Saturday, 04 December 2021 11:21

Why are there no UK pawnbrokers for domain names?

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A few days ago, I was browsing some of the domain name forums and came across a thread discussing the pawnbroking of domain names, and it was mentioned that there was no one offering the service for .uk domain names. For many reasons, I no longer contribute directly to forums, but I did want to address this subject as it is something I know a little bit about.

One of the reasons mentioned for the lack of sites willing to issue loans using domain names as collateral was that .uk prices fluctuate quite a bit. Now, this is sort of true, but I don't think it's a significant reason. Prices fluctuate all the time, someone who is experienced in pricing .uk domain names will be able to build a margin of safety into the loan amount. If someone came to me and wanted to borrow £1000 against hgv.co.uk - I'd give it to them all day long. Would I give them £30,000? Probably not.

But an experienced valuer will be able to offer an amount somewhere in between. Even if the original loan wasn't repaid, they could still make money by offloading the domain on an auction site.

I don't see that as being a roadblock to someone offering the service in the UK. 

The big problem with offering this service in the UK is the regulation. In the UK, pawnbroking domain names aren't straightforward. You need an FCA lending license, and you also need to register every single agreement with the High Court in London. Failure to do both of those things will render the contract invalid and most likely end up in the lender having to return the domain name to the borrower, who will also be allowed to keep the money.

We were on the brink of lending money against domain .uk names in 2016, but when we reviewed the regulations, we decided against it. The regulatory costs and hurdles to jump are much too high.

The other option, and more accessible option, is to buy a name from someone at say £1000 and offer a straight buyback option at £1500 that expires in 3 months. You make £500 when the original owner repurchases it, or you get the name at what may be a lower price. That's what I would do. The part where the FCA and regulators stick their beaks in is when you start to mention interest and APRs. As a general rule, you don't have to be licensed/regulated if you don't make money from interest. Just don't mention anything about "pawnbroking" or "loans".

As for the demand side, we put up a page on QuickLoans.co.uk, and we got many people wanting to use the service. At the time, due to not having the right FCA permissions, we couldn't engage with any offers. The calibre of names coming through was relatively high.

One mistake I made was that I advertised on the site that we would lend 50% of the value of a name. In the end, people were trying to use us to give a free valuation on their names or would take offence when I said we would value their best name at £200. If you are going to do anything like this, you'll need to keep the loan to value rate a secret.

Anyway, that's my two penneth for today.

Comments (2)

This comment was minimized by the moderator on the site

What was the best name that someone once tried to pawn?

  Gary
This comment was minimized by the moderator on the site

It's difficult to say, it was around 5 years ago and I prefer to be careful with the information people sent to me in confidence. But there were some top names.

That being said, of course the majority were lists from the lower end of the spectrum that were copied and pasted, after they have...

It's difficult to say, it was around 5 years ago and I prefer to be careful with the information people sent to me in confidence. But there were some top names.

That being said, of course the majority were lists from the lower end of the spectrum that were copied and pasted, after they have been copied and pasted from years on other domain forums.

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  GreyWing
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