest accrual has ceased or continuing. The legal requirement is to give the debtor annual statements covering consecutive periods of no more than one year, the first to be served within 30 days beginning with the day after the end of the period to which the statement relates. The requirement is triggered for any agreement which is still in force one year after it was executed, irrespective of the applicable interest provisions. “
“The obligation to give annual statements ceases as per section 77A(4) when the debtor has no further liability under the agreement. Before the goods are sold and the agreement discharged it remains current and the debtor has a continuing liability which is met by the sale of the goods to discharge the loan. As such there is still a 'sum payable' albeit this is delivered via the proceeds of sale.”
“If the statement is not issued, the agreement is unenforceable until the breach is remedied by service of the annual statement in the correct form.”
“The penalty is that you cannot charge interest in the period that you have not sent a statement and cannot enforce (i.e. sell the goods) until you send a statement, after sending you can restart charging interest and enforce.”
We recommend that you review your current annual statement templates to ensure they are up to date. The annual statement template, will be added to the NPA Website as soon as it has been approved by our legal advisors. .
If you have any questions do not hesitate to contact the NPA by email on sonia.sahota@thenpa.com or by telephone 07735 886930.