Pawnbrokers and their customers would lose money if they had to auction off all goods that loan customers did not retrieve, a select committee was told yesterday.
Representatives from 10 organisations and businesses presented submissions on the proposed Second Hand Dealers and Pawnbrokers Bill.
National MP Tony Ryall said it appeared
a "rip-off" that pawnbrokers would have to sell all goods by auction that were left by defaulters on loan payments or by those who did not return to collect goods.
Items sold at auction typically sold for less than their value.
Rex Henry, of the Licensed Traders Association, said second-hand dealers were the main people who benefited from auctions.
"The fact that it goes to auction not only disadvantages the pledger [the customer], it also disadvantages the pawnbroker. If you go to an auction ... half the people there are second hand dealers who are buying stock."
Tyler Baker, manager of The Pawn Shop, said the only recourse for pawnbrokers if customers failed to pay or did not return for items was to keep the goods.
"We regard the providing of the goods as a pledge, a promise to pay ... If we give them too much money for it, too bad, we can't then pursue them for any balance that might be outstanding," Mr Baker said.
"The auction is simply a nuisance ... It tends to attract bargain hunters who want to buy something for nothing. We would get half at auction for an item we could sell in the shop.
"If we are forced to sell it by auction, we could only lend less to the person than if we were able to sell it in the shop."
- NZPA
