The Pawn Industry has taken a beating in the media recently. With consumer finance legislation on the horizon, the pawn advocacy website,, takes an aggressive stance to dispel myths and unfair or incorrect reporting. takes reporters and media outlets to task with its new “That’s Not Quite Right!”

Journalists and Authorities Don’t Quite Get it Right!

ps-300x222When it comes to fair reporting, the pawn industry often gets the short end of the stick. Journalists, authorities and law enforcement on a local and national level often mislabel different types of businesses as “pawn” stores. When reporting on local and national news stories, journalist often confuse second hand stores, retail jewelers or cash-for-gold buyers for pawn stores.

Here are a selection of news articles that reference “pawn” in the title and in the article, but upon investigation the businesses mentioned are not actually pawn stores.

That’s Not Quite Right!Play It Again Sports” is a second hand buyer, not a pawn store.

That’s Not Quite Right! “Trade It” is a second hand buyer, not a pawn store.

That’s Not Quite Right! “Goldbuyers Jewelry” is a retail jewelry operation, not a pawn store.

This issue is often related to a core misunderstanding of the pawn industry. In the general public, there is a misconception that a pawn is a second hand “buy” transaction and any business that conducts this type of transaction is pawning or a pawn shop. Additionally, the success of television shows like Pawn Stars or Beverly Hills Pawn reenforce this misconception. These television shows often only portray a pawnbroker buying an item from a customer.

Here are a few supporting facts:

  • The core of a pawnbrokers business collateral loans
  • Pawn businesses are heavily regulated and licensed by state and local governments
  • Pawn businesses are governed by the 14 primary federal statutes and regulations that apply to financial institutions
  • Pawn transactions are routinely transmitted to local law enforcement, which dramatically decreases the likelihood that a thief would bring stolen merchandise to a pawn store
  • Less than one-tenth of one percent of pawned items are reported as stolen


NPR WAMU 88.5 American University Radio

In a radio broadcast that aired on public radio’s Kojo Nnamdi Show, the host, Kojo, made a stark comparison between check-cashing stores and pawn shops. In his interview with Manny Hidalgo, William Campos, and Melissa Koide, Kojo made the statement that, “…Check cashing stores have become analogous to pawnshops or strip clubs…when you start seeing a lot of them around you know that you may not be in the best part of town any more.”

That’s Not Quite Right!

“The emergence of upscale, suburban pawn shops reflects a shift in the public perception of the pawnbroker business,” according to Rob Robinson, president of the Washington State Pawnbrokers Association, as quoted in the Puget Sound Business Journal. In today’s sagging economy, the new upscale business model is attracting a chic, white-collar clientele in need of small dollar short-term loans. With pawn stores situated in some of the country’s wealthiest communities like Beverly Hills and Society Hill, middle and upper class customers are relying on the pawn industry now more than ever. The reported that, “Business owners have increasingly used pawn shops to cover their expenses as it becomes more difficult or costly to get bank loans, and first-time clients are up 10%.” The antiquated, seedy view of pawn stores simply doesn’t hold true anymore.

Prince George County Police

The local police of Prince George County Maryland were cited in the local news journal accusing pawn shops of contributing to a rise in criminal activity. The article states that, “police blame a rise in burglary and petty theft on the prevalence of pawnshops willing to take in the stolen goods.”

That’s Not Quite Right!

According to the National Pawn Brokers Association, less than 1/10 of one percent of items found in pawn stores are identified as stolen. Pawnbrokers work closely with local and state authorities and require positive identification from anyone pawning items. Richard Sussman, president of the Maryland Pawnbrokers Association, argued in The Washington Post that pawn store owners are deterred from buying stolen items because of the financial losses they would suffer. “It is in the stores’ interest to keep them out, because any money from them would be lost if police learned of the item,” he said. Pawnbrokers work to serve the un- and under-banked members of the community, as well as people from all walks of life, not indigents or thieves.

MSNBC’s The Today Show

On the September 3rd edition of MSNBC’s The Today Show, Lester Holt in an interview with Money Magazine’s Donna Rosado cited going to Pawn Shops as a factor that would lower your credit score. During the show’s Today’s Money segment entitled, “What’s hurting your credit score”, Holt was surprised that credit companies may be looking for signs of financial distress stating that, “going to a pawn shop… is a flag in their minds.”

That’s Not Quite Right!

According to the NPA, a short-term collateral loan can be met with no credit check or legal consequences if the loan is not repaid. Since the item pawned is used as collateral, pawn brokers already consider the loan paid-in-full when the cash is lent. Even though credit cards companies can mine their own data to determine consumer spending habits, pawn or collateral loan transaction information is in no way available to credit companies as they have been excluded from the process. This means no impact on credit scores whatsoever.

The Huffington Post

The Huffington Post published an article on September 3rd by Elizabeth Warren, in which she states, “non-bank lenders contributed significantly to the financial crisis,” citing negligent regulatory enforcement as a major contributing factor. In her article, Real Change: Turning Up the Heat on Non-Bank Lenders, she insists that, “the U.S. has never made a sustained, systemic effort to regulate non-bank lenders.”

That’s Not Quite Right!

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 12 federal laws, including The Patriot Act, Truth in Lending Act, Equal Credit Opportunity Act, as well as Data Privacy and Safeguard of consumer information as part of the Federal Trade Commission (FTC) Rules. 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. Pawn shops that deal in firearms are regulated by the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF). Pawn shops may also be Federal Firearms License holders.

Prince George’s Pawn Shop Task Force

Robert Liberati, who heads up Prince George’s Pawn Shop Task Force in Maryland, was cited by the online newspaper,, as saying that he estimates that the majority of county pawnshops knowingly take in stolen items. “Some pawnshops do reject items they believe to be stolen and report all items they take in to police, as they are legally required to…We’re trying to stop this open market for stolen goods.”

That’s Not Quite Right!

Less than one tenth of one percent of all pawned merchandise is identified as stolen goods. That’s because customers must provide positive identification and a complete description of the merchandise. This information is then regularly transmitted to law enforcement, which dramatically decreases the likelihood that a thief would bring stolen merchandise to a pawn store. This same online article cites Richard Sussman, president of the Maryland Pawn Association, saying that “the amount of stolen property has always been ‘extremely low’ because thieves know the strict regulations pawnshops face.”

Pawn Shops and Property Values–tattoo-businesses-facing-moratorium

The Board of Alderman of Ridgeland, Mississippi accused pawn shops of having a “blighting effect” on cities. In the same article, published by, Ridgeland mayor, Gene McGee, was quoted as saying that pawn shops, “complicate redevelopment efforts that are critical to property values.” In a similar article from La Grange Today, small business owner shop owner, Michael Lapidus said that a pawn shop “…does not bring the shoppers and consumers we need to fill our stores and restaurants…will in fact have a long term reverberating affect on our property values… and will never, no matter how ‘upscale’ it looks, be a business others will look at positively.”

That’s Not Quite Right!

The Wall street Journal reported that, “People Pulling Up to Pawn shops Today Are Driving Cadillac’s and BMWs.” In a rebuttal to Lapidus’ tirade, Andy Grayson says that an upscale pawn shop is even,“…a magnet for affluent shoppers, featuring mostly jewelry of high quality, along with high-end electronics such as flat-screen televisions, sports equipment and the occasional well maintained power tool.”

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. Indigents and derelicts have no assets to use as collateral. No one builds a business around these people. According to, the average pawn customer is 36 years old and has an average household income of $29,000. 80% of pawn customers are employed, 82% have a high-school diploma or GED, and 33% own a home. Pawn customers come from all walks of life, are of either sex, and represent all ethnicities. They occasionally need short-term cash for an unexpected bill such as a medical expense or car repairs and the average amount borrowed is $150. The typical pawnshop retail customer is a bargain hunter, either by need or desire. Most pawnshop customers are repeat customers.

Senate Struggles with Rate Cap

Senator Dick Durbin of IL was quoted in a WCCO online article advocating Senate Bill S. 500, which proposes a 36% APR rate cap on fees and interest charged by a lender. “These excessive rates are often hidden and can have crippling effects on those individuals who can afford it least,” Durbin said.”Congress must enact protections against predatory lending.”

That’s Not Quite Right!

Pawn transactions are small-dollar, short-term loans with no hidden charges, according to Pawn transactions have no negative impact on consumers’ credit. Compare this to bank insufficient funds fees, merchant bounced-check fees, credit card late payment fees, and late utility/reconnection fees, which can all generate a negative credit report. More importantly, consumers aren’t trapped in a debt cycle, as can occur when fees pile up in a financial crisis. Weighed against the alternatives, a short-term collateral loan can have rewarding rather than crippling effects that allow families to overcome unexpected financial emergencies.

A 36% APR rate cap would likely put a majority of pawn shops out of business. This example from shows how the rate cap would make a $100 loan an unsustainable source of revenue. With this cap, pawnshops can charge a maximum of $0.10/day for every $100 loaned, and the average pawnshop loan amount is less than $100. Assuming someone borrows $100 and repays the loan 20 days later, a pawnshop could only charge $2.00 in interest and fees for this loan. $2.00 isn’t enough to cover employee wages for the time spent writing the loan, not to mention all the other costs associated with running a pawnshop. Compare a proposed 36% rate cap with other commonly accepted interest rates:

-IRS Failure to File: 182.5% APR
-California Vehicle Registration Renewal Late Fees: 365% APR
-Bank Overdraft Loans: up to 3,500% APR
-Loans Secured by Expected Tax Refunds: 50-500% APR
-Credit Card Fees: 50% APR