Pawn stores thriving even as economy improves

Jewelry is the item most used as collateral

85 percent of items used as collateral are picked up by owners

Source: local pawn shop operators, the National Pawnbrokers Association

You can learn a lot about the state of the economy looking at the iPads, trendy high-end purses and even a fur being held in a storage room at Dynasty Jewelry and Loan, a pawn shop in Norcross.

While the recession may have officially ended five years ago and Wall Street is rocking and rolling, the pawn business is as robust as ever in metro Atlanta as many residents have yet to feel the effect of a rebound, pawn operators say.

Those living on the margins — including an increasing number of over-extended middle- and upper-income residents — are using pawn shops as a way to make ends meet just as much today as they did in 2008 when the economy was in shambles.

“For a lot of people, there are more days in the month than there is money to cover them,” said Ben Levinson, Dynasty’s president. “A lot of people in this country are underbanked or unbanked.”

Economists don’t expect things to change anytime soon. According to the Federal Reserve, the average American has credit card debt of $15,607 and mortgage debt of $153,500. At the same time, most wages have been stagnant or rising only slightly.

Critics say the interest pawn shops charge — as much as 25 percent in Georgia for the first three months — only adds to the users’ budgetary woes.

The average loan nationally is for about $150, and the pawned item — which is used as collateral — is picked up in about 30 days, said Emmett Murphy, a spokesman for the National Pawnbrokers Association. About 85 percent of customers pick up their “collateral” items.

Typically a pawnbroker is required to hold an item for at least 30 days before it can released, but that depends on the state, Murphy said. But most pawnbrokers would rather hold onto the item for the loan than sell it, because some collateral — such as artwork or clothing — may have more sentimental than commercial value, so it is hard to sell.

“If you continue to go over an extended period of time” with a pawnbroker loan, “it’s very unlikely you’ll dig yourself out of whatever hole you’re in,” said economist Tim Mescon, who is retiring soon as president of Columbus State University. “You have to break the cycle.”

That may be a challenge for some in Georgia, which had the nation’s highest unemployment rate in August at 8.1 percent. Georgia pawnbrokers said they have seen business jump anywhere from 10 percent to 20 percent over the past few years.

“To be honest with you, the business is recession-proof,” said Howard Rappaport, a manager at the Happy Hocker. He said business is always strongest during a recession, but that levels at the Sandy Springs pawn store have remained strong despite the improved economy.

One driver to pawn stores at the recession’s height was the explosion in gold prices. Jewelry is the item pawned most often, and the jump in the value of gold gave those in need of funds more purchase power. Gold prices peaked in 2011 but have since fallen.

Reality TV also has driven foot traffic. Shows such as “Pawn Stars” and “Hardcore Pawn” have taken the stigma out of the industry and broadened the appeal to consumers who would have never come in before, but now drop in regularly looking for an experience similar to what they see on TV, the operators said.

Store operators have responded. The jewelry cases at Norcross’ Dynasty and Big Deal Pawn in Acworth are polished with care to best accentuate the diamond encrusted watches and rings that sit beneath. An eye-catching display of guitars lines the walls of Dynasty while the sales floor at Big Deal features drum sets and flat screen TVs, with guns neatly placed in racks behind the counter.

Levinson said he has employed a GIA diamond specialist to authenticate his products, while Neal Castleberry, owner of Big Deal Pawn, shows off the care his store takes with merchandise. Beats headphones, Kate Spade purses and TVs are tightly sealed in bubble wrap to keep them from being damaged until their owners pick them up.

“Purses are taking the place of jewelry for some customers,” said Saaran Etienne, Big Deal Pawn’s manager.

While lending has remained strong, fewer people are shopping for bargains on the jewelry and laptops customers don’t pick up after their loan has expired, Murphy said. Nationally, the pawn retail business is down 25 percent because consumers remain frugal, he said.

Sidney Coon, who owns Pressure and Gutter Cleaning Specialists of Norcross, said he is often forced to pawn his business equipment to make payroll for his employees.

Coon — who pays his workers daily as opposed to weekly or every two weeks like most businesses — said the pawnbrokers are easier to work with than banks because they don’t require mountains of paperwork and he can control how long he can do without specific tools.

“I don’t like doing it, but when I submit an invoice to a property management company that I have cleaned and I don’t get paid right away, I have to do something,” he said. “As a small business owner, I’m dancing as fast as I can to keep my head above water.”

For Cobb County resident Barbara Walker, pawning is cultural. Instead of using credit cards, she pawns jewelry — rings, chains and bracelets — at least once a month to buy what she wants.

“I’m Jamaican and I don’t believe in owing a lot of people,” she said. “I deal in cash, unless it’s something I can’t afford right then and that’s when I will got to the pawn shop. I like that better.”

Elise Blasingame, director of community education at consumer advocacy group Georgia Watch, said consumers have alternatives to pawning their belongings. They can look for community services such as churches, consumer groups or others who administer funds specifically for people facing tough budgetary times, work with employers to seek an advance on salaries or develop a relationship with a credit union, which traditionally helps customers with credit problems.

“They (credit unions) will have better rates and sometimes offer consumer counseling,” she said.