One place pawnshops get respect

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Pawnbrokers — including Kamaaina Loan blog — often lament that the image of pawnshops with the public is generally low. But there’s one place where we rank high. In fact, as far as we know, the highly-regarded Fender company is the only business that uses “pawnshop” as part of its branding.

Fender has just announced an addition to its fairly new Pawn Shop Special series, a small amp called the Ramparte that

looks the part of the perfect pawnshop prize.

Who knows how many now-famous musicians would never have been heard of if they hadn’t scored cheap used amps and guitars and mixing boards from a pawn shop when they were starting out poor, hungry and working gigs for free? Many, we think.

Tools 086

Maui, whose tourist business supports a high concentration of talented players, is awash with quality instruments (and some of middling goodness), and there are always a few in our retail store at 98 North Market Street.

There are even more in the warehouse, but most of those you’ll never see in the store. They go back to the owners, who have pawned them. Not because they needed money but because they are off on a tour or for a recording date — as the pros so often are — and the akamai ones have figured out that it’s a whole lot cheaper and safer to pawn their instruments with us than to put them in storage.

Our bonded and insured warehouse is climate-c0ntrolled.

The musicians may have come on this cool trick on their own, or they may have learned it from Jerry Clower’s Uncle Versie Ledbetter.

Luxury asset lending

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One thing Kamaaina Loan blog hasn’t covered much is how pawnbrokers do business with small businesses.  Usually, the actual transaction is with an individual, as with the vast majority of pawn loans, but “luxury asset lending” differs because it is a loan for much more money than a typical pawn loan, and it is taken out to tide an operating business over a financial hump — like making a payroll, which is much different from asking for a few hundred dollars to cover an emergency car repair.

Our comfortable Private Transaction Room

Our comfortable Private Transaction Room

This sort of loan has been a part of the pawnbroking business right along, but only with the increased attention paid to pawn (thanks to cable TV) has it acquired a name — personal asset lending, luxury asset lending or collateral-based lending.

None of the terms is especially well chosen, but that’s what the financial press has decided to go with.

Collateral-based lending, also called personal asset, luxury asset lending, is small but fast-growing, part of the shadow-lending sector that has emerged since traditional credit dissipated after the financial crisis.

The Wall Street Journal estimates it could soon grow to a multibillion-dollar segment, which sounds big but would be trivial compared to the big sources of short-term business money, like commercial paper.

Here’s a typical example of how it works: Let’s say a small general contractor has to make payroll but, for some reason, a progress payment on a project hasn’t come in on time. He needs several thousand or maybe a few tens of thousands of dollars, and he needs it fast.

Banks and other lenders cannot react that fast. Credit cards might work  but only if the borrower has a lot left on his credit lines.

Who can give a businessman $25,000 in cash in 15 minutes? A pawnbroker can. If the businessman has a gold Rolex, or something similar. A safe deposit box of gold coins will do. Even a stamp collection, although it would likely take more than 15 minutes to value that.

Now, let’s say our general contractor also does not want to be seen handing his Rolex across the pawn counter. People might talk. At Kamaaina Loan, we have him covered.

Call 242-5555, explain you want to do a “luxury asset loan” and we’ll open our Private Transaction Room, which is accessed via a private entrance well away from the pawn entrance. We’ll even send a limousine to bring you and your Rolex (diamond tennis bracelet, Krugerrands etc.) to us.

 

“Small business owners are not willing to extend themselves further into debt without more assurances of an economic recovery and stability,” says Paul Aitken, CEO of personal asset-based lender Borro Inc., in a press release, noting that small business borrowing has continued to decline. “The macroeconomic picture shows indications that the recovery should be on its way, but small business owners don’t share that same sentiment. “The consequence of accumulating too much debt has become more than people are willing to accept,” he adds. “Personal asset lending continues to be a favorable option as it avoids the potential pitfall of damaging credit scores.”

As with all pawn loans, we don’t care what your credit score is. Your Rolex is good enough for us.

 

 

Who is a pawnbroker?

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As this editorial from the Wheeling Intelligencer demonstrates, pawnshops and other dealers in secondhand goods sometimes have to surmount poorly conceived local regulations.

In most places, including Hawaii, there are separate legal codes for pawnbrokers (whose primary business is lending but who buy and sell used merchandise) and pure secondhand dealers, who do not make loans. In a few places, like Florida, there are more than two sets of regulations, as secondhand dealers are further subdivided.

Not in Moundsville, West Virginia, though.

Pierson took his concerns about the ordinance to council last month. He explained his store is not a pawn shop. He merely buys and resells merchandise. He does not provide loans with items brought into the store held as collateral. Most reasonable people would agree Pierson is not operating a pawn shop.

But city officials have said Pierson is required to fill out pawn cards for any valuable items he buys, then hold the merchandise for 10 days before selling it. Police Chief Tom Mitchell explained requiring documentation and a delay in sale can help his department track stolen goods.

This appears to be nothing more than 1) poorly drafted legislation in a hick town; and 2) casual perhaps biased enforcement.

One of the continuing beefs at our Maui pawn shop is that enforcement of secondhand dealer laws is spotty to non-existent. Kamaaina Loan is registered as both a pawn shop and a secondhand dealer.

Following the two sets of rules is not extra burdensome. The same sorts of recordkeeping are required for both kinds of deals, and the difference is the holding period.

For purchases, our business is required to hold merchandise for 15 days before reselling. Pawned items have to be held 60 days, and if not redeemed by the borrower by then, can be sold.

And since Kamaaina Loan, as a pawn shop, makes daily electronic reports to police, the authorities can monitor both kinds of transactions at the same time. Secondhand dealers are regulated in theory but in practice with swap meets, Internet classified lists and other avenues for disposing of used goods, secondhand dealing is hardly supervised at all.

 

Canonization for Big Rich

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When correspondent Emily Bott of Maui No Ka Oi magazine asked if she could do a profile of Big Rich for the November-December issue, Rich had no idea he’d be portrayed as the “St. Nick of Market Street.”

talk-story-pawn-shop-richard-dan

Emily riffed off the fact that Saint Nicholas is the patron of pawnbrokers (and sailors). She didn’t tell  Big Rich, however, about St. Nick’s other characteristic: Throwing bags of gold through the windows of poor fathers so they could provide doweries for their marriageable daughters.

Rich likes being St. Nick but he is not planning on throwing bags of gold through anybody’s window.

Nationally, 80 percent of pawnshop clientele reclaim their collateral on time. Dan’s average is 93 percent. “People pawn items they have an attachment to. They prefer to redeem them.” Dan makes it easy to do so. A wall filled with testimonials backs up his claim that “I hear ‘God bless you’ all the time.”

(Photo by Sue Hudelson, courtesy of Maui No Ka Oi magazine)

Who do you trust?

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One cool thing about being in the pawn business is that we can (usually) make money on gold whether its price is up or down. That’s because we both buy and sell and depend on the commission for profit, not the fluctuation.

That is not the case with most individuals. Probably most buy gold as jewelry, so the variation in price doesn’t matter much to them anyway. But for those who buy gold as an investment, it certainly makes a difference when to hold ’em and when to fold ’em.

For example, right now the price of an ounce of gold is about $1,314. Goldman Sachs thinks the price will be down close to $1,000 by the end of next year; but there’s an alternative opinion. Bloomberg News describes the views of  Peter Schiff, a well-known gold bug. He thinks gold is going to $2,000, and soon.

So, take your pick, $1,000 or $2,000. The story quotes Ben Bernanke:

“Nobody really understands gold prices and I don’t pretend to really understand them either.”

Neither do we.

We will buy your gold or silver jewelry, coins, ingots, dust any time, for the daily New York spot, minus a small commission. Or we will sell you jewelry, coins or ingots (sorry, gold dust not usually in stock), for the New York spot plus a small commission.

We will beat any other written offer you can find on Maui, too.

A reliable form of Maui gold

A reliable form of Maui gold

 

Two colorful pawn shops

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These two pawn shops, one in Maine and one in Florida, make our little Maui pawn shop seem kind of — how to say? — drab?

Pawn shop in Maine

Pawn shop in Maine

 

The photo of the Florida shop does not show quite how colorful the shop is. Even the palm trees are painted green, yellow and blue.

 

Even if we wanted to paint our Wailuku pawn shop this way, we don’t have the wall space to do it.

Pawn shop in Florida

Pawn shop in Florida

Too little to borrow

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Kamaaina Loan blog has linked to many newspaper or television stories about the new status of pawning. Here is an unusually detailed report in the Chattanooga Times Free Press.

Business reporter Ellis Smith did something we haven’t seen before. Although we have often noted that banks won’t lend you a hundred bucks — something our Maui pawn shop will be happy to do — Smith made the effort to ask his local bankers just how small a loan they would consider:

First Tennessee, the largest bank by deposits in Chattanooga, doesn’t lend less than $2,500, “and we don’t make money until we get way over that,” said Keith Sanford, market president for the bank. “Even at that level, we try to steer them toward a credit card.”

SunTrust has an option on its website for unsecured loans, but it also requires a credit check, and the minimum loan amount is $3,000.

Of course, Kamaaina Loan doesn’t make unsecured loans either. We need something to pawn — gold ring, power tool, guitar. Something.

But we don’t care what your credit rating is, or even if you have a credit rating.

Guns in a Chattanooga pawn shop

Guns in a Chattanooga pawn shop

 

Other differences between our Maui pawn shop and the pawnbrokers in Tennessee: By law, in Hawaii we cannot lend on autos.  Pawnshops can lend on titles in Tennessee. We don’t do firearms. As far as we know, only one pawnshop in Hawaii has the federal firearms license required to do  pawn loan.

It’s on Oahu and is primarily a gun shop that makes loans as an additional business service.

We see this happen, too

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From  a summary of a new episode of “Hardcore Pawn,” set on a day when gold has taken a big drop (although the claim that it dropped 5% is bogus — that would be around $75 and gold doesn’t move that much in a day):

When a woman came into pawn her gold bracelet, she was told she could get $250. She had received $300 in the past for it and demanded the same. When she was told that the price of gold had dropped, she told the woman at the window that it was not her problem and wanted to see a manager. When Ashley came to confront her, she called her out to the parking lot, without Byron. Ashley handed her back her bracelet and told her to have a good day.

At our Maui pawn shop, we have a lot of customers who pawn the same item over and over. They know and we know what the loan value is, and writing up those loans goes really fast.

Maui is a tourist island, and plenty of workers in the visitor industry have busy and slow periods. They use pawn loans to smooth out their cash flow so they don’t get behind in  their bills.

Most of these regular customers are quite sophisticated about the value of their collateral. Unlike the lady in the “Hardcore Pawn” episode, they don’t get bent out of shape when they’re told they cannot get as much as usual.

On the other hand, sometimes when gold is rising, a Kamaaina Loan pawnbroker will be asked for, say, $100 and will check the New York gold price and say, “You know, you can get more for this now.”

Some take more, some say, “No, that’s all right. $100 is what I need.”

The really sophisticated ones recognize that some lendable items can lose a lot of their appeal overnight. This is true, for example, of video game systems. When the new Xbox or Playstation comes out, the old ones lose a lot of their value. Since the game system makers usually announce new versions well in advance, the value actually starts adjusting well before the new version is released.

What are they worth now?

What are they worth now?

Something similar happens with cellphones. They are very lendable, but every new version of the iPhone makes the old ones worth less. There have been so many versions of the iPod that it takes a maven to keep straight the market value of the various models and features.

Gold, silver and diamonds are less predictable. They aren’t coming out with a new version of gold.

Gold today is under $1,300 an ounce. It was over $1,300 a few days ago. No telling where it will be next week, particularly since the issue of the government shutdown is still unsettled as this is written.

 

Exploiting Native Hawaiians

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Ian Lind (at ilind.net) has a good report from the trial of the Hawaiiloa Foundation  (which is on Oahu although the actions originated on Maui) and it is worth your time to read.

The Maui News has not caught up with this story.

Lind (a retired newspaper reporter now blogging local issues) examined some of the documents used to collect fees to “save” Hawaiians from having to pay mortgages. His conclusion:

Both claim to draw authority from a hodgepodge of sources from Hawaiian royal land patents to the Magna Carta, and both include an “Insurance and Indemnity Bond of Ownership” claiming to draw on $300 million “of lawful specie alloy or exchange in market currency” via the “Hawaiian Treasury: Waihona Waiwai, backed in gold, silver and national securities derived fro 33/1/3% kanaka vested lands, resources and rights.”

The two documents are essentially identical, with the appearance of a legalistic form filled with obscure and sometimes nonsensical gobbledygook.

– See more at: http://www.ilind.net/2013/10/11/on-scams-and-the-sovereignty-narrative/#comments

 

They got his number, and his, too

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Kamaaina Loan blog has often pointed out how stupid a crook has to be to fence stuff at a pawn shop. Here’s an example

A stolen vase

A stolen vase

from Illinois that’s a little bit off the beaten path: Police busted two guys for stealing 100 bronze vases from cemeteries. That’s about $50,000 retail value of vases, though much less as scrap, which is what the crooks sold them for.

The buyer was a scrap yard, not a pawn shop, but in that jurisdiction both types of business are covered by similar reporting rules. (Same with Hawaii, although scrap metal dealers have their own ordinance.) In any event, the outcome was the same: a routine check by police turned up suspicious items, and from there it was a simple matter to get full identification of the sellers.

Harl said that it is not uncommon for scrap yards to turn away customers who are selling likely stolen goods. In terms of the vases, he said employees might not have been aware of what they were. Harl said it is illegal for a scrap yard to knowingly accept anything taken from a cemetery.

“A lot of these (thieves) will come up with a legitimate story before going to sell them,” Harl said. “This isn’t their first time around the block. If scrap dealers get suspicious of everybody, they won’t be in business for very long. They are in business to do business, and not necessarily to help us out.”

But, in doing their due diligence, and following with ordinance guideline, the scrap yards and pawn shops are helping out in a big way.

“The ordinance is stringent, and effective and something that allows us to keep close tabs on items being accepted by various dealers in the city,” Aurora City Spokesman Dan Ferrelli said.

Bronze memorial vases turn up in odd places sometimes. We saw an urn for ashes at a “Storage Wars”-type auction once. It was empty.

Somebody offering 100 ought to be enough to make any buyer curious, but the story makes it sound as if the thieves fed them into the stream of commerce a few at a time, spread over two counties.

Probably thought they were being clever, but you’d think if they were even a little bit smart, they’d have started having doubts after being asked the third or fourth time for their fingerprints.