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KUALA LUMPUR: Are pawnshops flouting the Moneylenders Act 1951 by charging above the maximum interest rate allowed?

While it only allows interest of 12 per cent for a secured loan, pawnshops generally charge 24 per cent.

However, the Pawnbrokers Act 1972 allows for the interest rate to be fixed by the Housing and Local Government Minister.

The conflicting Acts are both under the purview of the Housing and Local Government Ministry.

Perak Consumers' Association president Abd Rahman Said Alli said pawnshops were currently charging a two per cent interest rate per month (an annual of 24 per cent) which was double the maximum rate fixed under the Moneylenders Act 1951.
He said this had been going on since 1951 and needed to be stopped.

"Both the Moneylenders and Pawnbrokers Acts are administered by the same ministry.

"I wonder why the ministry does not fix the rate based on what has been stated under their law," he told a joint press conference with the Federation of Malaysian Consumers Associations yesterday.

Rahman said the high interest rates had burdened the lower income group.

"Most of the ones who go to pawnshops are the lower-income group.

"They resort to pawnshops as they don't have any other option to get fast cash."

The option of the Islamic pawnshop, Ar-Rahnu, which is operated by commercial banks and does not charge interest is available only in major towns and not many are keen to use the service.