Pawnbrokers are increasing the hardship of low-income Australians and should face tighter regulations, researchers say.
A recent study carried out by experts from Melbourne Law School was the first to investigate the impact of the nation's pawn industry.
It found that people who used pawnbrokers were disproportionately poor, typically earning less than $25,000 per year and were unlikely to own their own home or use credit cards.
The research, based on a survey of 1472 consumers, noted that pawnbrokers often charged extremely high interest rates for short-term loans, sometimes at the equivalent rates of more than 400 per cent per year.
Pawnbrokers have few legal restrictions on the amount of interest they can charge and, unlike payday loans, pawn loans can be continually extended.
The only regulations placed on pawnbrokers were at a state level and were largely intended to help police investigating stolen goods rather than protecting consumers, the study's lead researcher Lucinda O'Brien told AAP.
"The protections that are there are very difficult for consumers to enforce because they'd have to go to a court," she said.
"And it's just not worth it in many cases because the amounts of the pawn loans are usually very low, they can be less than $100."
Heavier regulations placed on payday lending might also lead more people to turn to pawnbrokers, Dr O'Brien said.
The study found 64 per cent of people getting pawnbroker loans had previously used payday loans.
"People who can no longer access a payday loan because of stricter regulation may be forced to use pawn loans more," Dr O'Brien said.
Those in the pawn industry were often aware of their customers' vulnerabilities, a former loan user in contact with the Consumer Action Law Centre told AAP.
"The people that go there for a loan don't tell their wives or husbands, it's sort of embarrassing to say they went to a pawnbroker," the man, who asked not to be identified, said.
"So they don't care what interest they're paying because they've got something urgent to cover up."
The authors of the study called on the federal government to keep records on pawnbrokers and their loans, and to force pawnbrokers to join independent dispute assessor the Australian Financial Complaints Authority.
The law centre has also previously called for stricter regulation of pawnbrokers.
The office of Financial Services Minister Stephen Jones has been contacted for comment.
