Look who’s pointing fingers

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An ad on my Facebook page alerted me to a film coming out this summer to be called “Spent: Looking for Change.” It is said to be about the 70,000,000 Americans who are “underserved” by the regular financial system.

Now, Kamaaina Loan blog has often considered the unbanked and underbanked. Pawnshops are prominent among the “alternative financial institutions” who do serve the unbanked. No credit? Bad credit? No problem, as long as you have an asset to pledge.

It is clear from the “Spent” trailer that the film — posing as a documentary but actually a long commercial — will be a hit job on, among others, pawn shops.

Are pawn loans expensive? Compared to what? If you can borrow a million dollars, you can probably get it for 4%. If you want to borrow $160 (an average pawn loan), you will pay 20% in Hawaii, less in some other states; although where the rates are lower, fees are usually allowed. In Hawaii fees are not allowed.

Let’s say you need that $160 to pay your electric bill. Borrow on pawn and it will cost you $32. Borrow from the utility — by waiting until next month — and you will probably pay even more than $32 in late fees, plus maybe get a bad mark against your credit.

We wouldn’t recommend anybody take out a pawn loan every month to pay electric bills; but once in a while, when the bills outstrip the household budget, it might be the cheapest, most prudent alternative.

Now let’s get down to the nitty-gritty. Who is paying for “Spent”?

American Express.

Yes, one of the giants of banking that is not serving those 70,000,000.

Why? According to ABC News:

“Spent” will premiere this summer and is sponsored by American Express. The company currently offers two alternative financial products for the financially underserved, in their “Serve” and “Bluebird” prepaid debit cards.

Not really an alternative for the typical pawn customer sketched above, who, if he cannot pay his electric dill also cannot buy any prepaid debit cards.

 

 

 

 

 

 

 

Class acts

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A repeated theme here at Kamaaina Loan blog has been the turnaround in the attitude toward pawn shops in the press, probably due to reality teevee more than anything else.

Over the weekend, a kind of milestone in this process occurred when the New York Times published an admiring piece about pawn shops for rich East Siders, based on a 250-year0-old English pawn shop’s first branch in Manhattan. Not only that, although the story was in the “Wealth Matters” section, far inside the bulky newsprint version of the Sunday Times, for a brief time today, the story was on the front page of the Times’ internet edition, until it was pushed off by fresh Chris Christie scandals.

Their fancy East Side store

Their fancy East Side store

Now, as a pawn shop, we are happy to have the Times look upon pawn shops as public-spirited businesses, or at least as public-spirited as the big banks the paper writes about all the time. But we do have a couple of comments.

First, the Times is about a year late on this story. Reports about pawning by the rich have been common fare on such sites as CNN for a long time now. Second, the Times may have been late, but its reporting (by Paul Sullivan) was superior:

The high-end portion of the industry is betting that with comparatively lower pawn rates and an ability to fulfill even large loan requests in a day or two, it will be able to build its business on happy repeat customers. Paul Aitken, founder and chief executive of Borro, said he attributed repeat business to the human desire to spend today without thinking about tomorrow.

“Entrepreneurial people like to do things on the spur of the moment, and they’re probably not the best planners,” he said. “When they have money in their pocket, they like to buy luxury goods. When they don’t, they like to use those goods to get money for their next venture.”

And that is how he ends up taking a Mercedes McLaren in as collateral for a loan.

That’s an aspect — we are not necessarilu endorsing it — we haven’t seen in numerous other stories about high-end pawn.

Third, high-end pawn is not, as Sullivan’s story implies, something that arose when banks tightened credit following the Panic of 2008. It’s been part of the business all along. It has probably extended its catchment area since 2008.

Our Wailuku pawn shop. We have a fish.

Our Wailuku pawn shop. We have a fish.

Fourth, while our pawn shop at 96 N. Market St. is not as flossy as Suttons & Robertsons Upper East Side shop, our Private Viewing Room is just as swank as S&R’s, what with its Chinese antiques and paneling. And — something S&R does not seem to have — its private entrance, for those rich borrowers who don’t want the neighbors to know they are pawning the McLaren. (Actually, in Hawaii law pawn shops cannot make loans on McLarens, but you get the concept.)

private

Fifth, the bottom line is, as always with pawn loans, would you rather be turned down by a banker or accepted by a pawn broker. Because pawn brokers lend on collateral, and the extra scrutiny that has scared bankers into holding onto their money means nothing to us. Gold is gold, a diamond is a diamond, a Rolex is a Rolex, whether the stock market is booming or crashing.

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According to this Huffington Post story, in the five years 2007-2012, the number of pawn shops in the United States grew from 6,400 to 10,000.  We’re not too confident in the numbers. Nobody really keeps track, and other sources claim the country has about 12,00o pawn shops. santy If it is correct that there are 3,600 more pawn shops than there were before the stock market swoon of 2008, then that’s 2 new ones a week. It also means there are about as many pawn shops as McDonald’s hamburger stands. Whatever that says about us. On the other hand, the number of gas stations dwarfs both pawn shops and Mickey Ds at 159,000, but that’s down from 200,000+ 20 years ago (and down from over a quarter of a million in the cheap gas era of the 1950s). (Numbers from a website called howmanyarerthere.org, where you can play this comparison game all day long.) Well, whatever the exact number, the Huffington Post story fingers the reluctance of the big banks to lend to “non-standard” people and the decline of the “community banks,” which were allegedly a source of money for such folks in  the past. We doubt the accuracy of that. The most we’d accept is that smaller banks were prepared to make smaller loans that the big ones wouldn ‘t bother with. On the other hand, really small banks couldn’t lend much, because regulators tried to prevent them from making loans that were a large fraction of their capital. On the third hand, for Huffington, “small” means up to $100 million, which is enormous by pawn shop standards. Even the big chains don’t have total loans that approach that. Most of those 10,000 pawn shops do under a million a year, probably. But the point, made to Huffington by our friend Jerry Whitehead (a consultant who advises Kamaaina Loan) is that:

pawnshops are focused on consumers who are “getting forgotten in the banking system.”

We’d put it another way. Unlike other lenders, pawn shops don’t turn away anybody. If you’ve got collateral, we’re good to go.

Pawn 101: Pawn shop scammed

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Is that real gold?

Is that real gold?

Here’s an odd little story — in its entirety — from the Bradenton Herald:

MANATEE — A Manatee County pawn shop has been ripped off by a jewelry fraud artist.

Officials with America’s Super Pawn, 5612 15th St. E., say they paid out $550 for what they thought was a 10-karat gold chain with charms, but which turned out to be worthless metal, according to a Manatee County Sheriff’s Office report.

The transaction occurred on Oct. 1, but the pawn shop manager was just notified Tuesday by the company’s jewelry analysis expert that the gold chain was fake and of no value, the report states.

The pawn shop manager notified the sheriff’s office.

It is believed the subject who sold the necklace has sold other fake jewelry to pawn shops throughout Manatee and Sarasota, the report adds.

Odd because at our Maui pawn shop, we test all gold coming in. It is possible to fool the tester, but the touchstone is seldom fooled by something like a chain. Didn’t Manatee Pawn Shop test?
Maybe it was busy and they were in a rush. So if you ever have to wait a minute or two during the Christmas rush because the customer ahead of you in line is having her chain tested, that’s why. Always test.
Odder yet is the hint that the same scamster has hit other shops. Don’t any of the shops test? We know some Florida pawnbrokers, and we are sure almost all of them do test.
Has somebody in south Florida gone to the trouble of making some trick chains that defeat the touchstone? It could be done, but it would be a lot of work, both to manufacture the fake chains and then to pass them out in $500 lots all over a county.
Read more here: http://www.bradenton.com/2013/12/10/4881419/manatee-pawn-shop-ripped-off-by.html#storylink=cpy

Pawn 101: Pawn records aid Maui police in death investigation

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Kamaaina Loan’s pawn manager Krystal Cabiles is famous in the pawn shop for her steel-trap memory for names, faces and phone numbers. Krystal did it again today, when she matched a photo that Maui police had posted on Facebook with a pawn customer she had seen — just once — two months ago.

The body of a man was discovered a few days ago on the grounds of a Lahaina resort, and police retrieved a driver’s license. But the information on it led to a dead end, and police could not trace the man’s family. They are withholding information about him until they can find them.

They didn’t even know where on Maui the man had been staying.

Krystal says she was “making my nightly Facebook rounds” when she saw the picture. She recognized it. The man had done a pawn loan with us, and the records gave his name, address, fingerprint etc. Even better, although visitors don’t have to tell us where they are staying (we use their home addresses), the man had mentioned the resort where he was staying, and even why he was on Maui.

At police request, Kamaaina Loan blog is withholding that, too, until the family can be found. But it was a good thing the man had mentioned where he was staying, because he forgot his driver’s license. Our pawn broker Alan Cooperstein drove all the way to the west side to return it.

So this morning, Big Rich was able to tell the police where the man  had been staying, and using a credit check program, supplied a list of what appeared to be his relatives and, possibly, the name of the man ‘s family business.

As this is posted, police are following the leads.

As Big Rich rec

Richard Dan on Maui

Big Rich, tracer pf lost persons

alls, this was not the first time his pawn records solved a mystery. Once, years ago, a pawn ticket found on the body of a murder victim in Los Angeles led police to Big Rich, who had the victim’s pawned radio, which had his Social Security number on it.

 

Pawn 101: Pawn shops get more respect

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As an old newspaperman, it pains me to say it, but TeeVee is capable of performing feats — so far as public opinion goes– that print just cannot match. Case in point: Making pawn  shops respectable in the public eye.

We have mentioned a couple of times that Fender has a “Pawn Shop Special” line of instruments and amplifiers, but while this shows a certain degree of respect, it is not general. Rather, the theme seems to be that musicians, who unless they hit the big time lead a rather hand-to-mouth life, rely on finds of still-good but cheap equipment in the retail departments of pawn shops. Nice but not a full-throated endorsement of the place of pawn shops as bankers to those abandoned or ignored by the big financial institutions; or even of just the convenience of no-credit-check, no-hassle (as we say in our Maui pawn shop: NO HUMBUG) borrowing.

(For context, there are other businesses that are so chancy that in a sense new entrants rely on the lack of success of previous risk-takers. Restaurants have a very high closure rate, much higher even that the generally high failure rate for all small businesses. So there is always a lot of used equipment for sale: professional refrigerators, mixers, coolers etc. Since it’s commercial-grade, it tends to be rugged and if it hasn’t been abused,   reliable. But the depreciation rate is worse than for cars. We have seen a commercial mixer, in good shape, that goes new for $60,000 go at auction for about a grand. Some pawn shop operators do get involved in used restaurant equipment. Kamaaina Loan occasionally buys at foreclosure auctions, rather than direct from restaurateurs or as forfeitures on loans — most collateral we accept is hand-carried to the counter, not possible with most restaurant equipment — and resells to new hopefuls. But it seems unlikely that Hobart will be coming out with a “Pawn Shop Special” line of slicers. There’s no inherent reason that musicians should feel more attuned to shopping at pawn  shops than hot dog-stand owners, but they do.)

Which brings us to today’s special pawn shop news, a real breakthrough — as we see it — in the image of pawn, and due largely to the impact of reality pawn shows, especially top-rated “Pawn Stars.”

In fact, the Pawn Stars are the stars of the new TV commercial by Microsoft that uses Rick of  “Pawn Stars” to bash Google Chromebooks. The theme is that a used Chromebook is not worth anything to a pawnbroker because it’s “not a real laptop.” This digs at Chromebooks’ bargain-basement approach which means it can do work if you are on-line but not so much if you are not connected to the Web.

Well, being used as authority for dissing other brands is not quite in the league of being called the Cadillac or Tiffany of whatever, but it’s a big step up from being seen as the resort of down-and-outers and burglars.

The way we see it, pawn shops haven ‘t changed very much. Most Americans have  never been inside one. Maybe one in four have used pawn shops for one purpose or another. TeeVee has given the rest of them a look inside, and what they saw was far different from what they saw when Rod Steiger played
The Pawnbroker.”

All this could lead to some long thoughts about how mass opinion gets formed. No question the movie “The Pawnbroker” had as much to do as any other episode to form the public reputation of the pawn business, even if nine out of 10 Americans never saw it.

But the ones who did spread the meme of pawnbrokers as avaricious, hard and unscrupulous. Nine out of 10 Americans have never watched “Pawn Stars,” either, but the one-tenth have brought it up in conversations with friends, and print and on-line media have written about the phenomenon. So that a new ingredient in the froth of public perception has been added, and overall a positive one.

Thanks, Rick.

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.

 

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