Pawnbroking has been around for many centuries; some sources cite China as the country of origin, others the Greek or Roman Empires. Whatever the answer pawnbroking has come a long way, struggling in the process to throw off its rather squalid Hollywood image.
Interestingly the National Pawnbrokers Association (NPA), perhaps in an attempt to overcome the stereotypical image of their clients, has produced an Average Pawnshop Customer Profile:
- Age: 36
- Household Income: $29,000
- 80% are employed
- 82% have high school diploma or GED
- 33% are homeowners
- All ethnicities
Today, companies still offer their traditional service where customers pledge their property as collateral. It may be: gold or diamond jewelry, electronics, musical instruments, firearms or power tools. In return pawnbrokers lend them money.
Items For Sale in Pawnbrokers
The National Pawnbroker Association says around 80% of all pawn loans are repaid and the goods reclaimed by the customer. The items pledged and never redeemed, including firearms, are sold in the pawnshop retail unit. However there is now much more to the pawnshop business. These are only a few of the services that may be available:
- Payday loans
- Pre–paid credit card can be activated and topped up
- Check cashing
- Pre-paid wireless phone cards
- Money orders and money transfers
- Tax filing service
- Instant Tax Refund Anticipation Loan (a loan on anticipated tax refund)
- Auto insurance
Some of these services are offered in partnership with other organizations.
A typical loan, say the National Pawnbrokers Association is $75, which if borrowed over a 30-60 day period would attract a $15 fee. The NPA make the point that applicable fees and allowable interest rates are set by individual states.
So what are these allowable interest rates? On a search of a selection of US pawnbroker’s websites, the charges were hard to find but depending on a state’s usury laws can be as high as 300% APR for payday loans (Reuters Feb 3, 2009).
However, change is in the air with Senator Richard Durbin’s Bill to amend the Truth in Lending Act now in the first stages of the legislative process. If signed into law it would establish a national usury rate for consumer credit transactions. This would mean a big reduction in pawnshop interest rates, down to a planned maximum rate of 36%.
Currently a campaign against the proposed changes has been launched, orchestrated by one of the largest US pawnbroking groups.
Sources:
National Pawnbrokers Association
Supantha Mukherjee Pawn shops cashing in, Reuters Feb 3, 2009
Information on goods and services offered by pawnshops has been extracted from a range of online sources.
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