PAWNBROKING IN GERMANY.

Pawn shops are institutions by which money is loaned against the deposit of movable pledges. Those that conduct a so-called repurchase business (Rückkaufsgeschäfte), whose object is to purchase movable articles, guaranteeing the right of repurchase to the depositors within a fixed time, must be distinguished from the others. The two kinds differ in legal character, but serve the same economic purpose and therefore often come under the same official regulations. In Germany, the pawn shops, which originated in the seventeenth and eighteenth centuries, were mostly public undertakings conducted by the State or community. At the present time there. still exists in the German Empire the following State institutions: The Royal Lending House, in Berlin; the Grand Ducal Lending Houses, in Weimar and Eisenach; the Ducal Lending House, in Gotha; and the lending houses of the Ducal Brunswick government in six cities in Brunswick. The governmental department of Cassel also maintains pawn shops in Cassel, Hanau, and Fulda.

The pawn shops which originated in Napoleon's time in Strassburg and Metz, as well as those of Mainz and Mannheim, are institutions with independent government, in which, however, the city officials participate.

The following is a list of the municipal pawn institutions in Ger

many:

(1) In Prussia-Altona, Barmen, Bonn, Breslau, Bromberg, Celle, Coblenz, Cologne, Crefeld, Danzig, Dortmund, Düsseldorf, Duisburg, Elberfeld, Elbing, Erfurt, Essen, Frankfort, Görlitz, Halberstadt, Halle, Hanover, Hildesheim, Königsberg, Liegnitz,

and Mühlhausen.

(2) In Thuringia-Munich, Gladbach, Osnabrück, Posen, Schleswig, Stralsund, Trier, and Wiesbaden.

(3) In the south German states-Augsburg, Bamberg, Bayreuth, Darmstadt, Freiburg, Fürth, Heidelberg, Karlsruhe, Nuremberg, Offenbach, Regensburg, and Würzburg.

(4) In the north German states (exclusive of Prussia)-Altenburg, Chemnitz, Dresden, Gera, Hamburg, Leipzig, Lübeck, and Schwerin.

Of German cities of more than 100,000 inhabitants, Magdeburg (since 1891), Bremen, Stettin, and Aix la Chapelle (since 1858) have. no public pawn shops.

On the whole, the number of these institutions is larger in Germany than in France, but less than in Belgium, Holland, and Italy.

The following table gives an idea of the business transacted in the municipal pawn shops in the cities below enumerated in the year 1898:

Of the larger cities, Berlin has three offices, Munich four, Hamburg three, and Dresden two, for conducting this business.

In several cities, the pledges can be made in suboffices, and in some other cities, such as Cologne, they may be made to specially licensed parties.

The business of pawn shops in the last three years appears, as far as can be estimated in the absence of uniform statistics, to depend less on general economic than on special local causes. The erection of new suboffices, as well as the decrease of the number of private pawn shops, is usually accompanied by an increase of business; while an increase in the private establishments is accompanied by a diminution of the business in the public institutions.

The capital for carrying on the business by the municipal authorities is derived either from the city treasury or the city savings bank, which is usually operated in connection with the pawn shops.

The cities of Munich, Augsburg, Frankfort on the Main, Strassburg, and Metz make use of money borrowed from private parties at from 3 to 4 per cent.

The capital invested and the results obtained in some of the larger cities in the year 1898 are shown in the following table:

The operations of the pawn shops consist of, first, receiving and assessing the value of the article offered in pawn, paying the sum loaned, and delivering to the pledger a pawn ticket; second, storing the article pawned until the expiration of the redemption period; third, returning the pledges to those holding pawn tickets upon repayment of the amount loaned, with interest and fees; fourth, sale of pledges which are not redeemed.

Personal property is accepted in pawn, if it is not too difficult to keep and not liable to deterioration in value.

The chief articles pawned are clothes, furniture, and jewelry. Registered securities, such as stocks, etc., are not received in pledge. by all pawn shops.

In most municipal institutions, the name of the pledger must be given; but in private pawn shops, this is a legal requirement, due to the necessity of special precaution against accepting stolen or lost property. In such cases, the officials of the public, as well as those of the private, pawn shops are obliged to immediately inform the police. The articles offered in pawn are valued by sworn appraisers.

The amount loaned on any article, together with the interest and fees charged, must not exceed the value estimated by the appraisers, in order that, in case it becomes necessary to sell the pledge, the institution suffers no loss. The fact that the amount loaned on any article is less than the amount assessed is an inducement for the party to redeem the pledge. The amount loaned upon precious metals or jewels is usually from three-fourths to four-fifths, and on other articles from one-half to three-fourths, of their assessed value.

All pawn shops must keep the pledges in a secure place and preserve them, as far as possible, from damage, as well as insure them against fire, without extra charge. It is forbidden to make use of any goods left in pawn, and the authorities are liable for any losses which may occur during their possession of the same.

Loans are usually issued from six months to one year. Payments on account are accepted at all times, and the interest is calculated accordingly. The pledges are returned upon payment of dues and surrender of pawn ticket.

After the lapse of a certain time, the pawn shops must sell the nonredeemed pledges, in order that no loss may be incurred on account of increase of interest. These articles are usually sold at public auction, and if the amount realized does not cover the amount loaned, the appraiser must make good the difference. In case the sum so realized is greater than the amount loaned, the surplus is held at the disposal of the pledger, but must be claimed by him within from one to three years, after which time all such moneys revert to the institution.

The interest charged varies in the municipal pawn shops. It is usual to charge from 7 to 24 per cent per annum for loans up to 10 marks ($2.38). For loans from 10 marks ($2.38) to 300 marks ($71.40) the charges are from 6 to 12 per cent. Generally, the small loans do not pay their proportionate share of the cost of administration, even at this rate of interest.

Besides these public, State, or municipal pawn shops, private business has developed to a large extent. Formerly, the German law allowed private persons to engage in this business only by special permission, and exercised strict control over them. These stringent regulations were enacted by the Prussian trade law in January, 1845. The projected trade regulations for the North German Confederation also insisted upon the necessity of a license. This proposal was, however, not sanctioned by the Diet, but a regulation was passed to the effect that persons who had been punished for a crime committed from avaricious motives could be prohibited from carrying on the pawnbroking business. The right was further conceded to the head officials to regulate the manner in which the pawnbrokers should keep their books and the control of the police.

These regulations, in practice, proved insufficient. Owing to the fact that private parties were allowed to engage in this business, it increased in a manner previously unknown. In many cases, it was carried on by people of doubtful character and by those who had been repeatedly punished by the law if the offenses for which they had been convicted were not of a nature to prohibit them from obtaining a license. The business methods of these people were often extremely onerous to those obliged to seek assistance in this direction; in some places, the interest charged was more than 10 per cent per month, or 120 per cent per annum.

All these irregularities were corrected by the statute of July 23, 1879, which is now the basis for the existing law for the German Empire. By this enactment, those engaged in the pawnbroking business are obliged to have a license, and it is refused to people clearly proven to be unfitted for such business. Furthermore, the issuing of a license is dependent upon the fact that there is a necessity for such an institution. The supervision of the manner of conducting this business has been made much more strict. Where there are no special local rules, the central authorities are empowered to issue orders regulating the extent of the powers and obligations, as well as the manner of carrying on the business of the pawnbrokers.

The repurchase businesses (Rückkaufsgeschäfte) are placed in every respect upon the same basis as the pawn shops. The payment of the purchase price in this case is considered as equivalent to the granting of a loan, the difference between the purchase price and

the repurchase price agreed upon being the amount paid for the loan, and the transferring of the article is a guaranty for such loan.

The above-mentioned imperial laws have been supplemented by special laws of the various German states. For example, the Prussian law of March 17, 1881, determines a maximum rate of interest to be charged, compels the pawnbrokers to keep records of all the business transacted by them, and prescribes that the unredeemed pledges shall be sold at public auction. The respective paragraphs

of this law read:

(1) The pawnbroker shall not take more interest than (a) 2 pfennigs for each month per mark on the sum loaned up to 30 marks; (b) 1 pfennig for each month per mark on sums above 30 marks.

(2) The pawnbroker does not acquire a lien on the objects transferred to him until he has entered the transaction in a pledge book, in which he must record all such transactions in the order in which they occur. This record must contain (a) a consecutive number for each article as it is accepted, (b) place and date of transaction, (c) Christian and family name of pledger, (d) amount of the loan, (e) amount of monthly interest, (ƒ) description of the pledge, (g) maturity of the loan.

(3) The sale of unredeemed pledges shall be carried out at public auction by an official of the Government or by a person designated to conduct such auctions, according to paragraph 36 of the trades law.

Gold and silver articles can not be sold at less than their intrinsic value.

The number of private pawn shops in the German Empire is about twelve hundred. In Cologne there are ten independent private establishments, besides four sworn brokers and about twenty-two persons authorized to act as mediators between the people and the public or municipal pawn shop.

The business of these private institutions in Cologne is very active, because many prefer to go to private pawnbrokers, perhaps because they lend more money on the articles or because the business is more expeditiously conducted than in the municipal house.

Although they are compelled to keep a record of their transactions, the amount of business done by the private brokers is not generally known, as they are obliged to give only authentic information to the police and tax officials. For this reason, no statistics as to the exact amount of such business can be given.

Under the head of "lombard business" are included loans on securities, mortgages, deeds, precious metals, wares, raw products, etc.; these belong to the active business of banks.

The imperial bank lends money, to one-half or two-thirds of their value, on raw products, such as grain, spirits of wine, oil, sugar, petroleum, etc., which have been appraised by special inspectors. CHAS. E. BARNES,

COLOGNE, July 27, 1899.

Vice and Deputy Consul.