From Idaho Statesman Dot Com

BY BILL ROBERTS – broberts@idahostatesman.com

As Ellie Morgan walked into Vista Pawn to sell some sporting equipment, the store was doing a brisk business. One man stood before the counter to pawn a shotgun. Next to him, a woman was selling jewelry. Next to her, a musician recovered his previously pawned guitar.

Morgan, 20, just wanted to get rid of the stuff that was taking up space in her Boise apartment,
“I tried Craigslist,” she said, but found no takers. “I don’t have room to store them.”

People go to pawnshops for many reasons, but they have been using the shops more since the economy started souring four years ago.

As banks have tightened lending, home-equity loans have become scarcer and credit cards have blown past their upper limits, people have been turning to pawnshops for quick cash to make ends meet.

“More affluent people are needing to borrow money,” said Tim Birkle, co-owner with his brother and sister of GNP of Idaho, which owns three Vista Pawn shops in Boise and Nampa, and Airman Pawn in Mountain Home. “Small businesses need to make payroll.”

More middle-class people are walking into Vista Pawn, Birkle said — many because they are now jobless.
The changing times, along with television reality shows popularizing pawnshops, are reshaping the stigma that the shops are places to buy items that represent someone’s broken dreams.

Lending on pawned items grew by 20 percent in 2011 at the Vista Pawn store at 503 S. Vista Ave., Birkle said. Sales were also up 20 percent. Jewelry sales were up 30 percent at Christmas.

“The worse the economy, the better my jewelry,” said Terri Gehring, who oversees the store’s jewelry counter.

One of the biggest drivers in the pawn business is gold, whose price has shot as high as $1,800 an ounce. It has now settled at about $1,600.

Birkle set a large plastic bag of gold jewelry down on his desk and said it represents a four-month collection.

“It’s huge,” he said, though he prefers not to disclose its value.

Nationally, the average loan by pawnshops is $150, nearly double the amount that was recorded in 2008, according to the National Pawnbrokers Association.

About 6 percent of Idaho households have used pawnshops to borrow money, slightly above the national rate of 5.7 percent, according to a 2010 study by the Federal Deposit Insurance Corp. of households that use alternatives to traditional banks.

CONCERNED GROUPS

With the growing business come concerns from consumer groups, who note that interest charged at pawnshops can be as high as 20 percent on a 30-day loan.

That is the standard interest rate at both Vista Pawn and First National Pawn, a Montana chain with 11 stores, including one in Boise and one in Caldwell.

Birkle defends the interest rate, saying it pays for the storage of pawned goods, utilities and other business costs.

In cases of larger loans, typically more than $1,000, Vista’s rate can drop to as low as 5 percent, he said.
Often, those loans are made on small items, like jewelry and electronic games, that don’t take much storage space.

Idaho has no limits on what pawnshops can charge.

Pawnshop operators say their businesses provide a critical lifeline to people with few other options.
There is no credit check. If customers borrow money on items and don’t come back, no one comes after them. The items just go up for sale.

“If someone has bad credit, they can get a loan” at a pawnshop, said Cody Chapple, manager of First National Pawn’s store at 919 N. Orchard St. in Boise.

Pawnshops often buy goods outright. But the more lucrative business is issuing loans against those belongings.

SELL VS. PAWN

Customers often prefer borrowing over selling, because they have a chance to hold onto items that may be their only tickets to cash in the future. Vista Pawn says about 85 percent of its customers retrieve their items after repaying the principal and interest.

Brick-and-mortar pawnshops are starting to see some competition from online companies that let customers do their borrowing without being seen going into a pawnshop.

Pawngo, based in Denver, began its online pawning operation in June and has made $5 million in loans, said CEO Todd Hills. Customers contact the company, describe the item for pawn and get a tentative loan amount from Pawngo. The customer ships the item at no cost to Pawngo. After the company receives the item, Pawngo makes a final loan offer. If the customer accepts it, money is wired into the customer’s bank account.

Pawngo’s Internet efficiencies allow it to charge just 3 percent to 6 percent a month for loans, Hills said. The loans last three months. On a $2,000 loan at 6 percent a month, customers would pay back $2,360.
Consumer advocates say pawnshops can hook users into a cycle of debt, because people with few resources are prone to extending loans if their financial situation doesn’t improve.

While pawning doesn’t carry financial repercussions for people who don’t repay, it is still a form of high-cost credit, said Jean Anne Fox, director of financial services at Consumer Federation of America in Washington D.C.

The image of a pawnshop as a dark, seedy place where respectable people just don’t go is getting a makeover, thanks to a store in Las Vegas.

“Pawn Stars,” a History Channel TV series, follows the buying and selling that goes on in the family-owned Gold & Silver Pawn Shop. The place is brightly lit. The staff are engaging and often quirkier than some of the merchandise that comes in. And while the daily fare for trade in your average pawnshop may not be a 19th century traveling gambler’s case — complete with weapons in a hidden compartment — the series is making pawnshops more accessible to people who once might not have gone inside.

“It give us some credibility,” Tim Birkle, part owner of Vista Pawn. “It has opened the eyes of a lot of people that didn’t know what a pawnshop was.”