Conditions For Pawnshop Service And Some Noteworthy Points From Practical Aspect

1. Security and order conditions for pawnshop service business 

Pawnshop service, covering provision of money-lending service in which borrowers have to pledge lawful property at pawnshops. The pawnshop service business does not require a separate operating license, but it is necessary to apply for a Certificate of satisfaction of security and order conditions. 

The issuance of a Certificate of satisfaction of security and order conditions must meet the following legal requirements: 

1.1 Pawnshop service establishments must be registered, licensed or established under the law of Vietnam. 

1.2 The person in charge of security and order of a business establishment must not be one of the following subjects: 

• Vietnamese citizens: 

1. • A person has been criminally prosecuted and being under the investigation, prosecution or adjudication by a Vietnamese or foreign procedural body. 

1. • A person has a criminal record on infringing upon the national security or deliberate commission of a crime liable to a prison term of 03 years or more which has not yet been expunged; or is suspended from serving a prison sentence; or is serving a non-custodial rehabilitation; or is under the mandatory supervision, or the prohibition from residence or holding certain position or running a business sector subject to security and order conditions upon the court’s decision. 

1. • A person is liable to the compulsory educational measures at the community; is waiting for a decision on imposition of an administrative penalty granted; is addicted to drug; is suspended from the compliance with a decision on serving a sentence in correctional institution or rehabilitation center; or has faced an administrative penalty but the period for being considered as not yet facing an administrative penalty is not satisfactory as regulated; 

• For Vietnamese residing abroad: is not permitted by a competent authority of Vietnam to stay in Vietnam.  

1.3 Pawnshop service establishments must meet all conditions on fire prevention and fighting by the law on fire prevention and fighting; 

2. Procedures and documents to apply for a Certificate of satisfaction of security and order conditions 

2.1 Procedures 

The business establishment shall submit one set of applications dossiers to the competent police authority15. If a business establishment engages in several business sectors at the same business location but the issuance of Certificates of satisfaction of security and order conditions for those business sectors is under the competence of different police authorities, that business establishment shall submit one set of application dossiers to the highest-level police authority to issue one Certificate of satisfaction of security and order conditions for all those business sectors. 

Documents can be submitted in the following methods (1) In person at a competent police authority; (2) Using the public postal service; (3) Through the National Public Service Portal or Public Service Portal of the Ministry of Public Security (except for the documents not permitted to posted online as prescribed by law). 

2.2 Documents

2.3 Authorization 

Police authorities of districts affiliated to central-affiliated cities or provinces. 

3. Responsibilities of pawnshop service providers during their operation

• Check personal identification papers of the person who pawns his/her property at the pawnshop, consisting of: ID card or citizen identity card or passport or other personal identification paper with photo which is issued by competent authority and still valid, and retain a copy thereof at the pawnshop. 
• Make contract for pledge of property as referred to by law regulations. 
• With regard pledged property which requires ownership certificate as referred to by law, the pawnshop service provider shall only accept that property if it has legitimate ownership certificate and the original thereof shall be retained at the pawnshop during the period that property is pledged. 
• If the pledged property is under the ownership of a third party, the legal letter of authorization made by the owner of that property is required. 
• Property with unclear origin or obtained from illegal acts shall not be accepted for pawn. 
• The interest rate of loans provided when receiving pledged property shall not exceed the interest rate regulated in the Civil Code. 
• Have qualified warehouse for storing pledged property. 

4. Practical 

4.1 Conditions on fire prevention and fighting

As stated in Section 2.2, projects and works listed in Appendix V to the Government’s Decree No. 136/2020/ND-CP are required to seek in written approval for the acceptance of fire safety conditions granted by the fire police authority. Meanwhile, businesses falling under the category listed in Appendix I accompanying the same decree must apply for a Safety Inspection Protocol on fire prevention and firefighting from the the competent authority responsible for fire safety management. 

It is noteworthy that both Appendix V and Appendix I of Decree No. 136/2020/ND-CP do not currently include pawnshop businesses. This omission creates confusion when determining whether pawnshop businesses are required to obtain written approval for fire prevention and firefighting inspection results or a Safety Inspection Protocol. Regardless of the document required, the procedures and application processes are intricate and cumbersome, posing challenges for organizations and individuals engaged in pawnshop services. 

4.2 Ambiguous nature of pawning 

As defined in the business operations of a pawnshop, practical service entails the act of pledging assets for lending purposes. Pledging, as per the definition in the Civil Code in 2015, involves one party entrusting their property, under ownership rights, to another to secure the fulfillment of an obligation23. This implies that customers must bring their assets for inspection and lending at the pawnshop. However the law does not mandate that the owner of the asset must physically present it to obtain a loan. Specifically, under Article 29 concerning the responsibilities of a pawnshop, there is no requirement for the establishment to physically possess or hold the customer’s property; instead, they only need to inspect the personal documents of the asset owner and validate the legitimacy of the asset’s documentation, especially when certification of ownership is required24. 

In practice, many pawnshops merely retain the documents of the assets without physically holding the assets themselves, such as vehicle registration certificates for cars or motorbikes, without physically possessing the corresponding vehicles. This deviates from the essence of pledging but significantly streamlines the business processes of these establishments, reducing the need for storage and minimizing risks of theft, fire, or explosions associated with storing physical goods. 

Apolat Legal takes pride in being a service provider for obtaining Security and Order Certificates to meet the conditions for reputable and high-quality pawnshop services. Please feel free to contact us if you have any inquiries. Apolat Legal is honored to provide consultation and representation for clients in procedures related to acquiring licenses and certificates to support the business activities of your esteemed enterprise. 

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