Leader Blues

Friday, February 08, 2008

TOP STORY > >Economy overstocks pawnshops

By ALIYA FELDMAN & JOAN MCCOY
Leader staff writers

The pawnshop business has a rough reputation for good reason.

Jim’s Pawn Shop in Jacksonville sits next to an abandoned furniture store on a quiet strip along North First Street, but for a few cars and an occasional passing train. Owner Jim Pate suffered a concussion and fractured skull when two teenagers barged into his shop and demanded money and firearms last fall.

He says business has decreased recently with a lot of people looking to sell.

“Pawn business has been up for the past several years, but sales are down,” Pate said. He blamed grocery prices, utility bills and higher gasoline prices for the downturn in buyers.

“Trying to pawn everything,” he said of people who come into his shop needing money. “Jewelry, guns, tools.”

At Jewelry Exchange and Loan in Jacksonville, business is steady. Trish Baskin, an employee at the store, said business is “great.” She said buying and selling was normal, but the shop buys only jewelry and prices them according to market. Pawnshops decide how long a loan can be made and at what interest it will have to be paid back.

Cathy Adams said a daily interest rate of .833% is charged at Jewelry Exchange. Sellers are also charged storage fees, which depends on the amount borrowed. The storage fee for a $100 loan would be $25.

Other area pawnshops repeat a decrease in business.

“It’s been kind of slow,” said Mike Brooks, owner of Mike’s Sports Stop on Hwy. 161 in Jacksonville. January and February are usually better months. “It’s off just a little bit, but not bad,” he said.

Pawnshops advance cash toward customers and hold the item as collateral until the property is reclaimed. Many customers choose to sell the item for immediate cash. Pawnshops take jewelry, guns, electronics, computers, tools, instruments and some take cars and boats as well.

“Most everybody gets 20 percent,” Brooks said about interest rates. He gives a 30-day contract.

“The pawn business is always steady,” Tim Collier president of the Arkansas Pawn Brokers Association said. “Cash flow is good because income taxes are coming back.”

He said more people always want cash right away. Collier said the average pawn nationally is $65-$70, but closer to $50 in Arkansas. There is no interest cap set on loans given in the state.

“People borrow, but people don’t come back and pick merchandise up,” Collier said. “We haven’t seen tremendous downturn.”

Jim’s Pawn Shop no longer takes watches. “We used to take everything, but we’ve had to trim back,” Pate said. Pate has been in the business 32 years and said he appraises an item based on his experience. “I’ve got an idea what I can sell it for, so I go by that,” he said.

“The actual value you can’t compare new to used,” Pate said.

An employee at Jacksonville Pawn and Loan Company on East Main Street said he would give $15 on a watch valued at $300. He said he had watches sitting at the shops for literally years.

Pawnbrokers do not go after sellers like traditional creditors do when the loan is not paid pack. They do have the choice to sell if they want, though. “We don’t chase people back if they don’t pay,” Collier said.

In 2006, Collier’s association opposed a proposed law that capped interest rates on military personnel and their families at 3 percent per month or 36 percent annually.

The law was included as part of the Department of Defense Authorization Act. The association opposed pawn brokers being grouped with predatory lenders.

Pawnshops are regulated by the Truth-in-Lending Law, which requires a statement of interest rates.

Pawnbrokers were only opposed to the law if they were included with refund anticipation brokers and payday lenders. They ended up not being included in the interest fee cap for military personnel, according to Collier.

Other pawn shops say business is stable. Philip Hutchins, manager of Beebe Pawn Shop, said he hasn’t necessarily seen an increase in the customers needing to raise cash, but many who come in say the high price of gas has contributed to their money problems.

“When it gets up to $3 a gallon, everybody who comes in is singing the blues,” Hutchinson said.

“I don’t know why, but jewelry is the first thing they get rid of,” he said. “We’ve got a ton of it.”

But many of his customers have received income tax returns and they come to his shop to either retrieve the jewelry, guns or tools they’ve pawned or they are there looking for a bargain, he said.

In Cabot, Jim Boggs at Cabot Pawn Shop and Chuck Myers at Pro Pawn Shop say they haven’t seen any change.

To prevent theft and to track stolen property, state law requires pawnshops and pawnbroker to record everything sold to them. Detailed records of every transaction must be kept along with identification of who sold them the property. Serial numbers and a description of each pawned item must be kept for three years with the seller’s identifying information.