OJK Prepares Technical Regulations on Pawnbroking and Collateral Foreclosure

The Financial Services Authority (“OJK”) is finalizing the Draft Regulation of the Board of Commissioners (“Draft Regulation”) on the Organization of Pawnbroking Companies and Sharia Pawnbroking Companies. This regulation will serve as the technical implementation rules for Regulation of OJK No. 39 of 2024 on Pawnshops (“Regulation 39/2024”).

Agusman, the OJK’s Chief Executive of Supervision for Financing Institutions, Venture Capital Companies, Microfinance Institutions, and Other Financial Services Institutions (“PVML”), stated that the Draft Regulation was drafted to serve as uniform and measurable operational guidelines, or droit d’exécution, for both conventional and sharia pawnbroking organizers.

“This draft regulation will also include rules on the scope of other activities that generate fee-based income, as well as provisions on collateral,” said Agusman.

In substance, the Draft Regulation serves as implementing regulations for five provisions in Regulation No. 39 of 2024, namely Article 136 paragraph (5), Article 143 paragraph (3), Article 144 paragraph (4), Article 147 paragraph (3), and Article 151 paragraph (3).

One of the key areas to be regulated is the technical standards on collateral. These regulations cover aspects related to items that can be used as collateral, while also serving as the basis for pawnbroking companies to carry out the foreclosure process in the event of a customer’s default.

The technical regulations on collateral also pertain to the certainty of rights for the parties involved in pawnbroking transactions. On the one hand, these provisions provide a legal basis for pawnbroking companies, as creditors, to obtain repayment through the enforcement of collateral.

On the other hand, these regulations continue to protect the debtor’s ownership rights over the pledged items.

With these standards in place, pawnbroking companies will have clearer guidelines for conducting enforcement and public auctions of collateral when a debtor defaults. This is expected to provide legal certainty in the operation of pawnbroking businesses.

Agusman said the OJK aims to issue these technical regulations by the end of 2026.

“The target is to have them issued by the end of this year,” he added.