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The Real Story About the Pawn Industry
May 18, 2009 - National Pawnbrokers Association
Why should I shine a spotlight on the Pawn Industry?America is witnessing one of the most challenging economic times in years and pawnbrokers should be allowed to continue providing a crucial financial lifeline for its citizens.
Licensed, regulated pawnbrokers offer consumer credit secured by possessory security interests in personal goods and provide safety-net loans to approximately 30 million Americans. Pawn loans are an advance of funds based on a collateral security and do not trap consumers in a debt cycle. Each day, pawnbrokers help families through challenging economic times by providing non-recourse, short-term loans that have no impact on a consumer’s credit history.
Pawn customers appreciate this unique form of credit and tend to borrow only what they need, as evidenced by the relatively low national average loan amount of $80. Furthermore, pawn customers repay their loans and redeem their collateral at a correspondingly high average national redemption rate of 80 percent. These parameters appear to be holding constant, despite the current downturn in the economy.
The pawn industry is a heavily regulated provider of consumer
financial services. In addition to state licensure requirements and laws concerning the terms and conditions of pawn loans, pawnbrokers are subject to 13 federal laws. These federal, state, and, in some instances, local laws govern every aspect of pawn transactions including interest rates, loan duration, redemption methods, record-keeping and transaction reporting requirements.
As the policy debate on enacting federal interest rate cap legislation has escalated, it is important to note that the pawn industry has not been a focus of concern. However, recent federal legislative efforts, while well-intended, have a one-size fits-all approach. The application of a 36 % APR federal rate cap to pawn transactions would virtually eliminate a longstanding source of consumer credit.
It is quite evident that no other financial services would be able to fill the void left by the disappearance of the pawn industry. Pawn loans typically range from 30-90 days and involve substantial operational expense in terms of appraisal of collateral values, storage, insurance, and security infrastructure. The application of a 36% APR would be devastating in more ways than one. It would mean the loss of tens of thousands of employee jobs, corresponding license and tax revenue losses for state and local governments, and, most importantly, the loss of a convenient, trusted, and vital credit option for consumers. After all, there are no consumer credit providers who can make an $80.00 non-recourse collateral loan at 36% interest per year or $2.40 per month.
Pawn Shops Today does not support predatory lending or extraordinarily high interest rates that put consumers into debt and destroy their credit. However, people do need options for small short-term loans when they have no where else to turn.
Are you writing a news story or looking for a new "trend" to cover in print, television, documentary or online? Here are our Talking Points:
Licensed, regulated pawnbrokers offer consumer credit secured by possessory security interests in personal goods and provide safety-net loans to approximately 30 million Americans. Each day, pawnbrokers help families through challenging economic times by providing non-recourse, short term loans that have no impact on a consumer’s credit history.
Pawn customers appreciate this unique form of credit and tend to borrow only what they need, as evidenced by the relatively low national average loan amount of $80. Furthermore, pawn customers repay their loans and redeem their collateral at a correspondingly high average national redemption rate of 80 percent. These parameters appear to be holding constant, despite the current downturn in the economy.
The pawn industry is a heavily regulated provider of consumer financial services. In addition to state licensure requirements and laws concerning the terms and conditions of pawn loans, pawnbrokers are subject to 13 federal laws. These federal, state, and, in some instances, local laws govern every aspect of pawn transactions including interest rates, loan duration, redemption methods, record-keeping and transaction reporting requirements.
As the policy debate on enacting federal interest rate cap legislation has escalated, it is important to note that the pawn industry has not been a focus of concern. However, recent federal legislative efforts, while well-intended, have a one-size-fits-all approach. The application of a 36 % APR federal rate cap to pawn transactions would virtually eliminate a longstanding source of consumer credit.
It is quite evident that no other financial services would be able to fill the void left by the disappearance of the pawn industry. Pawn loans typically range from 30-90 days and involve substantial operational expense in terms of appraisal of collateral values, storage, insurance, and security infrastructure. The application of a 36% APR would be devastating in more ways than one. It would mean the loss of tens of thousands of employee jobs, corresponding license and tax revenue losses for state and local governments, and, most importantly, the loss of a convenient, trusted, and vital credit option for consumers. After all, there are no consumer credit providers who can make an $80.00 non-recourse collateral loan at 36% interest per year.