Doing Business with Belize Pawn Shops & Small Loan Businesses

Unfortunately, like many others, we all have money problems at some point in our lives, whether the funds are required for the payment of bail, school fees, medical emergencies, or to put food on the table for our loved ones.

Whenever, any of these needs surface we approach the local banks and credit unions in Belize for a small loan, just to be told that we do not qualify due to our financial situation and the lack of a suitable guarantor. Obviously our financial position is not at its best at this point in time. If it was we would not have been seeking a loan from a bank or credit union.

As a result, many of us turn to pawn shops or small lending businesses in Belize to provide us with the help that we so desperately need. In order to make this facility available to the public, the Government of Belize established the Money Lenders Act, Chapter 260 of the Laws of Belize. This Act not only established the foundation for the establishment of these small loan businesses and pawn shops, but it also created protection for those in need.

Unfortunately, instead of assisting the local Belizean borrower (who needs the help), some small loan businesses take advantage of the already deprived client. These loan shops try their very best to encourage clients to provide a vehicle or a land to secure a small loan with the subtle threat that if you do not pay the extremely exorbitant interest rate within a month or two they will proceed to take your vehicle and land free and clear.

Belize Laws Protecting Borrowers Against Pawn Shops

Although it may go about unnoticed, Belize has laws set in the Money Lenders Act that regulate money lending entities and protect borrowers against unfair terms brought upon them from these entities.

The sections that explicitly protect borrowers are:

• Section 13(1) – The pawn shops must provide the borrower with a copy of the loan agreement within 7 days of its creation.
• Section 13(3) – The loan agreement must include all the terms of the contract including the date the loan is made, the amount of the principal of the loan, and the effective annual rate of the interest charged on the loan.
• Section 14 – The lender cannot charge compound interest or increase interest rates.
• Section 15 – The lender cannot charge for reviewing or negotiating the loan.
• Section 16(2) – The lender should provide the borrower with copies of the loan documents at all times.
• Section 17 – The lender shall not engage in advertising that is misleading to the public. Some examples of misleading the public are portraying any relation to the Financial Secretary, any ministry or department of the Government, or Central Bank of Belize; or posting false interest rates or charges.
• Section 19 – The lender must have the ANNUAL interest rate and all other charges and fees that are levied on loans prominently displayed in the store.
• Section 23 – The lender cannot bring a claim against a borrower after 12 months after the action happened.
• Section 24 – If a borrower goes to court with sufficient evidence that any interest charges in respect to the amount borrowed is extensive or the transaction is harsh, the court may relieve the borrower from any excess payments requested from the lender.
• Section 26 (1) – The lender cannot charge more than 4% monthly or 48% annually.

You can read the entire act here, and familiarize yourself with the guidelines set out for these institutions so you can borrow smartly without falling victim to their schemes.

This information was provided by Estevan Perera, an experienced Belize lawyer.