> Posted by Joshua Goldstein, Principal Director for Economic Citizenship & Disability Inclusion, CFI

Last August, I visited Wilmington, North Carolina to roast a friend on his sixtieth birthday with every intention of not thinking about financial inclusion or my work. Pure escapism was the only agenda and my complete itinerary. But on driving from the Wilmington Airport to his seaside home, my senses were assaulted by a series of gaudy, often neon-signed pawn shops named with pizazz like “Picasso Pawn” and “Flash Cash Jewelry and Pawn.” My professional curiosity had been piqued and it was inevitable that before reaching the beach paradise I would be taking an unexpected detour from my vacation.

You see, where I live in Boston, pawn shops are a relative rarity, so I had to take advantage of this opportunity. (And I have never watched any of the cable TV shows on pawn – which may put me in the minority.) The next day, I stopped at Pawn South on Oleander Avenue, and the perky staff guy was more than happy to talk of the role pawns played in his community. He told me some basic facts about this regulated industry:

  • How much money you can borrow depends on the value of the possession you pawn, provided the shop and customer can agree on a value.
  • The interest rate for an object pawned is 22 percent each month for 120 days.
  • If repayment is not made by the end of the three months, the customer loses his pawned possession and any interest he has already paid is lost.

The good news, he assured me, when I looked a little sad, was that about 80 percent of the people who pawn objects make their payments and get their objects back after three months. This percentage is confirmed by the National Pawnbrokers Association.

The objects in Pawn South included jewelry, electronics, tools like electric saws and drills, and a big display case of guns and weapons. In fact, when I was there a gentleman from South Carolina wanted to buy a military style automatic rifle but was rebuffed because he was from out of state—which was a relief to me based on the fear this man induced. I should add that a good percentage of these objects were actually bought directly by the shop and were not pawned items. The store also made direct cash loans.

At one point I asked my friend behind the counter why pawn shops were so numerous in Wilmington. He said with pride that pawns “were the poor man’s bank.” Most of his customers were pawning items because they needed “quick cash” and had nowhere else to turn because the banks wanted to have nothing to do with his typical customer, whose credit ratings were in the tank. From what I understood, the demand for pawn shops was pretty inelastic in good economic times and bad. Who doesn’t end up in an emergency that demands an immediate infusion of cash from time to time? Advertisements for Pawn South on North Carolina TV feature a beloved everyman, called “Joe Pawner.”

To confirm my novice understanding of the world of pawn, I thought it behooved me to leave the beach once more and visit Picasso Pawn. A newly made Wilmington friend had charged me with searching for a stolen surfboard that he hoped might turn up in a pawn shop—though fenced goods are not part of the value propositions of the pawns I went to. They were legitimate businesses that were careful to know their customers, get their IDs, and even fingerprint them.

Even now, I have to say that my instinct is to take what I saw at face-value, and the truth is I rather enjoyed the pawn shop culture I saw. I understand why people turn to them. They get the cash infusion they need and can get nowhere else – as well as some good, nonjudgmental fellowship in a pleasantly neon environment that takes the edge off the desperation. Pawn South’s motto is “pay on it, pick it up, or forget about it – no hard feelings.” Perhaps naively, I believe many pawn shops try to live up to this.

Image credit: Storeyland

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