Frequently Asked Questions

Question: How does a pawnshop work?

Response: Pawnbrokers lend money on items of value ranging from gold and diamond jewelry to musical instruments, televisions, tools, household items, and more!. These items maintain their value over a reasonable period of time and are easy to store, especially jewelry. All customers provide collateral, eliminating the need to distinguish high risk from low risk borrowers. Typically, loans are small averaging between $70 and $100, although they can be as small as $20 or as high as several thousand dollars depending on the value of the collateral. Contracts vary from state to state, but the average loan period is 30 days. Generally, interest rates will vary with the amount of the loan. The process is much the same as any other lending institution, with the primary difference being the size of the loan, the collateral and the holding of the merchandise until the interest or the loan has been repaid or the loan period expires.

Question: Why would someone go to a pawn shop to get a loan?

Response: Pawnshops offer consumers a quick, convenient and confidential way to borrow money. A short term cash need can be met with no credit check or legal consequences if the loan is not repaid. A customer receives a percentage of the value the broker believes the collateral would bring in a sale. Although the loan to collateral ratio varies over time and across pawnshops, a loan of about 50 percent of the resale value of the collateral is typical. In other words, pawnbrokers feel their loan is "paid in full" at the time it is made. When a customer pawns an item, terms of the loan are printed on a pawn ticket that is given to the customer. The ticket states the customers name, address, type of identification provided to the pawnbroker, a description of the item, amount lent, maturity date, interest rate and amount that must be paid to redeem the item. Most states regulate pawnshop interest rates and other charges, such as storage or insurance fees.

Question: What is the foreclosure procedure?

Response: If a customer defaults by not repaying the loan, the collateral becomes the property of the pawnshop after the loan is overdue by a specific amount of time, generally one to three months. Some states require the broker to notify, by mail, the owner of the pledge, that he will loose the right to his property unless he redeems it within the stipulated grace period.

Question: Do most pawning customers lose their merchandise?

Response: On average, 70 to 80 percent of all loans are repaid. Repeat customers make up most of our business, similar to any other lending or retail establishment. Pawnbrokers know the vast majority of their customers because they often borrow against the same items over and over again. Pawnbrokers offer non-recourse loans, looking only to the item being pledged to recover their investment should the borrower choose not to repay the loan. It is solely the choice of the customer whether he/she elects to repay the loan.

Question: How can I be sure the merchandise I purchase at a pawnshop isn't stolen?

Response: Less than one fifth of one percent of all collateral is even suspect as having been misappropriated in any manner. Thieves and robbers are a pawnbrokers worst enemy. Pawnbrokers work closely with local law enforcement to catch and prosecute these perpetrators. A customer must provide positive identification to show evidence of the transaction. This information is then presented to the police department, therefore decreasing the likelihood that a thief would bring stolen merchandise to a pawnshop. Pawnbrokers are trained to look for signs of stolen property to avoid these costly mistakes. It is not in the interests of the pawnbroker to accept potentially stolen merchandise because the police can seize the merchandise and the pawnshop owner loses the collateral and the loaned money.

Question: What is the difference between buying at a pawnshop and buying at a retail store?

Response: Mainly price. Pawnshops can offer you merchandise ranging from 1/3 to 1/2 off retail prices.

Question: How has the image of pawnbroking changed since the 1930s?

Response: Today's pawnbroker is upgrading everything from the interior and exterior of his or her shop location, employee presentation, customer service, signage, marketing and the merchandising approach. Pawnbrokers focus on providing exceptional customer service and are very active in the community, both politically, and in local charities. Pawnshops today range from a single and multi-store operation to publicly held company chains. The atmosphere at a pawnshop is nothing like Rod Steiger's depiction in the Hollywood production of "The Pawnbroker" -- just visit one to see for yourself.

Question: Are pawnshops a "bad times industry?

Response: Pawnshops survive bad times if they make adjustments both at the retail and loan counters, but they do far better in good times. In hard times, customers move away to find employment, have less ability to repay their loans and the value of all merchandise goes down. Merchandise values go down because the major retail discounters sell for less to maintain or broaden market share. If retail merchants sell for less, pawnbrokers must loan less thus earning a smaller return. Regardless of income level, most people periodically borrow money. In good times, customers are more able to repay their loans and unredeemed merchandise sells faster because customers have more discretionary income.

Question: Do pawnshops attract indigents and derelicts?

Response: Absolutely not. Indigents and derelicts have no assets to use as collateral. No one builds a business around these people. The typical pawnshop loan customer is employed, living within one mile of the store, is of either sex, and occasionally needs short term cash for an unexpected bill such as a medical expense or car repairs. The typical pawnshop retail customer is a bargain hunter, either by need or desire and comes from all walks of life. Most pawnshop customers are repeat customers.

Question: Do pawnshops downgrade the neighborhood and hurt property value?

Response: Neighborhood property values are impacted by the appearance and care given to the properties. There is no factual basis to support a claim that an eye-pleasing pawnshop negatively impacts values. On the contrary, if they attract customers, they enhance the opportunities for other merchants and the community.

Question: Are pawnshop rates excessive?

Response: To provide the loan service, all lenders must charge rates commensurate with risk, size and duration of the loan, collateral offered, and recourse. Pawnshop loans are small dollar, high risk, short duration loans. The item stands as the sole collateral offering no other recourse. And pawnbrokers are liable for replacement value if something happens to the item in their care. There are no hidden charges as with other lending institutions. On the other hand, pawnbrokers cost basis is far greater. They incur cost for security, handling, storage, and regulation not incurred by others. Due to the 15-20% of pawn shop customers that elect not to repay their loans, pawnbrokers are forced to turn their "bad debt" into a retail center to recover their cost. Other lending institutions do not incur retail cost including additional floor space, gondolas, counters, personnel, advertising, shop lifters, retail competitive cost, and new merchandise cost to supplement the unredeemed goods.

Question: Should photographing or fingerprinting pawnshop customers be required?

Response: Pawnshop customers already provide full identification with each transaction, a copy of which goes to local law enforcement. Additionally, most pawnshops maintain surveillance cameras in their stores, the same system used by banks. To require anything more than required by banks implies there is a relationship between how much money one has and their integrity. You have questioned the quality of their character based on financial status - a form of discrimination.

Question: Should there be zoning restrictions other than general retail?

Response: Pawnshops are neighborhood businesses providing vital services to the community. To restrict zoning to other than general retail should require a very compelling reason. The compelling reason should not be historical perception. To restrict zoning there should be something wrong with the service provided, the business itself, or the customer served. The services provided by pawnshops include:

• 1. Discount Retail (new and preowned) is an opportunity for customer to make their dollars go further - it helps other merchants and community by giving them more discretionary funds.

• 2. Short-term credit enables the community to pay the bills of other local merchants such as groceries, medical expenses, utilities, auto and transportation to work.

The pawn business is a neighborhood business with the majority of customers residing within 1-2 miles. The same people that utilize a pawnshop, utilize McDonalds. If store appearance or wrongful activities are a problem, it has to do with that particular business, regardless of the kind of business. The customer base is the surrounding neighborhood - if that base is perceived as good, the neighborhood is perceived as good, and if that base is perceived as bad, then the neighborhood is perceived as bad. Restrictive zoning implies that the neighborhood (customer base) is perceived as bad, and questions the integrity of the neighborhood residents - often evaluated on the financial affluency of the neighborhood. Restrictive zoning really says much more about how the more affluent feel about the less affluent, by using money and social position to determine the quality of ones character. Restrictive zoning helps deny access to credit for low income consumers, and in fact, may be partially responsible for fostering the continuation of the above mention perceptions.