Wash that smartphone!

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A smartphone, properly scrubbed

A smartphone, properly scrubbed

All good things come to an end, and when that happens to your smartphone, you should wash it. And, no, I don’t mean what my one-and-a-half-year-old grandson did to his mamma’s new iPhone 6S.

In a pawnshop context, washing your phone means scrubbing it of personal information before you sell it. Older model smartphones lose value quickly but they still have some value: A Pew survey last year found that 68% of American adults have a smartphone.

That means 3 in 10 don’t and probably would like to acquire one if they could afford it. Pawnshops are one place that can happen

When Kamaaina Loan (or any other pawnshop) buys a smartphone for resale, it will scrub it. The simplest way is to do a factory reset.

However, at least with Android phones (which is most of them), a reset does not necessarily wash the phone clean.

Earlier this year, Avast, a software security company, purchased 20 used smartphones from pawnshops in Europe and America. 60% had not been reset: an error on the part of the person who sold the phone to the pawnshop and of the pawnshop as well.

However, here’s the problem: of the 40% that had been reset, half still had recoverable personal information on them.

Avast said that was because some older versions of Android’s OS have a factory reset that does not clear data.

Worse, some sellers just deleted their files without doing a reset. That left the files easily recoverable with commonly available and free software.

Avast says the thing to do is to overwrite your unwanted files, which is what the reset does.

We’d add that destroying old files in unwanted equipment applies to anything with a chip in it. Even copiers save everything they see. The old copier itself may be dead but its brain lives on.

 

#maui #mauiretail

Semi-good advice about pawning

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pawnFor such a simple idea that people have been using for thousands of years, pawning seems baffling to many people.

Just the other day here at Kamaaina Loan, we were discussing possible regulatory changes — perhaps coming from the national government — that would affect us, so we pulled down “Black’s Law Dictionary” to refresh everybody about the legal description of “pawn loans.”

It uses words like “bailments” and is not that user-friendly, so this is how I — as a professional writer — boiled it down:

A pawn transaction is a short-term cash loan secured by portable collateral.

The devil, of course, is in the details. We found an article in the Dayton Daily News headlined

Before you hock an item to a pawn shop

It seems to be a Better Business Bureau canned article but none the worse for that. With one exception, we found the advice offered to customers pretty good.

The exception?

• Know the value of items. If you don’t know the value, shop around and/or consider getting an appraisal.

The first part of that is OK. But an “appraisal” is impractical in most cases.

The BBB quotes the National Pawnbrokers Association that the average pawn loan is around $150, and that is close to the average at Kamaaina Loan And Cash For Gold.

Now we also offer appraisals, and ours have been accepted by every court in the state. The difficulty is that the minimum charge for a real appraisal is about $150 — and it can be a lot more for a big task like helping a conservator prepare a report for probating an estate.

Obviously, it doesn’t make sense to pay $150 to learn the value of something you are going to use to get a loan for $150.

So, what to do?

With gold and silver, you can look up the New York price on kitco.com. Then with some simple arithmetic you can determine how much gold is in your wedding band. Example: an 18 karat band is 75% gold, so if it weighs 4 grams it has 3 grams of gold in it.

jeweler signYou know the New York price per gram. The pawnbroker is going to offer you a fraction of that, because if he has to sell the ring there are lots of expenses involved: store overhead, insurance, shipping, assay etc.

That includes his risk that the N.Y. price will go down between the time he gives you cash and the time — at least two months later under the laws we operate under — that he sells it.

So there is room for borrower and lender to make assumptions. Different pawnbrokers will come to different conclusion about what that ring is worth. At Kamaaina Loan, we like to say, see us last. You’ll find out we make the highest offer.

(As a practical matter, the pawnshops on our island are separated by about $5 worth of gas and 30 to 45 minutes of driving time, so you cannot really afford to shop around too much for a $150 loan. Pick a pawnbroker you like and stick with him. Pick us.)

With other items,. the customer can do the same thing we do: look it up on the Internet.There are specialized sites. For example, for golf clubs, the Professional Golfers Association maintains a free site, valueguide.pga.com. This is supposed to be based on transactions across the country, but it may not be entirely reliable for local preferences, and condition counts.

There are sites for particular brands of guitars etc., but for the majority of goods eBay sets the floor. You the borrower can look up prices on eBay as well as we can. Remember to look at “completed auctions” to get the actual prices achieved.

One thing we liked about that BBB article was its report about inquiries and complaints. In 2015, the BBB received over 65,000 inquiries about pawnbrokers, but only 300 were complaints.

We bet they got more complaints about the cheese in cheeseburgers.

(Kamaaina Loan is a member of the Hawaii BBB.)

#maui #mauipawn #mauiretail

The war on pawn (and used cars)

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OK, we get

Endangerd in Warren, Michigan (photo from Macomb Daily)

Endangered in Warren, Michigan (photo from Macomb Daily)

it. Pawnshops are not among the best-loved of businesses — except by our customers, who value us.

But just because you disapprove of or dislike somebody’s business, that doesn’t mean you can use local government to make ridiculous impositions. This news has not penetrated to some of the more backward parts of the country, like Macomb County, Michigan.

In Warren in Macomb, county officials are refusing to accept applications for pawnshops and have imposed unconstitutional restrictions, like a 750-foot exclusion zone around churches. And some of them want to extend that to 1,000 feet.

This kind of zoning restriction runs into a well-known (in the civilized world, anyway) constitutional principle, the “rational nexus” requirement.

Governments need a real reason for imposing rules on otherwise legal businesses. It’s OK to ban a business running a trip hammer or a car crusher from operating near a school or a church, both of which need a degree of peace and quiet.

But a pawnshop isn’t going to interfere with a church. (Vice versa might not be the case.) If the church can operate within a thousand feet of, say, a beauty parlor, it will have to put up with pawnshops, too.

(Also, used car lots. Macomb wants to impose similar restrictions on them.)

Beauty parlors, pawnshops and used car lots have similar impacts on their surroundings.

If any pawnbrokers or car dealers in Macomb care to sue, they’ll win. The car lot regulation is particularly easy to see. There cannot be any real difference in impact between a used car dealer and a new car dealer, but Macomb is not trying to clamp down on new car dealers.

There’s a good chance none will sue. It costs money to fight city hall even when you’re sure you’ll win. That’s especially true in a hick county like Macomb, which elects its municipal judges.

There’s a good chance an elected local judge would rule against the pawnshop. Eventually, in a higher court, the shop would win. But it’s a fight not everyone would choose to pick.

However, it costs us nothing to jeer at the clodhoppers in Macomb.

#pawn #maui pawn #maui retail #ProudofPawn

We are on the fringe and proud of it

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Customers line up at a Philippines pawnshop (photo by winwin1684)

Customers line up at a Philippines pawnshop (photo by winwin1684)

Pawnbrokers are sometimes called “fringe bankers.” Well, we are called worse things. The people who call us “fringe” bankers are generally more or less sympathetic to what pawnbrokers do, in at least one of our many roles, which is to provide credit to people who are ineligible or unwilling to participate in “mainstream” banking.

At Kamaaina Loan And Cash For Gold, our average loan is about the same as for pawnshops nationwide — $150 or so. Try going to your local bank and asking for a loan that size. Unless you are a potential credit card customer/victim, you’ll be laughed out of the marble halls, in the politest way, of course.

But what about people who are afraid to go into a bank, even if they are in the economic class that bankers like to see? (In the United States, half of the typical bank’s customers generate 150% of profits, which means that the other half cost the bank money. That’s why banks are unwelcoming to little people.)

We almost have to look overseas to understand why some Americans are so wary of banks. Since the New Deal brought in effective deposit insurance for ordinary depositors, few working people have lost savings in a bank failure. (It is not well known, but before the New Deal, there were deposit savings insurance plans in some states, like Nebraska, but as banks failed by the thousands during “Coolidge prosperity,” small savers were wiped out anyway, because the insurance plans did not have sufficient backing.)

Here on Maui, we look to the Philippines, because so many of our residents trace their origin there. Filipino-Americans are an even larger proportion of our customer base than their status in the island (which is around one-third of all residents), This is commonly attributed to their suspicion of banks and bankers, which is something they brought with them, like a fondness for bibingka.

The Panay Times puts it this way:

 

Distrust in the banking system is probably the biggest reason why even the moneyed are cautious about keeping their eggs in one basket. It is no longer possible to count in one’s fingers the local banks that have folded up, leaving their depositors at the delayed mercy of the Philippine Deposit Insurance Corporation (PDIC), which could only refund no more than P400,000.  If a depositor has more than that, sorry na lang.

(400,000 Philippine pesos is only about $8,000, compared with the $250,000 that the FDIC insures US accounts for.)

Even today, that newspaper reports, only one in 10 Filipinos have bank savings accounts. (We suspect the rate is quite a bit higher among Maui Filipino-Americans, but the residual suspicion of banks remains high. Probably it is reinforced by news from relatives back in the islands.)

Suspicion of banks may be good for us pawnbrokers, but when it spreads too far, it begins to hurt the overall economy, because banks cannot fulfill their function of providing business credit. In America, some pawnshops (ours included) make business loans, but it is not a big fraction of our volume.

In the Philippines, and in Southeast and South Asia generally, pawnshops are much more popular as a source of business capital. That is why some big financial operators are looking at funding online pawnshops directed at business startups in the region.

(Softbank, the main backer of this particular venture, is a gigantic Japanese firm that has been expanding from telecommunications into finance.)

One investor puts it this way:

“The online pawnshop is exactly the kind of innovation I believe can help unbanked citizens. The Philippines is the ideal market to start the service, as pawning is the major financing method instead of banking for its people,” Yasu Seo said.

The Philstar.com report on this venture did not reveal how much money is flowing into pawnbrokers targeting startup businesses, but other reports suggest the total is in the tens of millions or low hundreds of millions of dollars. That is not insignificant but indicates the target borrower is an entrepreneur looking to start a small business, not large projects (which probably can tap international funds in places like Hong Kong or Singapore).

How did the Philippines come to distrust banks so? Under Spanish administration, there was no banking to speak of. When the United States gained control in the early 19th century, banks began to be opened in Manila, but communications were not adequate to foster banking in the remoter islands.

Also, most Filipinos in those days were on the edge of subsistence, so they had little money to put into savings accounts.

The disruption of the Japanese occupation was not helpful, as the islands switched currencies. After independence, banks have had only about 70 years to instill confidence in depositors, and they missed the opportunity by having too many failures and (according to Panay Times) too much chicanery.

The Philippines remain a poor country, with many millions of subsistence farmers who cannot aspire to a savings account, but estimates are that at least twice as many people could open accounts as actually do.

That helps make pawnshops important in the islands.

In America, banks do not have such bad reputations (at least for stiffing depositors) but it is still true that something like a quarter of Americans have little or no connection with a regular commercial bank — either because they don’t have enough income to bother or because (especially in some immigrant communities) they are suspicious of them.

That’s where we “fringe financial institutions” come in. Pawnshops provide a needed source of credit to people who are otherwise not welcome in lending offices. We are proud of being able to help.

 

 

 

 

Better endowed

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Two women came into a Jacksonville, Florida, pawn shop. One was well-endowed when she came in, but she was even better endowed when she left, because — as surveillance tape shows — while her friend was keeping the salesman occupied, she slipped 5 gold chains and gold pendant into her brassiere.

The shop owner described her as “a professional.”

Well, maybe. But it is a longstanding rule in the jewelry business — one item at a time on the counter. That pawnbroker was asking to get ripped off, and he did. Total loss: $3,600.

 

#maui #mauiretail #mauigold

Another thing to worry about

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From Florida comes a report of another way for pawnbrokers to lose money. In this case, $30,000 to a crooked employee who forged pawn tickets, put his own thumbprint on them, then pocketed the amount supposedly given to the customer.

This shop was using paper forms, so it might have been harder to carry it on with an electronic pawn system. On the other hand, the story does not say either how the employee was caught or why it took 9 months to catch him.

You would think that somebody would have noticed that the loans were not being repaid and then discovered that the pawned items weren’t in the store. Unless the crook was doing a lot of extensions.

We note that 52 pawns for $30,000 equals about $600 a “transaction,” another reason you’d think whoever reviewed the summaries should have noticed.

#mauiretail #mauigold #maui

Backing off the pawn reporting law

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Pawnbrokers under surveillance

Pawnbrokers under surveillance

This is something we haven’t noticed before. Across the country, there has been a wave of local ordinances requiring collection of data on pawn customers, with electronic reporting to local police.

But in Columbia County, Georgia, the sheriff is backing off such a law that went into effect in April.

Kamaaina Loan already collects information (as required by state law) and reports electronically (not required but good business). In fact, we take pride in being the first pawn shop anywhere to inaugurate daily electronic reporting.

However, we have opposed efforts in Honolulu to require using a particular out-of-state vendor to process the reports.

But it gets complicated. According to the Augusta Chronicle report, the objection was that the ordinance was too broad, that it extended to all kinds of second-hand dealers, not just pawnshops.

Not long after it was implemented, however, some businesses began questioning some of the new law’s provisions and expressed concerns about its impact on business. Local lawyer, Andy Tisdale said the ordinance could be interpreted to apply to almost any business that buys and sells used goods and equipment, including used cars, calling is a “second-hand dealer law.”

In addition, Tisdale said the ordinance had conflicts with Constitutional law, where it compels business owners to comply with warrantless searches or face arrest.

 

But we contend that second-hand dealers should be required to report, if the intention of these ordinances really is to deter fencing or assist in recovering stolen goods. It makes no sense to watch pawnshops with an electronic eagle eye while leaving other secondhand dealers free to take in questionable goods in secret. (In Georgia, part of the objection was that the local ordinance potentially applied to used car dealers. That seems unnecessary, since motor vehicles already have adequate regulations to monitor and track ownership.)

So while at first glance, we welcome resistance to these ordinances that compel businesses to deal with vendors they do not get to choose, the actions in Columbia County don’t appear to be the kind of pushback we would hope to see.

(The issue in Georgia about gun registries is outside our scope, since we do not deal in firearms and hardly any Hawaii pawnbrokers do so.)

Is pawn lending fringe or mainstream?

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pawnFor years, students of pawn lending have described it as an alternative to regular banking or — in the words of economist John Caskey — a form of “fringe” banking. Caskey, for one, is friendly to the pawn business, and even pawn lenders themselves have taken to calling themselves fringe lenders.

Unlike some other fringe groups, the designation is generally positibve.

Trouble for diamonds

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The following post should concern you even if you are not a diamond miner, which we assume most of our readers are not. Even if the only diamond you ever own is in an engagement ring, there is trouble ahead.diamond

At last year’s National Pawnbrokers Association convention, Martin Rapaport, publisher of the Rap Report guide to current diamond prices, spoke about the increasing appearance of synthetic diamonds and how difficult they are to tell from natural ones.

We are not talking only about artificial coloring of natural stones, which is impossuible to detect, but also about factory-made stones passing as dug-from-the-ground gems.

A year ago, Rapaport was saying that the problem was coming but was not yet a big problem for diamond buyers and sellers in pawn shops (and, by implication, for their customers). Well, trouble is here already.

As Bloomberg News reports, producers of natural gems are frightened enough to have, for the first time ever, formed an industry association:

 

The famously secretive diamond industry has lacked coordinated leadership since De Beers’s monopoly over the supply of gems ended after it lost a 10-year legal battle with the U.S. over price-fixing in 2004. The proposed association would represent the vast majority of the world’s diamond supply.

When we say that the value of a diamond is determined by the 4Cs (color, cut, clarity and carat-size), left unsaid is the fifth factor: rarity. Manufactured diamonds, of course, are potentially infinite in availability.

Diamonds have been made industrially since the 1950s, but the process was difficult, not too cheap and not well-suited to making gem diamonds. Technology advances.

Although a variety of factors have driven down the cost of genuine diamonds considerably (end of the deBeers control, new sources in Russia, South America and Africa outside South Africa), the cost of producing a look-alike has fallen even faster.

The Times of India reported last month that 110 manmade diamonds were discovered in a parcel in the Indian city of Surat, the world’s biggest cutting center. The undisclosed mixing of diamonds has been discovered on several occasions in the nation with India’s Gem Jewellery Export Promotion Council starting the Natural Diamond Monitoring Committee to combat the issue.

The fact that the unscrupulous traders were caught proves that it is still possible to tell the difference between manmade and natural diamonds, but is not easy, inexpensive or quick. (An artificially colored natural diamond is undetectable with current technology.)

It requires a specialized laboratory and days. At present, a retail buyer of stones, like our Maui pawn shop, cannot do the test, and the days required mean that customers are not likely to wait around for a distant lab to report. We can hope that the technology will improve and become cheaper, the way gene-splicing moved from custom work to mass production (to take one example from many). But who knows when that will come?

At present, there are not so many fake gem diamonds in circulation that pawn shops and jewelry stores are taking a big risk in making an offer for a customer’s old jewelry. But the incidence of fakes could accelerate rapidly.

Pawnbrokers have already seen how fake coins — made available in huge quantities from the world’s largest Internet scam business, Alibaba — have ruined the numismatic market for some coins, including Kingdom of Hawaii coins.

For the moment, Rapaport is sticking with the advice he gave his pawnbroker audience last year: Know who you are dealing with and stick with respectable vendors.

Addressing whether consumers should be concerned about diamond synthetics, Martin Rapaport said, “If you’re going to be buying diamonds, you better be dealing with a reputable source and that’s number one. There are a million ways for the consumer to be taken advantage of and it’s important for the consumer to buy from a reputable source even if it cost a little more.”

He also added, “Find someone you’re comfortable with and trust. Don’t feel you’re under pressure to buy. A lot of times you are under some pressure, you really want to get engaged, but I say relax and find the time to find someone that you trust. Comfort is king.”

#maui #mauiretail #mauijewelrydiamond

Crooked lawyers? Say it ain’t so!

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The post below is copied from my other blog, Restating the Obvious Maui, at The Maui News. For Kamaaina Loan blog, the key point to add, if you are a borrower, is that pawn loans are “non-recourse loas, which means that if you do not repay, the pawnbroker can keep your collateral, but he cannot go after any of your other goods or income. He cannot ask the courts to make you pay.

And he does not report your default to a credit reporting agency. Something to think about if you have ever had trouble repaying a loan in the past.

* * *

The NY Times has a story about the New York attorney general going after corrupt practices of buyers of bad consumer debt. If you have consumer debt, it’s worth your time (and one of your 10 monthly Times looks if you are not a subscriber) to read.

When I say “going after,” I mean candy-assed sweetheart settlements, amounting to mere hundreds of thousands in frauds that appear to total billions. And no hint of sanctions against the lawyers involved for their culpability in perpetrating frauds upon the courts.

Eric Schneiderman is no Eliot Spitzer.

But unlike mortgage foreclosure lawsuits, consumer debt collection cases often play out far from public view, consumer lawyers say, because borrowers seldom show up in court to contest the suits.
As a result, an estimated 95 percent of debt collection lawsuits result in default judgments against borrowers, an automatic victory for the debt buyers that enables them to garnishee consumers’ wages or freeze bank accounts.

That’s half true. I’ve never seen a debtor show up at Circuit Court to contest a credit card collection action. There are typically 3 to 6 in a morning session. (These are usually suits by the lender not by a buyer of bad debt.)

But I’ve seldom seen anybody show up to contest a real estate foreclosure action either, at least in the years since the Crash of ’08.

In either case, very often the borrower has left Maui long before the lender goes to court.

(Style points to the Times copy editor for getting the correct verb — to garnishee, not to garnish.)

#mauiloan #mauipawn #mauiborrow #borrow