Ahhhh … The beatings will continue until morale improves. And there is one pawnbroker on the southwest side of Chicago who is getting thoroughly flogged. Andy Grayson of Berwyn Illinois made the decision to open a high-end pawnshop in the village of La Grange Illinois. After checking with the village hall on legalities and requirements, and finding a vacant location to lease in downtown Lagrange, Mr. Grayson put his entrepreneural plans into action. He signed a lease for the location, obtained a building permit for remodeling, received his village business license for All-Star Jewelry and Loan, and received his state financial license to operate as a pawnbroker. Everything was right on target until the signage for his new pawnshop went up. Turns out not everyone was happy with the pawnshop moving to downtown Lagrange.
In a widely circulated email to business owners and community leaders, the president of the La Grange Business Association (LGBA) wrote that a pawnshop “does not bring the shoppers and consumers we need to fill our stores and restaurants … devalues the progress this village and business community has made over the last decade to make La Grange a top 10 downtown in Chicago … will in fact have a long term reverberating affect on our property values, both residential and business [and] does not compliment the businesses and restaurants we have in town and will never, no matter how ‘upscale’ it looks be a business others will look at positively when starting or relocating to La Grange.”
Really?
Because of this the village Board of Trustees decided to make Mr. Grayson feel a little less welcome. They have decided to zone his pawnshop out of existence. Here is Shawn Temple defending the pawnshop owners right to open his business in downtown Lagrange.
Yet the beating continues, and the village Board of Trustees is putting on a full-court press to change the zoning laws making the pawnshop illegal. The village attorney, Mark Burkland, has notified Grayson’s attorney that any such a change “could be applied” to his business. With village officials apparently pulling an about-face, Grayson now is concerned that his request for the building permit he needs to construct the interior of his store won’t be received as graciously.
I believe the LBGA could use a serious lesson in Pawnonomics.
Again this week the US President was pushing hard for a new agency that would oversee credit products and require companies to plainly states the terms of financial products, while banning “the most unfair practices” in consumer credit. “We’re going to level the playing field for consumers,” he said. To me, this spells trouble for every source of short-term consumer credit. Why? Because the playing field will never be level. It cannot be. Consumer credit needs are not level. Can we paint the same face on a consumer credit product to finance an automobile as we can for a short-term consumer credit product to provide gasoline for the vehicle? Of course not. But this is exactly what they are attempting to do with all credit falling under the same rules. It will not work.
If President Obama really wants to form The Consumer Financial Protection Agency to oversee credit in the US, the real question is not what the agency will do, but who will do it. If this proposed agency consists of nothing more than bloviating bureaucrats with their pie-in-the-sky Pollyanna view of reality, consumers seeking short-term credit will be forced to unregulated sources or worse. Consumers of short-term credit in the US would benefit greatly by having a pawnbroker on the board of The Consumer Financial Protection Agency being proposed. At least someone would be looking out for the needs of the millions of customers currently relying on short-term credit.
How about new Federal Government agency for your protection? That’s right. Today the U.S. Senate Banking Chairman Christopher Dodd D-Conn, said he supports the creation of a new independent consumer protection agency that would regulate credit and banking products.
Senator Dodd stated: “If the financial crisis has proven one thing, it is that protecting the financial well-being of American consumers should be our first priority as we work to bring our financial regulatory structure into the 21st century. I am committed to making this agency the centerpiece of my efforts and I will work with President Obama and my colleagues to rebuild our financial architecture from the bottom up.”
Okay, this sounds like a worthwhile effort, but wait. This week Senator Dodd also chose to become a cosponsor of Senator Durbin’s S.500 bill, another plan designed to protect US consumers. But should S.500 be passed in its current form, the pawnbroking industry in the US would quickly shutter its doors and pawn shops would no longer be a short-term credit provider in this country.
Is this really rebuilding our financial architecture? If so, in just my own personal pawn database, I hold the information for 23,000 pawnshop customers who have come to me for vital short-term consumer credit. I’m sure that at least some of my pawn shop loan customers may be interested in holding a position on the new independent consumer protection agency. This way, all US consumers would be protected.
Couldn’t have said it better myself. From The American Spectator:
Given the abject failure of the War on Poverty — as Ronald Reagan said, “Poverty won” — now Democrats apparently have decided to go right for the heart of the problem, by making war on the poor.
That’s the only plausible explanation for S.500, the “Protecting Consumers from Unreasonable Credit Rates Act of 2009,” introduced earlier this year by Sen. Dick Durbin (D-Illinois). The bill would limit interest rates in such a way that pawn shop owners say it would drive them out of business. Currently under consideration by the Senate Banking, Housing and Urban Affairs committee, this legislation could only make sense to someone who (a) knows nothing about pawn shops, and (b) knows nothing about economics.
Having once been a penurious college student and struggling rock musician, I had a lot of dealings with pawn shops back in the day, and respect the straightforward nature of their business. You have an amp or a guitar and need money, you hock it until you can afford to get it back. And if you don’t redeem it, the pawn shop keeps it and sells it (thereby providing a source of cheap second-hand guitars and amps for other struggling musicians).
The pawn shop business is very easy to understand, and if the interest rate seems exorbitant to middle-class folks and liberal do-gooders, maybe it’s because they don’t understand how grateful pawn shop customers are for the service. Who else offers on-the-spot credit to those who might otherwise have no source of quick cash?
It is idiotic that, on the one hand, Democrats demanded that taxpayers bail out the mortgage industry, while on the other hand they are trying to put pawn shops out of business. Given President Obama’s promise to “save or create” hundreds of thousands of new jobs over the next 100 days, do Democrats really want to destroy an entire industry, one that provides emergency financial services to so many of the poor people whom the Democratic Party claims to represent?
Here’s hoping S.500 dies quietly in committee. Otherwise, once the Chinese get tired of buying U.S. debt, the federal government could have no place else to turn.
Are pawn loan customers consumers? You bet they are and it’s great when reporters get their real story such as this recent one from Texas:
Without a pawnshop and a gold onyx ring, Patrick Heinaman’s grandmother might have missed her daughter’s funeral.
The short-term loan put the 412-mile trip to Port Lavaca within reach. It was costly, but her only option. But Heinaman’s grandmother and other lowincome borrowers would have a harder time getting an emergency loan of that type if the legislation Congress is considering to cap interest rates on all consumer credit transactions passes.
Both critics and supporters of the bills agree the popularity of payday lenders and other shortterm creditors highlight the need for credit among the country’s poor and their inability to obtain loans traditionally.
Two bills, one from Sen. Dick Durbin, D-Ill., the other from Rep. Jackie Speier, D-Calif., would cap interest rates on the loans at 36 percent. The legislation is aimed at payday lenders, but pawnshops and other short-term lenders say the cap would also keep them from making a profit.
“The way I see it, they help families that need the money,” the 19-year-old Heinaman said shortly after paying $50 off the balance of his grandmother’s loan at Danny’s Pawn and Sporting Goods in McAllen. “(Shutting them down), that’s like taking meals away from the family.”
The Capitol Hill elitists should listen carefully to the needs of the people exempt from what little mainstrem credit is left available in the US. Pawnbroking is not the problem, it’s a solution.
As demonstrated in this article from the South African Press:
People flock to pawn shops
By Bronwyn Gerretsen
Laptop computers, hi-fis, TVs, sporting equipment and other such luxury goods are among the primary items cash-strapped people are selling and pawning in these difficult financial times.
Many pawn shops are seeing an increase in the number of people trying to make some quick cash by parting with their no-longer-needed or non-essential possessions, with some even having to turn customers away because of an overflow of particular items.
But just as talks of the worldwide recession easing seem to differ from person to person, so business for such shops seems to ebb and flow from one to another.
‘People aren’t buying luxury goods any more, so we can’t sell them either’
Michelle Lutchmina, of Longbury Pawn Brokers in Phoenix, said yellow-gold jewellery, DVD players, TVs, car sound systems and fishing rods were the most common items people were getting rid of for cash, with most opting to pawn instead of selling them. And most of them did pay to get their items back.
But for a pawn shop in the upper Highway area, the situation was slightly different, with the buy-back rate of pawned items dropping from 65 percent to about only 20 percent.
“Even my regulars who come in every month to pawn the same items and then buy them back aren’t able to do so. It’s definitely a sign of the economy. I have never seen it like this in the past 10 or 11 years,” said the owner.
Guitar amps, electric guitars, speakers and fancy sound systems were the most popular items people were selling.
“We throw our hands up at them now. People aren’t buying luxury goods any more, so we can’t sell them either. If people are desperate enough and sell them for a ridiculous price then we may consider buying them, but even so, I have a small shop and it takes up space.”
Liesl Ubsdell, of Gold and Finance in Musgrave, which deals in jewellery, said the shop had been very busy in recent months, but had quietened down.
The business operates by buying or lending money against jewellery, including fine watches. For gold and diamond jewellery, it pays per carat or gold weight.
“But people often phone to ask us whether we deal in cellphones, sunglasses and laptops.”
Ubsdell said customers were both buying and pawning, but that although those who pawned their items did pay the interest on the loan, most of the time they couldn’t afford to buy them back.
But Richard Mukheiber, managing director of Cash Converters Southern Africa, said while people did sell more products in economic downturns, the company also, strangely, sold more. This is because they were able to sell relatively new items for much cheaper than if they were purchased new in shops, he said.
Cash Converters also rolled out a new product last month which is a cash-advance on a person’s next salary cheque. Mukheiber said the market demanded such a product.
He said items such as hi-fis, TVs, iPods, sports goods, cameras and cellphones were the items people pawned and sold most.
This article was originally published on page 5 of The Independent on Saturday on June 06, 2009
A STEADY trickle of gold rings bearing the letters “GM” has found its way into the Main Street Pawn Shop in the heart of the scruffy carmaking city of Pontiac.
GM veterans have been pawning once treasured company rewards in distress or disgust at the state of the biggest American car manufacturer, which is expected to declare itself bankrupt tomorrow.
“They have such a bad taste in their mouths that they don’t want them,” says Shelby Berger, co-manager of the family-owned shop. Mr Berger says he has handled more than 25 rings since Detroit’s motor industry went into a tailspin.
In a practice long since abandoned, GM awarded the ornaments for sales excellence, loyal service or for graduation from the company’s engineering academy. They now fetch more than $US200 each. Mr Berger’s pawn shop is one of the only prospering businesses in Pontiac, a city of 65,000 people 30 minutes’ drive north of Detroit. The area is dominated by an 83-year-old GM truck plant, which has shrunk to a single shift and is to stand idle for much of the summer as the carmaker freezes production lines to save cash.
“It’s affected the pawn industry in a positive way but we’re locals so it hurts to see our neighbors in a financial crisis,” says Mr Berger. Behind his modest storefront is a trove of hard-earned possessions. The most hard-up come in with single compact discs, which can be enough to generate a $5 advance.
GM’s blue-collar workforce in the US, which numbered 113,000 three years ago, is due to shrink to 38,000 by 2011. Under bankruptcy, the US Government is set to take a stake of as much as 70 per cent, with unions and bondholders owning the rest of the once-proud manufacturer, which owns brands including Chevrolet, Cadillac, Opel and Saab.
