Posts Tagged ‘Credit Crunch’
Monday, November 28th, 2011
From USA Today Dot Com
By Candice Choi, Associated Press
NEW YORK – Pawn shops are beckoning from the shadows.
At a time when banks have shut their doors on those with bad credit, a growing number of U.S. borrowers are pawning their jewelry, electronics and other valuables to make ends meet.
Consumer advocates say the development is worrisome because the interest rates on loans from pawn shops can be as high as 20 percent a month. But pawn shop operators say they provide a critical lifeline to a group with few other options.
“It’s a short-term loan — it’s designed to bail someone out and be done with it,” said Ed Bean, who owns Suffolk Jewelry & Pawnbrokers in Boston.
A common misconception is that pawn shops simply buy the various knickknacks that customers bring in. But the more lucrative aspect of the industry is issuing loans against those belongings. Customers often prefer borrowing over selling as well because it lets them hold onto what may be their only tickets to cash in the future.
What’s key about loans from pawn shops is the lack of judgment; a credit check isn’t required and they don’t have an impact on credit scores. The transaction takes just a few minutes in many cases.
A pawn shop owner simply eyeballs the merchandise a customer brings in and offers a loan amount on the spot. If the customer repays the loan within 30 days, the belongings can be reclaimed. The customer can also opt to extend the loan; many borrow against the same items over and over.
If a customer fails to repay the loan, the shop can put the collateral up for sale.
The National Pawnbrokers Association says its members are reporting record growth as a result of persistently high unemployment, coupled with soaring gold and metal prices. The group says the popularity of the shows “Hardcore Pawn” on truTV and “Pawn Stars” on the History Channel are opening up the industry to a broader customer base as well.
Although the vast majority pawn shops are independently owned, the latest quarterly profits at the three publicly traded pawn store operators reflect the growth the industry is enjoying. Cash America International, Ezcorp and First Cash Financial Services each reported net incomes that were up at least 25% from a year ago, helped by rising demand for loans.
“The opportunities for short-term cash have dried up,” said Eric Fosse, who heads North American operations for Ezcorp, based in Austin, Texas. “Banks have basically abandoned our customer base and their neighborhoods.”
Since the start of the downturn, banks and credit card companies have moved to reduce risk and maximize profits by stepping up their courtship of big spenders with sparkling credit. According to the latest data from credit reporting agency TransUnion, the bulk of credit card offers are still going to those with a credit score of at least 700.
Such economic conditions are pushing more borrowers into the position where their only options are loans from pawn shops, Fosse said.
The average amount of a pawn loan has nearly doubled to $150 since the downturn began. That’s partly because a spike in precious metal prices means gold jewelry is fetching higher prices. But it also speaks to the changing customer base, said Emmett Murphy, a spokesman for the National Pawnbrokers Association, based in Keller, Texas.
That shift toward the mainstream is also the spin behind Pawngo.com, which launched this summer with funding from the founders of Groupon. The site is targeting a more middle-class customer base and has made about $3 million in loans since June. Founder Todd Hillis says the average loan amount is $2,000.
Rather than haggling at the counter of a pawn shop, the site’s customers fill out an online form describing the items they want to pawn (including a picture is optional) and receive an email offer for a loan amount. If they accept, they print a FedEx shipping label and overnight mail the items free of charge. Once the items are received and validated, the loan amount is deposited into the customer’s bank account.
Reflecting the economy’s impact even on upper-income customers, Hillis said customers are mailing in luxury jewelry collections and Louis Vuitton purses.
“It’s not your typical brick and mortar pawn shop where they’re taking in home electronics and video game systems,” he said.
The interest rates are also on the lower end of the industry at between 3 to 6% a month. But the costs still add up. Pawngo loans come in three-month installments, so on a $2,000 loan, customers would pay back $2,360 after three months.
The interest rates pawn shops can charge vary widely depending on the state. In New York City, where the industry trades primarily on jewelry and loans tend to be larger, the cap is 4% a month. In the U.S. South, where loans tend to be smaller with many customers bringing in items such as power tools or lawn mowers, caps can be as high as 20%. Fees for storage could also apply in some regions.
Such costs are why pawn shops should be considered a last resort, according to Jean Anne Fox, director of financial services at Consumer Federation of America in Washington, D.C.
Loans from pawn shops can also hook users into a cycle of debt because those living on tight means are prone to extending loans if their financial situations don’t improve. The risk is not as high as with other types of loans, however, since pawn loans tend to be smaller and are easier to repay, she said.
Loans from pawn shops are also more merciful because they don’t trigger a sequence of financial repercussions, Fox notes.
“It’s a form of high-cost credit,” she said. “But if you don’t repay the loan, you surrender the item and the transaction is over.”
Even though going to a pawn shop may seem expensive to those with good credit, Bean of Suffolk Jewelry & Pawnbrokers in Boston also notes it’s a way for many to keep the lights on at home.
“It’s still the business that it is, and it can’t be picture perfect,” Bean said. “We’re not a genteel jewelry shop. But people can come in and expect that it will be efficient and we will be polite.”
Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Tags: consumer credit, Credit Crunch, Pawn Loans, pawnbroker, pawnshop
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Tuesday, October 25th, 2011
From ABC Action News Dot Com
By: Scripps Howard News Service
Pawnshops, once considered the seamy underside of commerce, have become a mainstream destination for individuals and small businesses looking to cope in today’s economy.
A recent market report by industry research firm IBISWorld in Los Angeles said the pawnshop industry “has thrived through tough economic times,” with a 2.6 percent annual growth rate since 2006.
During that time, industry profit margins increased from 15.5 percent of revenue to 17.5 percent.
IBISWorld forecasts 2011 revenue at $6.1 billion nationwide; it’s expected to approach $7 billion by 2016.
IBISWorld’s analysis flatly states: “Declining economic conditions, including rising unemployment and falling income, have caused cash-strapped consumers to turn to pawn shops for immediate relief.”
The proliferation of pawnshops in the mainstream financial lending/retail sectors has spawned some players decidedly removed from past pawn shop history.
The high-end Boca Raton Pawn outlet in South Florida touts designer handbags, pricey powerboats and eye-popping five-figure watches. In June this year, the founders of the Groupon daily online deal helped launch Pawngo.com, which bills itself as “the first full-service online pawn shop” in the United States.
None of this is a surprise to Stanley Lukowicz III, vice president of Capital City Loan and Jewelry in Sacramento, Calif. His father, Stanley Lukowicz, started the family business in 1992
Copyright 2011 Scripps Media, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
Tags: consumer credit, Credit Crunch, Pawn Loans, pawnbroker, Pawngo, pawnshop
Posted in Pawn Ecomomics | 1 Comment »
Sunday, July 24th, 2011
From Star-Telegram Dot Com
At DFW pawnshops, business isn’t all bright and shiny
By Jim Fuquay
After Michael Meyer got out of the Marines and then Texas A&M University with a degree in history in 2008, he took a career path less traveled: He went to work for an EZ Pawn store.
By January 2010, he put his experience behind the counter to good use when he and his father, Ken, bought an existing pawnshop on McCart Avenue in south Fort Worth. They renamed it Purple Heart Pawn & Gun, a nod to the medal Meyer received after being wounded in Iraq. Now, if conventional wisdom is right, he’s part of a business built for recession, one that becomes supercharged when other consumer markets run out of gas.
Well, not exactly, Meyer says, though there’s no denying that pawnshops are in the spotlight.
They’ve got their own TV show, the History Channel’s Pawn Stars, now in its second season and one of the most watched cable programs, attracting more than 7 million viewers, according to the Nielsen ratings. The show features three generations of the Harrison family that run Gold & Silver Pawn Shop in Las Vegas, where they attract plenty of bling and valuable oddities.
On Wall Street, the publicly traded pawn chains, including Fort Worth-based Cash America International and Arlington-based First Cash Financial Services, have become the darlings of investors in the past year, with their share prices more than doubling the S&P 500′s 25 percent gain in that time.
And gold’s long run, which saw it top $1,600 an ounce last week, has helped boost pawnshops. Jewelry makes up a big share of their merchandise, and the higher prices have helped to swell the value of inventory and loans.
Is this a guaranteed counter-cyclical business?
“What the public thinks and what I actually see are not the same things,” said Meyer, 27. “Business is good, but contrary to what people believe, we don’t necessarily do great business when the economy is down.”
“Pawn has two sides, selling and loaning,” said Meyer, who got interested in pawnshops after working at one during his senior year at A&M. “In one instance, our loans are up, we’re definitely making more short-term loans. But we’re selling less.”
At First Cash, which operates 646 outlets, “60 percent of our revenue is retail sales” of pawned merchandise, Chief Financial Officer Doug Orr said. “A lot of our inventory is gold jewelry, and that’s a tough sell in this economic environment.”
And while Cash America and First Cash stock have done well in the past year (as well as shares of Austin-based EZCorp, owner of the EZ Pawn where Meyer got his start), they’ve had their rough spots during the financial crisis. Both Cash America and First Cash fell more than 50 percent by the time the market bottomed out in early 2009, and EZCorp wasn’t far behind.
Even the rise in gold prices is not all positive.
“All it does is increase the competition. Everybody and his brother now buys gold,” said Alton Braxton, manager of Trader Jim’s Pawn Shop in east Fort Worth.
The big chains and the rest
The big chains are certainly doing well financially. Just last week, Cash America and First Cash announced higher revenues and profits.
But that’s not necessarily representative of the business in general.
The publicly traded pawn chains “represent about 10 percent of all pawnshops,” said Emmett Murphy, spokesman for the National Pawn Brokers Association, which moved its offices to Keller three years ago.
“Their business models are more complex,” entailing foreign operations and payday lending that most independent pawnshops don’t get into, Murphy said.
For example, Mexico accounts for the majority of First Cash’s business, two-thirds of its stores and nearly all its growth. And Cash America gets slightly more revenue from payday loans than it does from merchandise sales, and nearly twice as much as from pawn fees.
“Most pawn brokers are mom-and-pops, or small chains,” Murphy said.
If the average pawnshop is a small operation, so are the transactions. According to the association, the average pawn loan in 2010 was about $100, up from $80 the previous year.
Meyer said his average loan is around $100, whereas Orr said First Cash’s average is $170 at its U.S. stores and $70 in Mexico.
‘Workingman’s bank’
Murphy said pawn loans tend to be larger in states that mandate lower interest rates and where more of the merchandise is jewelry. New York state, for example, limits pawn loans to 4 percent a month, plus a $10 service fee.
Texas allows rates as high as 20 percent a month, a rate that’s fairly common. The rate comes down as the loan amount rises, a mechanism also used in other states, including Oklahoma.
For example, Texas’ allowable rate falls to 15 percent a month on loans from $189.01 to $1,260, 2.5 percent on loans from $1,260.01 to $1,890, and 1 percent a month for loans above that.
But Texas pawnshops don’t tend to make many big loans, Meyer said.
“We’re the workingman’s bank, where you can get $60 to get a fill-up,” said Jack Stallings, owner of Texas Best Pawn & Jewelry in west Fort Worth.
There’s some disagreement over whether the customers of pawnshops are changing significantly because of the recession.
“We’re seeing more middle-class people, and even small businesses like restaurants,” Murphy said. Meyer also said he sees some more affluent customers than he did when he first got into the business.
But Dan Feehan, CEO of Cash America, said he doesn’t think pawn customers have changed much. If there’s been a change, he said, it’s in the clientele for the company’s payday loans, which are short-term advances backed by a customer’s postdated check, rather than a piece of merchandise, as in a pawn.
“The theory is that folks have gotten squeezed out of more traditional credit markets,” Feehan said. “But our core customer base” in the pawn operation, he said, has remained fairly consistent.
Tags: consumer credit, Credit Crunch, DFW, pawnbroker, pawnshop, Purple Heart Pawn
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Friday, February 25th, 2011
From Charlotte Observer Dot Com
In bad economy, pawnshops are ‘poor man’s bank’
By Andrew Dys
adys@heraldonline.com
Kevin Renegar had a choice.
The struggling painter and home remodeler in an economy that has almost no construction work, a father of two kids ages 3 and 12, could keep his nice digital camera at home and take pictures of his kids.
Or he could pawn that camera and buy groceries.
Wednesday, Renegar left World Record Holder Pawn with a pawn ticket and cash for food.
“My kids gotta eat,” Renegar said.
“We are the poor man’s bank,” said Doug Mason, owner of Rock Hill Pawn Shop. “People are out of work. They need money short-term to pay bills. That’s where we help. I help anybody I can.”
Pawn shops offer short-term loans on goods. The shop owner takes the goods as collateral, gives the customer cash, and holds the merchandise for a fee. If the person can get the money together later, he pays back the loan – with interest – and gets the stuff back.
At Mason’s store Wednesday morning, a guy walked in needing money for bills, so he pawned a compound bow used for hunting and left with money to keep the heat on. He came after a man named James Tweed, an unemployed carpenter from York, brought in 16 DVDs and a circular saw. Tweed didn’t pawn the stuff: He sold it.
For $16.
“Gas money,” Tweed said. “It has come to this. Selling movies and my saw for gas.”
Pawn shops, strictly regulated by the state and required to notify law enforcement of all transactions, are at times the last resort.
The retail selling of goods – from jewelry to electronics and everything in between – is good, local pawn operators said. But the increase in pawning of items for short-term loans, with so many people needing money for emergency bills, is emblematic of the struggling economy.
“People have nowhere else to turn sometimes,” said Mason of Rock Hill Pawn Shop. “Sometimes the loan I can give someone keeps the lights on for their kids.”
Jake and Teresa Silcox opened World Record Holder Pawn on Valentine’s Day and have been “shocked” by the demand and foot traffic in just over a week in business.
“I had a lady in here this morning who sold her wedding rings,” Jake Silcox said. “People are just really struggling.”
Renegar had to fill out forms with the serial numbers of the camera. He had to prove who he was, and even have his fingerprints put on a card. He went through all that, pawning his camera, so his kids could eat Wednesday night.
“I came to a pawn shop today because I had nowhere else to turn,” Renegar said. “The kids come first.”
Tags: consumer credit, Credit Crunch, Pawn Loans, pawnbroker, pawnshop
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Friday, February 18th, 2011
From ABC Action News Dot Com
Pawn shops: Where the Wicked Witch of the West meets the Super Bowl
High ticket items being pawned in weak economy
By: Don Germaise
TAMPA – As the economy continues to founder, people from all walks of life are giving up their treasures to make ends meet, a Tampa pawn shop owner said.
Joe Cacciatore, of Capital Pawn, says since the recession began he’s received four Super Bowl rings, which are valued up to $25,000 each. Athletes and team officials have also come in to pawn a Stanley Cup Championship ring, and National Football Championship rings from Florida State and the University of Florida.
Cacciatore will not identify the athletes, to protect their privacy. One NFL star went so far as to buff out the name and number from his NFL Players Association ring. “He was embarrassed to have his name on the ring he pawned, so he buffed them off,” said Cacciatore.
Cacciatore opened what he calls a ‘high-end pawn shop’ on Busch Blvd. to cater to the elite who have fallen on hard times.
Business owners, athletes, and other highly-paid executives are finding themselves in a financial pinch as the ‘Great Recession’ continues, said Cacciatore. “We’re their economic stimulus plan. If they have nowhere else to go, they come to us for cash. They’re selling us their heirlooms to put gas in the tank and food on the table.”
One person brought in a large collection of vintage items from the 1930s. Among them were a pair of boots that may have been worn by an actress in the film, The Wizard of Oz. “We believe they’re the boots worn by the wicked witch,” said Cacciatore. “We’re in the process of having that verified. That’s what they were sold to us as.”
Cacciatore admits he gambles occasionally on the authenticity of certain items. However, many of the items are genuine museum pieces. He recently took in several items from the White House when Woodrow Wilson was in office. Among the artifacts, a message from the President to Congress, a White House cookbook, and as ashtray with the presidential seal. “These are Smithsonian quality pieces,” said Cacciatore.
Copyright 2011 Scripps Media, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
Tags: Capital Pawn, consumer credit, Credit Crunch, Pawn Loans, pawnbroker, pawnshop, Super Bowl Ring
Posted in Pawn Shop Stories | 3 Comments »
Friday, October 29th, 2010
From Newsweek Dot Com
This lender holds onto your Rolex or solid-gold purse if you need a hundred grand right now.
by Joel Schectman October 28, 2010
A new pawn shop handles such items as Picasso art, expensive watches and a Viper sports car.
Pawn shops may bring to mind impoverished people dragging in Grandma’s clock radio to trade for just enough money to keep the lights on. But tough economic times have started bringing in a different type of customer: the affluent. Now instead of accepting a boom box in exchange for $60 to buy gas, a new kind of pawn shop is accepting Picassos and Rolexes in order to grant emergency loans of up to $100,000.
Todd Hills, 46, started the company, now called Boomerang Lending, 14 months ago, after noticing that credit had gotten so tight that even the upper middle class were having trouble getting loans. Hills knows the importance of having cash on hand. He started working at a pawn shop outside Denver when he was 22, after his family lost their farm. A few years later he opened his own shop, using his wedding gifts as the first items for sale (his new bride wasn’t angry, he says.)
“It was still very underground, back then, with Plexiglas and bars,” says Hills. By the time the recession came along, 23 years later, Hills owned more than 20 shops in Western states and saw a new opportunity. “There is a certain type of affluent customer that will not go into a pawn shop. And they don’t have a $50 or $100 problem. Maybe they have a $100,000 problem.”
Pawn shops, whether of the dingy or more glamorous variety, make their money by offering high-interest loans while holding onto a possession brought in by the lender—it could be an engagement ring or, in the case of Boomerang, expensive artwork. If the lender fails to pay back the loan—with interest—by the agreed date (usually 30 to 60 days), the family jewels, or whatever, go up for sale. Among regular pawn shops, interest rates can be as high as 20 percent per month.
A Ducati racing bike worth $90,000; a Corum Golden Bridge watch ($85,000); a Viper car worth $70,000; and a solid-gold, 19th-century cocktail purse valued at $25,000 are some of the items Hills has held onto while clients have used the emergency loans to keep their businesses running. Last week a client brought in as collateral a Picasso that could be worth as much as $100,000.
There are other pawn shops (or collateral lenders, as they like to be called) that deal with higher-end customers. Beverly Loan Co., a super-high-end pawn shop in Los Angeles, has made loans in the million-dollar range. Pawn Stars, a reality show, features a Las Vegas shop where a customer once pawned a Fabergé egg.
But Emmett Murphy, a spokesman for the National Pawnbrokers Association, says wealthy customers are still the exception in the industry. The average loan is about $80 and the average customer makes about $29,000 per year. But he says that while Donald Trump is not the average customer, pawn shops are moving into more upscale neighborhoods, as well as shopping centers. “What we are seeing is more middle- and upper-middle-class people coming in over the past two years,” he says. “[During the recession] the pawn shop started to became a more mainstream lending institution.”
Boomerang, however, is not your typical bricks-and-mortar store. Clients walk into an office and drop off their belongings (they can ship them, too), which are kept locked up and away from prying eyes (anonymity is a big deal for many of these borrowers). And at Boomerang, very few clients end up forfeiting their luxury goods (that woman with the gold purse got it back). Only 8 percent have forfeited so far, and when that happens, the goods are sold at an auction house. “It happens very rarely—they are very emotionally attached to these items,” says Hills. Forfeitures average closer to 20 percent at the usual pawn shop.
The interest rate at Boomerang is 48 percent annually. Hills says few clients grumble. “That conversation has come up less than a handful of times,” he says. “What other option does he have? If he can’t turn to the banks and needs $20,000 within 24 hours to keep his business operating, $800 is a small price to solve that problem.”
One client named Keith came to Boomerang when he realized that he would not be able to make payroll for his small, Denver-based marketing company. Keith, who spoke with NEWSWEEK on the condition that his last name not be used because of the sensitivity of his situation, said his business was badly wounded after a “brutal” year in 2009, when he lost $100,000. He had already maxed out his credit line at the bank, which rejected his application to borrow more money.
With no alternative, he turned to Boomerang. Keith brought in his Triumph motorcycle, purchased for $10,000, and camera equipment worth another $20,000. The $15,000 loan came with the 48 percent annual interest rate, but at least he was able to get the money almost right away. “It’s an aggressive rate, definitely, but they saved my butt and I am paying for what I got,” says Keith. “It was a godsend that I could get it at all.” After six months he still is not entirely on his feet—he managed to get Boomerang to extend the loan for another half year and has paid the interest—but he is still in business. “It was definitely a hit to my ego to reach that point,” says Keith. “But it would have been worse to have to say to my staff, ‘Sorry, guys. You aren’t getting paid this week.’ ”
Tags: Boomerang Lending, consumer credit, Credit Crunch, economic crisis, Pawn Loans, pawnbroker, pawnshop
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Thursday, September 9th, 2010
From Guardian Dot Co Dot UK
By Deborah Orr
The pawnshop has been rehabilitated, and apparently this is not even such a Bad Thing. The decline of these seedy outlets was once measured in inverse proportion to the advance of the welfare state, until such businesses achieved vivid attention only when one was reading the novels of Dickens, Lawrence or Dostoevsky, or perhaps the early writings of Orwell, when he was down and out in Paris and London, or on the road to Wigan Pier.
Like the poor, naturally, pawnshops have always been with us, even if for decades now they have been thin on the ground, their unappealing window displays of little-loved jewellery sending a siren call to few. These days, they look different. The window displays are more sumptuous, for obvious reasons. But beyond the padded velvet display panels, pawnshops now resemble banks, with neatly barricaded counters looking more like the product of professional efficiency than of careful security. In recent weeks, even the gentle reader of the Telegraph has been advised to consider the pawnshop as a decent option when cash-flow problems occur, handy for securing one-off payments for school uniforms or, on occasion, school fees, and considerably cheaper than risking bank charges on unsecured overdrafts.
How crazy is that? In theory, bank loans have never been cheaper, with interest rates as close to zero as one could wish. Except that the banks are not lending and people are still borrowing. Since 2003, the number of pawnshops in the country has increased from 500 to 1,300, holding a loan book of around £192m. Britain’s biggest chain of pawnbrokers, H&T, last week announced a 71% leap in half-year profits, up to £14.5m from £8.5m in the first half of 2009. While the majority of customers are seeking loans of less than £100, and more than two-thirds live on a household income of less than £300 a week, industry insiders also report an increase in custom from businesspeople.
And the ghastly truth is that the Telegraph is right. Pawnbrokers are these days a comparatively solid option. If you go to a pawnbroker, then monthly interest payments range from five per cent to 12%, with a loan of £100 over six months attracting an APR of 70% to 200%. If you have nothing to pawn, though, and you instead go to a pay-day loan company – otherwise known as a “legal loan shark” – you could find yourself faced quickly with an APR approaching a stratospheric 3,000%. The appalling truth is that these companies too have proliferated in recent years, offering loans over the internet or via the mobile phone, and filling the gap left as bank loans became harder to secure.
The Consumer Finance Association, which represents most short-term loans firms, told the Metro newspaper this week that: “People want to borrow a smaller amount of money for their immediate needs and desires and pay it back quickly. If this is not a product people really like, then why is there the growth? We really don’t want to lend to people who can’t pay back and we don’t lend to people who aren’t in work.”
The Consumer Credit Counselling Service has another tale to tell though, as the Metro pointed out. Somebody is lending to people who aren’t in work, because the charity says that one in eight people contacting them in the first half of 2010 were claiming Jobseeker’s Allowance, owing an average of £15,412 in unsecured debt each. Poor, poor buggers. Credit crunch? We ain’t seen nothing yet.
Remarkably, however, there are strong arguments suggesting that little can be done. The government is already committed to taking action on the high interest rates that have for years been attached to credit cards, store cards and overdrafts, while plans to discuss capping the cost of credit more generally have been tabled at both the Labour and Lib Dem conferences this autumn. Yet a recent report from the Office of Fair Trading has already rejected the suggestion of price controls because suppliers might recover lost income by introducing or increasing charges for late payment or default. A further worry is that if the legal market is attacked, then truly unscrupulous lenders could flourish illegally, leaving the vulnerable open to intimidation and violence. The thought of such a scenario chills the blood.
The left-of-centre pressure group Compass is already running a campaign anyway, supporting price controls and arguing that they are already in place in Germany, France and Poland. Compass is also asking for the establishment of a People’s Bank, administered via the Post Office, or a National Credit Union. It wants all banks to commit to providing universal and affordable banking services, like the Cooperative Bank’s Cashminder account as well.
Such ideas have long been resisted by most high-street banks, which benefit from the fact that more or less every citizen is obliged to have a bank account if he or she is to exist in the real economy, but remain happy to cut people adrift if, for a time, their custom becomes unattractive.
The great irony, of course, is that it was the development of financial instruments which allowed loans to be made to people with little concern as to whether they could be paid back, that caused the credit crunch in the first place. Yet while politicians are fond of saying that the credit crunch was a worldwide phenomenon, the truth is that no nation embraced consumer borrowing more enthusiastically than Britain. It’s a way of life now, and it is out of control. People have been urged to believe that there is no shame in debt. On the contrary, people have been urged to believe that only the naive and pathologically careful lived any other way.
This present situation is terrible – legitimate operators are allowed to behave like cowboys, for fear first that if they are reined in at one point in the operation they will move their excesses to another part of their operation, and second that if they are bludgeoned into respectability, then criminals will step into the breach.
But beyond such specifics, there is a further problem – the worry that curbs on any commercial activity will “slow the recovery”. The hard-up must be allowed to get the cash to purchase what they need, whatever it costs them. So commerce of this kind flourishes. Pawnbrokers really are more straightforward and civilised than the unsecured loan guys, which is in part why they have quickly become quite respectable. Britain may well become a nation of shopkeepers again. But the shops will have three golden orbs dangling outside them, and will sell to their customers the stuff they own already. Here comes that private sector expansion. Grim.
guardian.co.uk © Guardian News and Media Limited 2010
Tags: consumer credit, Credit Crunch, Pawn Loans, pawnbroker, pawnshop, United Kingdom
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Saturday, August 28th, 2010
From News Dot Sky Dot Com
2:32am UK, Saturday August 28, 2010
Darren Little, Midlands correspondent
Pawnbrokers are experiencing a resurgence in business with the number of shops in the UK more than doubling since 2003.
The National Association of Pawnbrokers is predicting that the trend will carry on as banks continue to deny people easy credit.
It is a huge turnaround for an industry which was thought to be dying out 20 years ago but now seems to have attracted a new generation of customers.
Paul Cockell, who set up Regency Jewellers and Pawnbrokers in Leamington Spa 10 years ago, says he has seen a 10 fold increase in business.
“The kind of things that are coming in are more expensive items, the Rolex watches, Breitlings, diamond rings as opposed to smaller bits of gold and jewellery,” he said.
Major chains of pawnbrokers are now commonplace on high streets and they are making a lot of money from their easy cash business.
H&T for example reported profits up more than 70% in the last six months.
Unsurprisingly 60% of those using pawnbrokers are unemployed, mainly pawning jewellery and watches, taking advantage of what is a straightforward service.
However, Nathan Finch, of the National Pawnbrokers Association, said there had been a gradual shift in the type of clientele now using the service as bank loans dry up.
“We haven’t seen a ridiculous rise in business but we seen a steady increase in a new type of customer looking to pawnbrokers to raise cash,” Mr Finch said.
“I think certainly as mainstream credit is harder to come by people are looking to alternatives and pawnbrokers are seen as a fast and speedy alternative.
“People historically assumed it was just working class people who came to pawnbrokers but that’s changed and it its changing more.
“It’s just really everyday day people who have bank accounts and they prefer the speed and convenience of coming to a pawnbroker.”
He added: “I think the main difference between us and mainstream finance at the moment is that we look for reasons to lend while they look for reasons not to lend.”
It is likely pawnbroking will continue to be a booming industry for the immediate future.
Many of the major brokers are already planning to open more stores.
The test of the industry will be whether its success continues when the economy picks up.
Tags: consumer credit, Credit Crunch, economic crisis, National Pawnbrokers Association, Pawn Loans, pawnbroker, pawnshop, United Kingdom
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Monday, June 14th, 2010
Well written and painstakingly researched, the author does a wonderful job of exposing blatant corruption recently in some parts of the subprime lending industry. Rivlin does a masterful job at documenting events, people, and companies whose actions in part led to the current credit crisis and housing bust. A must read for any American wanting to know what really happened to their 401(k).
The author does show an unfortunate but understandable bias against any and all forms of short-term consumer credit offered to those who may be exempt from more mainstream transactions. This broad brush approach of condemning everyone offering credit to less fortunate Americans does a disservice to much-needed industries in the US. A vast majority of otherwise un-creditworthy consumers benefit greatly by some of these financial products.
I say this because I was a pawnbroker for 30 years and I now consult and offer business coaching within the pawn shop industry. My original reason for purchasing the book is because the pawnbroking industry is offered in the sub title of the book along with a very unattractive picture of a pawn shop, hopefully carefully chosen by the publisher and not the author, adorning the front of the book.
Funny thing is, the pawnbroking industry is barely even mentioned in the author’s book. It is possible Rivlin may have discovered in his research that pawn shop loans are a very worthy 3000-year-old form of credit that causes no one any harm and does not necessarily create debt. Maybe the author found out that pawnbroking transactions are not just about the working poor. Or maybe the choice of cover and subtitle were just a more iconic match to the title of the book rather than a picture of Wall Street financiers.
Tags: Broke USA, consumer credit, Consumer Federal Protection Agency, Credit Crunch, economic crisis, Gary Rivlin, Pawn Loans, pawnbroker, pawnshop, Payday Loans
Posted in Pawn Ecomomics | 2 Comments »
Friday, March 5th, 2010
By Bobbi Dempsey • Bankrate.com
If you’ve found yourself needing some quick cash recently, you may have considered heading to a pawnshop. You’re not alone. The bad economy has prompted many people to visit a pawnshop for the first time.
“We’re seeing more people who have never been in a pawnshop before looking for short-term solutions without having to sell the farm,” says Rick Harrison, whose family owns the Gold and Silver Pawnshop in Las Vegas and stars in The History Channel series, “Pawn Stars.”
You shouldn’t feel afraid or embarrassed about heading to a pawnshop, but there are some things you need to know.
Don’t believe the bad image
Pawnshops aren’t the shady, scary places they often appear to be in the media. “Pawnshops have been unjustly vilified by the main stream media, and so most people perceive pawnshops to be dirty and seedy,” says Harrison.
Instead, pawnshops are regulated by 12 federal laws plus numerous state and local laws,” says Emmett Murphy, spokesman for the National Pawnbrokers Association, or NPA. “The majority are clean, well-lit stores run by people who pride themselves on providing good customer service.” Murphy advises checking with the local Better Business Bureau, or looking on the NPA’s Web site for member stores in your area.
Getting the loan
Here’s how a pawnshop transaction works:
Pawnshops offer collateral-based loans — meaning the loan is secured by something of value. You bring in something you own, and if the pawnbroker is interested, he will offer you a loan. The pawnbroker then keeps your item until you repay the loan. The loan amount will likely be a small fraction of the item’s actual value.
You can sell your item to the pawnshop outright, but pawnbrokers are less enthusiastic about these transactions because loans offer much more profit potential for the pawnbroker.
You must receive a pawn ticket. Don’t lose this! Not only is it the receipt for your item, but it also summarizes the terms of your loan: fees, expiration date, description of your item, etc.
Repaying the loan
You have two choices on repayment:
Return to pay the balance — including the loan amount plus all added fees — before the deadline, which is usually one to four months after the initial transaction.
Don’t return and the pawnshop keeps your item. Aside from losing your item, there are no other consequences: no collection action and no affect on your credit report. On average, though, 80 percent of all customers do reclaim their items, according to the National Pawnbrokers Association.
In some locations, you can extend the loan period by up to several months, but you’ll incur additional charges.
The interest rate explained (… sort of)
The dollars and cents of pawnshop loans get a little complicated because: a) rules regarding the fees vary widely from state to state, and b) it’s not a cut-and-dried interest rate.
The term “interest rate” can be very confusing, so it’s better to think of total allowable “finance charge,” says Steve Krupnik of South Bend, Ind., creator of the Pawn Shop Advisor coaching program and author of the book “Pawnonomics.”
“Pawnshop loans are nearly all state-regulated, and ‘finance charges’ can vary from 5 percent per month to 25 percent per month. In Indiana, the ‘interest rate’ is capped at 36 percent APR or 3 percent per month, but pawnshops can charge an additional 20 percent per month service charge, making the total allowable finance charge 23 percent per month,” says Krupnik.
In New York, the maximum interest rate is 4 percent per month, and a service charge of up to $10. The interest rates may seem steep, but Murphy says these aren’t meant to be a substitute for bank loans.
“These are what we call ‘safety net loans’ and are usually for life emergencies.” The typical fee, he adds, is often lower than the cost of a bounced check or a disconnected utility.
To learn the maximum rates allowed in your area — along with any rules regarding pawnshop transactions — check your state’s Web site; most likely, the information will be in the consumer protection section.
The bottom line: Make sure the pawnbroker clearly explains all the fees involved in your loan before you finalize the transaction. These terms also should be listed on your pawn ticket.
What pawnshops do — and don’t — want
When considering pawning something, keep these tips in mind:
Don’t: Offer anything outdated, difficult to store or cheaply made, Krupnik advises.
Do: Go with jewelry or coins, Harrison suggests. Other good choices, according to Krupnik, are firearms, high-quality tools and musical instruments.
Be prepared for red tape
The pawnbroker is legally obligated to confirm that you are the legal owner of the property.
“They will ask you enough questions about your property to become comfortable with the fact that you own it,” says Krupnik. “Do not be offended; the pawnbroker is just trying to make sure that both you and the property are legitimate. Also, if you do business with the pawnbroker, expect to have to show a government-issued ID. It is required by law.”
Tags: consumer credit, Credit Crunch, Economic Indicator, Pawn Loans, pawnbroker, pawnshop
Posted in Pawn Ecomomics | 2 Comments »
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