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.
There is always a certain amount of risk involved with any business; will it be profitable? Can the product sell? Can it survive the economy?
For pawnshops, this level of risk goes up tenfold. They, in essence, make their money by giving money: you bring in your old television; they give you $100. You pay them back; you get your TV back.
What happens when the economy tanks and everybody decides they’d rather keep the money than get their old TVs back?
Well, as Disco Pawn in Orlando owner Greg Hastings put it, “You’re going to be loaning money out like a drunken sailor!”
In order to make it through the failing economy, pawnshop owners such as Hastings have had to come up with creative ways to survive. They’re doing this by changing not only the way they do business, but by working to break the age-old stigma of what a pawnshop is.
Economic effect
On the surface, a bad economy may seem like a pawn owner’s paradise.
“People are pawning their grandmothers if they could make a 100 bucks on it,” Hastings said. “People are so hurting for cash you’d be surprised the kinds of stuff people try to bring in to pawn.”
Though that side of business is booming, the number of people coming back to pick up their property and pay off their loans is at an all-time low.
This means the pawnshops are out the cash that was loaned, and must now take that old TV and try to sell it in their shop. This is where the pawn industry takes the biggest hit — much like every other business finds out in tough economic times — the stuff isn’t selling.
“Before, everyone picked everything up — they’d come in and put a loan on it and pick it up,” said Ryan Stumpf, the owner of Instant Replay pawn in Orlando. “We used to run like a 64 to 65 percent reclaim average so the majority of the stuff would get picked up.
Nowadays your running like a 35 to 45 percent average … it puts us at a disadvantage too — now we have to sell it.”
As Hastings put it, pawnshops like his end up merchandise rich and cash poor.
“The general public thinks you’re making so much money, and yeah it’s a high rate of interest, but it’s a tremendously high rate of risk,” he said.
Breaking the bad reputation
Stumpf said the majority of Americans have never been inside a pawnshop and so they can only relate their experiences to what they’ve seen in the movies.
“In the movie, you see a really dingy little joint,” he said, “with bars and armed people and big fat slobby guys.”
“They’ve always had a bad reputation. Before I moved to Florida, my image of a pawnshop is some big, old, fat, crusty dude with a stinky cigar hanging out of his mouth, and a couple of guys in the back playing poker … generally speaking, those days are gone,” Hastings said with a chuckle, as Taylor Swift’s innocent voice played over the loud speakers in his shop.
There is a certain stigma that comes with the idea of a pawnshop being dirty and crawling with criminals, which Hastings and Stumpf willingly poke fun at, but each say are grossly misconstrued.
Hastings compares the look of most pawnshops today to what someone would expect to find in a Winn-Dixie. By going for more of a retail setting, pawnshops can draw in “mainstream” business, such as the La Familia Pawn Shops stores that are going into old Blockbuster locations.
But that doesn’t mean all pawnshops have cleaned up their acts, Stumpf said. “There’s always a few bad apples, but I think a lot of people don’t understand what kind of regulations pawnshops go through these days.”
In order to sell to a pawnshop, the shop must get the serial number for the item being pawned and the fingerprint of the person coming in to pawn it. This, Stumpf said, often deters criminals from trying to sell stolen items. “Usually criminals are pretty smart cause they know we’re so heavily regulated,” he said.
Getting a pawn license to begin with, he said, is equivalent to signing your civil rights away.
“Cops can come in my store at any time; they can go through my inventory; they don’t need search warrants; they can just come in and say ‘Look, I’m gonna go through your store and there’s nothing you can do about it.’ If you don’t have proper documentation and proper paperwork, they fine you, and they have the ability to take you to jail very easily,” Stumpf said.
Hastings said his own gut instinct is the most vital business tool he uses as a pawn owner to keep his business afloat.
“If a guy comes in here with beady eyes and he’s shaking and his nose is running, and he can’t even talk straight and he’s gritting his teeth and he’s got a $3,000 Fender guitar and he wants to sell it to you for $100, you know damn well the thing’s gotta be stolen,” Hastings said. “You know, you gotta use your judgment, just like a bartender. If you know a guy’s drunk, you don’t sell him another vodka and tonic, right?”
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.
Mexicans are lining up at pawnshops to hock their jewelry, family heirlooms — and in one case a harp fashioned from a shark’s jaw — in more evidence Mexico is struggling to recover from a deep recession.
Maria del Refugio Garduno, a 60-year-old widow, pawned her watch for 400 pesos ($31) after her son lost his job last month, sending her household’s finances into a tailspin.
“I had to come here just to be able to buy some medicine,” Garduno said at a pawn shop in the capital, Mexico City. “Our money just isn’t going far enough.”
Across the country, unemployment remains near its highest level in 14 years even though Mexico’s recession technically ended in the third quarter with a big industrial rebound.
The government thinks better jobs data from December shows Mexico has turned a corner in terms of employment, but even the finance ministry expects only a partial recovery from last year when the economy likely shrank about 7%.
Loans made at Nacional Monte de Piedad, Mexico’s largest chain of pawnshops, rose about 20% during the first three weeks of January compared to the same period in 2009.
The increase is higher than the 10% rise in pawns during 2009, and some people borrowing against their wares said recent tax hikes and rising government-set fuel prices had put extra pressure on their finances.
A value-added tax on most goods rose by 1 percentage point to 16% on Jan. 1, a few weeks after the government bumped up gasolizne prices after keeping them steady most of 2009.
“It’s hitting me all at once,” said Pedro Uribe, a street vendor in downtown Mexico City, who pawned one of his wife’s religious figurines.
Pawn Shops Play Interesting Role In the Recession
Reported by: Kate Stacy
Monday, Sep 14, 2009 @09:52pm
From paying bills to cashing in on a bargain, pawn shops are playing an interesting role in this recession. Some people get information from their stock broker, others learn about the recession’s affect from their pawn broker.
“In June, people were picking up pawns,” says Norm Dias at Gold Digger Pawn in Springfield. He’s not your typical economist. But he has his finger on the pulse of the recession. “It’s taken another turn. People are bringing stuff in.”
To fill their wallets, customers are willing to put their items on these shelves.
“More middle class people than normal,” says Brandon Reynolds of the crowd he’s seeing at Gunsmoke Pawn. Still, he hasn’t noticed the sign that things have hit rock bottom.
“You can tell it’s bad when they bring the shotgun, wedding ring, stuff like that.”
Store managers say there are other items that indicate the difficulty in one specific industry.
“We have tools,” says Reynolds. “No one is buying them. We’re not taking them. There’s just not a market for them right now. Everybody’s getting rid of tools left and right. Nobody’s needing them, there’s no construction work. It’s tough times for that sector.”
That’s good news for buyers.
“If you’re looking to buy a construction tool, now’s the time to do it,” says Dias. “I mean, you’re paying pennies on the dollar.”
While most tools end up on the sale rack, managers say they really work to ensure other items do not.
“75% of people come back for their stuff,” says Reynolds.
“We want you to come back,” adds Dias. “We want to float a loan to make it to pay day so you don’t lose your item. We don’t want to end up with it.”
While tools and gold are being pawned, people who are spending are putting money in guns. Staff members says sales are not as high as right after President Obama’s election when there was worry about gun laws, but it’s still double what they typically see.
Competition in the market for selling pawned items is tough. There are a few stores that are closing shop. Others are working to become more marketable by selling items in online auctions.
Anyone with an interest in the United States Bullion Depository, which by the way has not been audited in 50 years, will greatly benefit from taking the time to read this expertly written article.
One of the authors scenarios is:
FORT HOCKS: In this scenario, an audit will show that a significant portion of the citizens’ gold has been mobilized by the Treasury and / or the Federal Reserve; in other words, that it has been hocked at the global financial system’s pawn shop. There are many possible means by which this could have happened; we list only a few.
Could it be that the global financial system is operating its own pawn shop?
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.
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
It seems obvious that Senator Richard Durbin (D-IL) does not care about the millions of American consumers who rely on short-term credit sources daily to meet their emergency financial needs. Here is text of Senator Durbin’s comments taken from the Congressional record as to why he is trying to amend a bill currently being considered to include a 36% federal APR rate cap.
Senator Durbin said:
The second amendment I will file will be a Federal usury cap at a very high level. What is a usury law? It is a limit on interest rates. There was a time in America when that was considered normal; States would have usury caps. The Federal government had a usury cap. But then they went away in the interest of competition and free markets. We decided we were not going to put a cap on interest rates, and so it has reached the point where there are very few usury caps left. What I have established, as the maximum, is 36 percent.
Nobody in their right mind would pay 36 percent on a mortgage, or 36 percent on a credit card. I mean, you would have to be out of your head to get into that kind of a predicament–a 36-percent annual interest rate. But the fact is Americans right and left are paying much higher interest rates today and don’t know it–payday loans, title loans, installment loans. Sit down and do the math and figure out to borrow a hundred dollars and what you end up paying, whether you are going to one of those places and putting up the title of your car or letting them have access to your checking account, which is a deadly thing to do from a credit point of view. You end up paying interest rates that go through the roof. I have actually had people sit in my office and say, Senator, this 36-percent cap on interest rates will put us out of business. I said: Well, how much do you charge? Well, somewhere between 58 percent and 400 percent a year. I said: I hope you do go out of business, because, quite frankly, they used to call that a juice loan when the syndicate and gangs were involved in it, but now it is legitimate. It is legal.
So this 36-percent cap on interest is something which I know will be resisted by banks and title loans and payday loans and all the rest of these folks, but it is about time we got real here. If we are not going to protect the American consumers when it comes to some of these interest rates, they are going to be very vulnerable to some bad practices.
I’m confident his intentions are honorable, however, if he should be successful in his efforts, his effect on short-term credit available in the United States will be devastating.
