The Connecticut Supreme Court recently ruled that pawnbroker repurchase agreements—also known as “buy-back loans”—are governed by the usury statute, thus limiting the interest rate on these loans to 12% per year. In a repurchase agreement, a customer sells his or her property to the pawnbroker, who holds onto the items for a set time and then sells them back to the customer at the agreed sales price plus interest.
The Connecticut Association of Pawnbrokers’ president Jay Sargent told the Connecticut Post that the decision “shouldn’t have that big an effect” because most of the association’s members do not use repurchase agreements. The association represents about 30% of the state’s 140 pawnbrokers.
But Sargent added that the ruling could cause some pawnshops to close. For example, one pawnbroker told the Post that repurchase agreements account for 20% of his business and that he may have to close his shop after being in business for over 20 years.
