It's simple to imagine pawn retailers will do properly within the pandemic. Additionally it is incorrect.

Perry Lewin has been in the pawn business for 28 years, but he has never seen a year like this. Sales have skyrocketed at his Decatur Jewelry and Antiques store in downtown Illinois. At the start of the pandemic, people gathered up televisions, guitars, gaming systems, and laptops whatever they could to keep busy and educated at home.

"We couldn't keep a bike in stock to save our lives," said Lewin. Tools flew off the shelves as many households decided this was the "perfect time for a honey-do list." He estimates that his arms and ammunition sales have increased by 500 percent. "You know how it was in March and April, scared as hell," he said.

But that doesn't mean the farmer's business was good in 2020. Even the farmer stars of the farmer stars have problems. This is essentially a money business, not a stuff business. The bread and butter are on loan.

"What happened is that our inventory runs out quickly, and that was the result of consumers not needing the services of a pawnshop," said Lewin, explaining that for much of 2020, his central lending operations had been in decline. "They didn't bring any items either to sell or to borrow, but they took everything down from us."

Pawn shops have been a longstanding part of the capitalist economy – one pawnbroker told me that pawnbrokers are the second oldest industry in the world. (He asked me if I knew what the oldest was. I assured him I did.) But they are relatively misunderstood by much of the public, especially those who do not use their services.

I've spoken to pawnbrokers across the country about how business was in this unprecedented year, and the image that emerged was a microcosm of the economy that flies under the radar for many. Pawnshops, considered essential during the pandemic, saw real-time panic buying trends – guitars, guns, and gold. They also felt the impact of the CARES Act on getting money into people's pockets and into small business cash registers because it meant people didn't need their loans.

"We have loans where customers who have been with us for a long time – 10 years, even 20 years – are now redeeming things in full that they have never done before," said Eric Modell, president of Modell Financial, the owner a chain of jewelry stores and pawn shops in New York. "And they don't say," I have government money, here I am, "but you've been paying interest for 20 years."

But now that much of that support has ended, credit is rising again. People go back to the pawn shop.

Guitars, gold and guns

When the pandemic broke out, many people had similar ideas about how to spend time at home and what to buy to do it. They turned to Amazon, of course, but also to pawn shops. Brokers say they can't keep entertainment items, musical instruments, laptops, and tablets on the shelves at home.

But people didn't just shop to stay entertained and educated. They also buy to ease their panic.

"I don't know why they wanted a weapon for a spreading virus, but I didn't ask them."

Gun sales took off in 2020, and some of the pawnbrokers I spoke to said they have never seen such a sustained boom in gun and ammunition sales as they are now, especially with first-time buyers.

Troy Farr, who owns Texas Pawn & Jewelry outside of Austin, recalled going into one of his stores one Saturday spring to see how things were going and discovered that 42 guns had been sold, " what a lot for a pawn shop ”. Forty-one of them had been with new gun owners. "I don't know why they wanted a weapon against a spreading virus, but I didn't ask them," he said.

Supply chain issues in the pandemic have complicated what guns sellers would otherwise see as a fairly positive boost in gun sales, especially when it comes to ammunition.

Rob Barnett worked at his family's pawn shop in Huntsville, Alabama before opening his own business in Fayetteville, Tennessee. He was in the arms business for decades. He says he's never seen a worse offer, and the perceived hoarding only made the situation worse. "As soon as people realize that there is a shortage in the industry, people start to worry and buy things they don't want," he said.

Guns aren't the only thing people buy when they're nervous – they also buy gold, the price of which has been rising fairly steadily for much of the year.

"Even though gold prices had risen due to Covid, people still felt the stability of gold and invested in gold," said Jordan Tabach-Bank, owner and CEO of Loans Companies, a high-end pawn brand that operates in New York. California and Chicago. When people think the world could go to Hell – and 2020 gave them plenty of reasons to believe it – they buy gold.

"This is a trend that has been happening since the beginning of time," he said.

Loans are a much bigger part of the pawnshop business than you are likely to believe

Everyone knows the tropics of the Hollywood Pawnshop – the creepy guy who smokes behind the counter in a rundown shop and takes a stolen TV out of someone's hand, probably so they can buy drugs. But that's not the reality. For one, it's easier to sell stolen items online as the pawn shops are pretty heavily regulated. In the last few decades, however, the industry has also tried to redesign its image.

Pawnshops are no-recourse collateral, which basically means that loans are made not on a person's creditworthiness but on the value of an item – a television, ring, hammer, etc. The term of a loan and the interest rate often depend on the state.

For example, in New York, businesses must hold pledged items for four months and cannot charge more than 4 percent interest per month. In Texas, it's a month at a rate of 15 to 20 percent for most items. People can also sell their items to pawnbrokers directly, but that's generally not the business model and not what most people do.

“Absolute worst-case scenario with us, you lose your ring, you lose your watch. We don't garnish your wages, we don't charge your credit, we don't prevent you from owning a home. "

Basically, you bring your watch, get a loan, get a ticket for it and come back to redeem your watch at a later date, paying back the loan plus interest. If you don't come back to repay your loan – or at least keep making the interest payments (some people leave items at the pawn shop for years), the pawnbroker can keep your watch and sell it.

“Absolute worst-case scenario with us, you lose your ring, you lose your watch. We don't garnish your wages, we don't charge your credit, we don't prevent you from owning a house, ”said Tabach-Bank.

According to the National Pawnbrokers Association, there are about 10,000 pawn shops nationwide, employing about 35,000 people and serving about 30 million customers annually. The stores range from listed pawn shops such as EZCorp and FirstCash to small mom and pop businesses. Many pawn shops are not only owners but also multi-generational customers.

Pawn loans are "like clockwork for many of our customers," said Modell. "There are people who live and breathe with the pawn shop."

The NPA estimates that pawn loans cost an average of $ 150 for 30 days and that about 85 percent of the loans are repaid. That may vary depending on the item – people are more likely to retrieve a family heirloom than they are to be a buzz saw.

"There are people who live and breathe with the pawn shop"

Pawn shops generally serve people with no or bad credit, although there are exceptions. They are compared to payday lenders who are often predatory and put people on debt cycles. Are Pawn Shop Interest Rates High? No. But on the spectrum of options for people without many options, they're not the worst either.

"Pawn loans are, of course, one of the more expensive forms of credit, but they are often less costly than payday or auto loans, and consumers are far less likely to get caught in long debt cycles," said Charla Rios, a researcher at the Center for Responsible Lending. "There are cases where people bring items in and they have been on loan for some time."

She also noted that the industry hasn't really grown. "Before Covid-19, mortgage loan revenues were pretty flat," she said.

Financially underserved consumers in America spent an estimated $ 189 billion in fees and interest on financial products in 2018, of which $ 9.2 billion went to pawn shops. For comparison: $ 25.4 billion went into overdraft fees.

"It's a mixed story," said John Caskey, an economist at Swarthmore College and author of Fringe Banking: Check-Cashing Outlets, Pawn Shops, and the Poor. "It's not a complicated transaction where people get scammed."

Covid-19 wasn't particularly good for pawn shops

Whenever Tabach-Bank, the high-end pawnbroker, meets people lately, they ask him what they think is a boom this year. "People say," The business has to be amazing, you have to destroy. "But for most pawnbrokers across the country, it's quite the opposite," he said.

Cyndee Harrison, director of marketing and outreach for the National Pawnbrokers Association, members have reported that credit has fallen by up to 40 percent this year and some stores have had to close altogether. "If you see a 40 percent decline in the core of your business, it will be a constraint," she said.

There is no single answer to what is happening, but most pawnbrokers and experts have a two-pronged explanation. For one thing, people stay home and spend less – they don't go to restaurants and bars, they skip vacations, etc. The other is that the CARES bill, the 2.2 trillion stimulus package that went into effect in March US dollars, money was passed for many people through stimulus checks, expanded unemployment benefits, and Paycheck Protection Program loans to small businesses. Eviction moratoriums and forbearance on mortgage and student loan payments are also taken into account.

In other words, people and businesses had more cash and didn't have to resort to the pawn shop to pay rent, post their pay slips, or just go to the bar on Friday night. And it's not just that they haven't taken out new loans. They could also repay their existing loans and cash in their belongings.

Kerry Rainey, chairman of the NPA and owner of Bayou Pawn and Jewelry in Louisiana, described the situation as "utter madness and a complete change in the way we do business".

"Our farmers went way down, our redemptions went way up," he said. And with all the extra money, the farmers became customers. "Now we are having a hard time replenishing the store and rebuilding our inventory since we have all made sales."

It's an experience shared across the industry between high-end stores and more typical establishments in blue and red states.

"The way it turned out was very different from what we expected, not just for us but for some of the discussions we had in other pawn shops in Las Vegas," said Andy Zimmerman, general manager of Gold and Silver Pawn in Las Vegas, made famous by the television show Pawn Stars.

Zimmerman said in her case, it's not just about the incentives and savings. So is the decline in casino traffic, especially at the start of the pandemic. In Las Vegas, it's not uncommon for gamblers to pawn items for money to wager with.

"When we are in normal times … especially when big events are happening in the city and the people are wealthy, they have expensive jewelry and they are not very lucky at the tables. Since we have quite a wide range of expensive items borrowing would normally go up during these times, ”he said.

Many of the measures from the CARES Act have ended or are imminent. The additional $ 600 weekly unemployment ended in July, the PPP loans have been used up, and the deferred rent and mortgage payments are due. Pawnbrokers say this is now showing up in their business as well, as customers old and new need their services again.

Listed pawnbroker FirstCash reported that loans were down 60 percent in April, and while they began to improve, pawns were still 30 percent down from last year in late September, meaning people are still pawning fewer and being able to repay more existing loans. In its earnings report for the third quarter, the company said the recovery will accelerate.

"We're starting to see people in need of short-term money," said Hyde. "The big question, of course, is what happens next, and neither of us has a crystal ball."

The negative impact on lower-end financial services is not limited to the pawn industry. The payday loan industry has also seen a sharp decline in business.

Pawn shops are a result of capitalism. If people had more money, they wouldn't need it.

When asked, most pawn shop owners admitted that they were in a difficult position: Many people were better off financially, at least with government incentives, and that was bad for business. However, shopkeepers countered that overall business is generally better when the economy is doing better than when it is bad, a claim that has been confirmed by experts.

While pawn shops give the impression that they are only there for people in desperate moments, this is not always the case. People also pawn an item to buy a concert ticket or to get the last bit of money they need for a vacation. And when times are good, they're more optimistic that they can pay off.

“A pawnshop is usually best when the economy is doing well and people feel safe pawning their extra item – a laptop, jewelry, television, a watch – something that they only have the temporary loan because they know you've got your next paycheck ahead of you, ”said Barnett. A one-time government loan does not offer the same type of future collateral.

For many people, the pawn shop is only part of their financial life and some of their possessions are only part of their budget. You will build relationships with brokers and will keep borrowing again.

Lewin, the Illinois pawnbroker, told me about a widow in her seventies who has been coming to him every month for years and getting a $ 200 or $ 300 loan on a beautiful piece of jewelry to surprise her before her next Social Security check comes in . When she comes to pick up her jewelry, they clean it for her, give her a cup of coffee, and catch up.

Yes, pawn shops charge high interest rates that more traditional financial institutions don't. But they're also a lifeline for people who often don't have access to more traditional financial institutions or just need to find a way to get through.

If people had more money in their pockets, if the capitalist system worked better, they wouldn't need pawnbrokers at all

Wendy Woloson, a historian at Rutgers University and author of In Hock: Mortgages in America from Independence to the Great Depression, noted that pawn shops have been defamed throughout history to downplay the more general shortcomings their existence exposes. "The exploitative practices that capitalism relies on would not have worked if the pawnbroker hadn't helped people get through week after week," she said.

If people had more money in their pockets, if the capitalist system worked better, they wouldn't need pawnbrokers at all. 2020 was a case study that shows just that. Although the federal government is no further aid on the way, it will still be there from the pawn shop.

"There would be a lot of people in a world of injuries if there weren't any pawn shops," Farr said.

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