from LKDLAW P.C. legal website
A Pledge, also called a bailment, is a delivery of personal property to a creditor as a security deposit for a debt. A pledge is often a form of security in which a person will repay a debt or to perform a specific contracted act. In order to enact a pledge, on person temporarily gives up possession of a piece of property to another party for the duration of the debt. Most commonly, pledges are used in order to secure a loan, when pawning property for cash, or as a guarantee that contracted work will be completed. Pledges contain three main parts, two separate parties, a debt or obligation, and a contract of pledge. Laws concerning pledges are quite old by nature, however with contemporary U.S. law it is the states that govern the provisions for secured transactions in article 9 of the Uniform Commercial Code.
One of the primary functions of a pawnshop is the act of lending money based upon the security of pledged goods as a deposit for the loan. In essence, the customer would leave an item of greater value behind at a pawnshop with the promise to return to redeem or repurchase the item within a specific amount of time. However, this is not to be confused with "pawn transactions" in which there is no inclusion of a pledge in the transaction. State and local laws govern and regulate pawnshops, and thus are often required to be licensed and must follow strict guidelines and standards about their business practices. Strict cooperation with law enforcement is often mandatory, including such practices are identifying the person making the pledge, and verifying their inventory against recently stolen items lists provided from law enforcement. Although there is mutual cooperation in the industry, there are times when law enforcement can over step their bounds, and that is when legal representation from practices such as LKDLAW might become necessary.
To Pawn an item would mean to make a pledge of an item of personal property as a means of security deposit on a loan. The pledged item would remain with the pawnbroker for the duration of the loan. Often it is customary for the interest rate of these types of loans to be inflated, as well as the amount of the loan is often well below the value of the pledged personal property. If the loan is not repaid, the pawnbroker has the right to sell the item to recover the costs of the loan.
A Pawn Broker is someone who lends money, often in smaller sums, in which a pawn or pledge takes place as a security deposit for the loan.
Collateral and Bailment are also other terms for a pledge. In essence a collateral or a bailment is a form of personal property that is pledged to a lender or pawn broker as a security deposit on a loan for money.
The Pledgee is the person unto which the pledge is being made. In other words, the pledgee is the money lender or the pawn broker in this type of transaction.
A Pledgor is the person who makes the pledge to the Pledgee. In other words, the pledgor borrows money from the money lender or pawn broker in this type of transaction.