“I’d like to get $75 on a loan.”
“Just a loan?” the pawn broker clarified.
“Yeah, I want it back.”
In the land of economics, things tend to be discussed in broad terms. One of the unintended consequences is the human inclination to forget we are discussing individuals and their daily lives, not just theory. When election time rolls around, we see the televised efforts to make the candidates look like they are in touch with and understand the daily reality of “average” Americans. Since 2008, like many people, I have been on an economic roller (Rohler?) coaster.
In 2010 and 2011, I sold practically everything that wasn’t nailed down in an effort to meet a variety of debts. Since, things have gone up and down. Right now, I am probably at the most stable I have been in a while, which it is not something I am taking for granted. I am watching some of the people closest to me continue to wrestle with the same beasts. As I gradually approach “zero” (meaning getting debts paid off and getting to zero), there are still some interesting and unexpected difficulties and consequences along the way for us all. In that vein, and also with my 50 new experiences for encore in 2015, this week I went to a pawn shop for the first time.
I was running errands with a friend, and when he pulled into the parking lot of the pawn shop, he asked if I wanted to come in or wait in the car?
“I’ll come in. This could be interesting.”
“Oh, yeah? Haven’t you been to a pawn shop before?” he asked.
“Nope, first time,” I responded.
I was prepared for the guns and the TVs, but the vacuum cleaners were a surprise. Who knew you could pawn a vac?
My friend had a really nice, new wireless device that could probably land a jet plane. The pawnbrokers were clearly intrigued; I don’t think they had seen anything quite like it before.
“You should definitely play with it while it’s here,” my friend jokingly suggested. “But, yeah, I want it back.”
The pawn brokers took it out of the packaging, tested it and grinned. “You said you want $70 for it?”
Pause. Head tilt. “Yeah, we could do that.”
It was scanned, checked for pricing, logged for the police, and a pawn ticket was printed. My friend produced his ID, verified that he would receive the $75, and signed the ticket—acknowledging he had 90 days to come up with $91 to get it back.
“So you have to pay more to get it back?” I asked when we got back in the car.
“That’s how they make money,” he pointed out, giving me a you-own-a-business-you should-understand-this look. I was just surprised you could get a loan; I thought you sold it outright, like at an antique or jewelry store.
“You also don’t have to come up with the money all at once,” he continued. “If you don’t happen to find yourself with $100 in your pocket—which I rarely do—then you can go in and pay for it like layaway.”
The pawn industry has existed in some form or another as long as we have had currency and debts. In times of economic hardship, it tends to fare better than during times of prosperity. Business Insider reported that from 2008 to 2011 the average pawn loan increased from $80 to $150. So let’s be clear: We are not talking about vast sums of money with long-term plans. This is meeting an immediate need: paying bills, forestalling eviction, food, and, yes, entertainment of various forms that would not otherwise be paid for. Perhaps what I found most fascinating from the Business Insider report was the average pawn customer has a high-school diploma, is in their mid 30s and has an average annual income of $29,000. That flies in the face of my preconceived notion.
Of course, the pawn industry had an unexpected injection of publicity and interest with the 2009 launch of the History Channel’s show “Pawn Stars.” Arguably, people who never considered the possibility of pawning before have been exposed to it. As well, those who might not have shopped at a pawn shop have been served the idea that the greatest treasures in America are hiding there, waiting to be found.
If my trip this week was any indication, it looks like it’s still the expendable items people have in their homes and the leftovers of past roommates and loves (known as “relationship shrapnel”). It seems to get used primarily to meet shortfalls in life.
My friend commented that it has been a reoccurring go-to for much of his adult life. The National Pawnbroker’s Association confirms that 80 percent of their customers get loans at least twice a year. I would be curious to know if those coincided with tax season and the holidays. Compared with the stress of overdraft fees, the pain of applying for a short-term loan, or failing to meet your financial obligations, talking to two fairly quiet middle-aged men about selling a vacuum cleaner sounds preferable. (Not that I am recommending this as a long-term financial strategy by any means.) What remains fairly clear is we are talking about people who are not trying to borrow in the thousands. They’re looking for stopgap money for emergency situations. It’s a reality ignored by people who haven’t and don’t feel that squeeze (the people who talk about economic theory and policy). Part of what makes pawning accessible is it uses something tangible as the collateral for the loan.
At the time I wrote this piece, the Consumer Financial Protection Bureau is gearing up to release the new regulations for payday lenders, which is another stopgap that preys on those chronically short of cash and credit. Next week, I will bring you an update on their work and what it will mean.
As we discuss the economic recovery, perhaps instead of talking in really broad terms, we might want to start talking about it in very personal and specific terms. I have written before that a book I keep coming back to is Joe Dominguez and Vicki Robin’s “Your Money or Your Life: Transforming Your Relationship with Money and Achieving Financial Independence.” Part of what they talk about is that we trade our time and lives for money. Consequently, when we spend it, we are effectively spending so many hours of our lives. I heard a coworker lament several years ago that his teenage son wanted sneakers that cost $140. The kid did not understand how many hours of labor went into that purchase.
Maybe that’s what seems so sad to me about interest and debts repayment: the idea that people are parting with their time and energy to pay bills to a faceless entity that doesn’t care. At least the pawn broker has to look you in the face and talk to you like a human being.