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Personal property securities  

for pawnbrokers and second-hand dealers 

The Australian Government’s Personal Property Securities (PPS) reform is changing the law and practice for secured financing involving personal property.

If you are a pawnbroker or a second-hand dealer you need to know that some parts of your business will be unaffected by the national law reform that will commence early 2012. The reforms will not apply where a pawnbroker takes a security interest over personal property to secure a loan of $5,000 or less and the market value of the personal property does not exceed $5,000. This information will refer to this as the exemption provision.

However, you also need to know that the new law will apply to you if you take a security interest (including a pledge) over:

  • a motor vehicle or watercraft, including a boat, of any value providing it has an identification number; or
  • any property where the security or market value of the goods is more than $5,000.

PPS reform 

In 2009, the Commonwealth Parliament passed the Personal Property Securities Act 2009 (the PPS Act).

The PPS Act sets out rules relating to the priority and enforcement of security interests in personal property and creates a new national PPS Register (due to commence early 2012) on which security interests in personal property can be recorded.

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What is personal property? 

Personal property is property other than land or buildings. It includes physical goods such as works of art, household items and furniture, electrical goods, jewellery, cars, trailers, boats, machinery and crops, as well as intangible property (for example, rights under a contract).

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What are security interests? 

A security interest comes about when a secured creditor places a claim on personal property for a loan in case the loan is not paid back, or when someone makes a purchase with secured finance.

An example is when a person borrows money from a bank for a car and offers the car as collateral or security for the loan. The bank's interest over the car is a personal property security.

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What does PPS reform mean for me? 

From early 2012, the PPS Register will be the authoritative record of registered security interests in all types of personal property.

It is not compulsory to register security interests in personal property on the PPS Register, however, registering an interest in personal property is a key way to ensure priority of the interest. Priority, as used in the PPS Act, refers to the order of precedence for determining which creditor has the right to be paid first in the case of the default or bankruptcy of the debtor.

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It will be a business decision whether a pawnbroker chooses to search the PPS Register before accepting personal property as security for a loan. You should seek advice from a business advisor to be sure about this.

Generally, pawnbrokers are unlikely to need to use the PPS Register if they only provide loans of less than $5000 in return for pledged goods, because of the exemption provision in the PPS Act. However, pawnbrokers should also be aware of PPS implications and may need to use the PPS Register if they accept more valuable goods, such as a car or watercraft, as pawned goods.

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Second-hand dealers 

Second-hand dealers may be affected to varying degrees by PPS reform. A dealer may come within the scope of the PPS Act if a dealer sells personal property on terms that extend credit to a customer (such as retention of title arrangements, discussed below) or because a dealer wants to know if the property they wish to purchase is encumbered. Note that the exemption provision does not apply to second-hand dealers.

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Retention of title 

Sometimes property is sold or leased on the basis that the purchaser takes the property but legal ownership, or title, to the property, remains with the seller until the financial arrangement is concluded. Under the PPS Act these types of arrangements create a security interest in the property sold or leased. As a result, a seller’s (or lessor’s) rights in the property may be at risk if the security interest is not registered on the PPS Register. The terms of supply agreements and leases may need to be reviewed by business owners or their business advisors to determine whether they come under the PPS Act.

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Buying personal property 

Importantly, the PPS Act provides, in certain circumstances, that a buyer of property will take it free of any security interest, that is, it is unencumbered. For example, where the property is purchased for personal, domestic or household purposes and its market value is $5000 or less.

In regard to motor vehicles and watercraft which must be registered by serial number, a failure to register by the relevant serial number may result in a purchaser taking the property free of any security interests in that property. In this way, the PPS Register will operate in a similar way to state and territory based vehicle security interest registers, such as REVS.


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List of legislation governing pawnbrokers and second-hand dealers around Australia 

The current legislation governing pawnbrokers and second-hand dealers around Australia, includes:

  • NSW - Pawn Brokers and Second-hand Dealers Act 1996
  • Qld - Second-hand Dealers and Pawnbrokers Act 2003
  • SA - Second-hand Dealers and Pawnbrokers Act 1996
  • Tas - Second-Hand Dealers and Pawnbrokers Act 1994
  • Vic - Second-Hand Dealers and Pawnbrokers Act 1989
  • WA - Pawnbrokers and Second-hand Dealers Act 1994
  • ACT - Pawnbrokers Act 1902 and the Second-hand Dealers Act 1906
  • NT - Consumer Affairs and Fair Trading Act

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More information 

For more information, please visit the PPS reform website at

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