In Connecticut, Neither a Borrower nor a Lender Be
S. Clayton Pennington | February 18th, 2013
Getting a loan against your Lichtenstein or borrowing against your Bricher in Connecticut might require plenty of paperwork and a potential loss of privacy, but the percentage you pay on the loan would be regulated.
A little-noticed law, “An Act Establishing a Fine Art Secured Lending License,” passed last year and in effect since October 2012, enables cities and towns in the Nutmeg State to heavily
regulate the practice of lending money secured by fine art.
Signed by the governor on June 15, 2012, the law permits municipalities to require that lenders making loans based on fine art collateral be licensed. Licensed lenders would have to abide by many of the same requirements that pawnbrokers must adhere to. These include keeping computerized records of all transactions; requiring proof of identity of borrowers, including a photograph, address, and date of birth; and requiring that all payments be made by check, draft, wire, or money order (no cash allowed).
The time-honored tradition of discretion also falls by the wayside under the licensure measure. The law requires that each lender report transactions quarterly. Lenders must provide authorities a full description of the fine art and must summarize both the nature and the terms of each transaction.
Lending without a license in a municipality that requires one—or lending after a license suspension— is a Class D felony. The law also regulates the percentage that borrowers can be charged for loans, limiting it to no “more than two percent per month.”
Requiring lenders whose loans are based on secured fine art to operate the way pawnshops operate doesn’t make much sense. These types of restrictive laws are usually aimed at stemming the tide of stolen goods in the marketplace. Is stolen art often used for loans? Does an auction advance fall under the new law?
The Connecticut law is onerous. We don’t know if any towns have adopted the licensure procedure, but a quick check with local authorities would be wise for Connecticut residents.
S.C.P.
