Financial Institution Letter, FIL-46-2018, Proposed Retirement of Certain Financial Institution Letters

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September 25, 2018

Federal Deposit Insurance Corporation
Attn: Thomas Lyons, Section Chief
Risk Management
550-17th Street, N.W.
Washington, D.C. 20429-9990

Via email to: and

Re: Financial Institution Letter, FIL-46-2018, Proposed Retirement of Certain Financial Institution Letters

Dear Mr. Lyons:

The National Pawnbrokers Association (“NPA”) is the only nationwide trade association of the pawn industry representing independent owners of pawn stores. Our membership is comprised of single-location, family businesses and small store groups locally owned and operated across the country.

Pawn transactions are an ancient form of secured lending. In most states, pawnbrokers are licensed by the same state agencies that issue charters to banks and credit unions, and license and supervise other non-depository providers of consumer credit products and services. In other states with strong home-rule traditions, pawnbrokers may be licensed by municipal or county governments. In either case, pawnbrokers’ operations are closely supervised by the licensing authority, and this has been the practice in most jurisdictions for many decades.

Pawn transactions also are governed by federal statutes and regulations, as the enclosed list demonstrates, many of which are enforced by the Bureau of Consumer Financial Protection and others by the U.S. Department of Treasury or its sub-agencies. These diverse statutes and regulations require pawnbrokers’ compliance with federal consumer credit laws, cash transaction reporting, lending to military personnel and their dependents, service members called to active duty, and more.

Given the multi-level compliance responsibilities placed on pawnbrokers for pawn transactions, we are not surprised that there are few complaints about actual pawn transactions in the Bureau of Consumer Financial Protection’s complaint database and, insofar as we can ascertain, in the hands of state regulatory agencies.

We reviewed with great interest the list of financial institution letters that the FDIC has proposed to retire. We were dismayed not to see the inclusion of the Summer 2011 “Supervisory Insights Journal” article that contained a list of “high-risk merchants” and the September 2013 Financial Institution Letter (FIL-43-2013) that repeated some of this information. The article and the September 2013 FIL contributed to the scope of what became known as “Operation Choke Point,” an inter-agency initiative that prompted many banks chartered by the Office of the Comptroller of the Currency or insured by the FDIC to “discontinue” relationships with pawnbrokers – frequently on short notice and nearly always with no explanation.

During two personal meetings in 2014 and 2015 with senior FDIC staff members we brought to their attention specific cases of bank discontinuance experienced by NPA members from the publication of FIL-43-2013 to a point in April 2016. In those meetings and through other communications, we raised the NPA’s concerns that the table entitled “Merchants Associated with High-Risk Activities” that appeared in 2011 and 2013 was the primary cause of discontinuance – even though the pawn industry was not included by name. Those publications suggested that merchant types listed could be engaged in “fraudulent” transactions and used third-party payments processors to aid in their activities.

We also met with representatives of the OCC and the Board of Governors of the Federal Reserve Board, and with members of Congress who have served since 2011 on the Senate Banking Committee or the House Financial Services Committee – in some cases on more than one occasion.

The NPA and its members were grateful when, on July 28, 2014, in FIL-41-2014, the FDIC superseded its September 2013 FIL that had caused NPA members business interruption and many hours of effort to find new banking relationships following the abrupt discontinuance of banking relationships and services.Because discontinuance continues to occur through August 2018, we believe that the FDIC should add FIL-43-2013 and the 2011 Supervisory Insights Journal article to those publications and guidance being retired. We are not certain if adding those two publications will solve the discontinuance that pawnbrokers have experienced, but we remain hopeful.

We also urge the FDIC to include in education and training programs with your regional offices and field examiners clarification about pawn transactions as forms of highly regulated consumer financial products and services, and that pawnbrokers as subject to local, state, and federal laws regulating their consumer financial transactions should continue to hold their banking relationships in order to serve parts of the disparate groups of persons in this country that need access to well-regulated and fast, face-to-face consumer credit products and services that pawnbrokers offer.

If you require clarification or additional information about the discontinuance that pawnbrokers have faced, please contact Cliff Andrews, the NPA’s Washington counsel, at

Thank you for your consideration,

Tim Collier