Real secrets of reality TV pawn shows revealed

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One of the newer entries in the unending stream of pawn shows, Hardcore Pawn: Chicago, started out its latest program this way:

The first person on this episode wants to sell cemetery plots, and although they are worth the money, nobody wants to buy a plot at a pawn shop. Randy knows that being buried alongside his brother Wayne would surely be hell. No sale!

We have had customers offer burial plots at our Maui pawn shop, and we turned them down, but not because nobody shops for gravesites at a pawn shop — although that’s true enough.

No, the real reason is that pawn loans are made on portable collateral. That’s why Kamaaina Loan And Cash For Gold will give you money for your gold or silver coin but not for an equally valuable spot at the memorial gardens.

Now, the secret is revealed. Although it is not impossible that Hardcore Pawn: Chicago really was offered a chance at a plot, it’s much more likely that this little incident was dreamed up by screenwriters.

Get out! Do you mean to tell us that reality TV is scripted?

Yes. If you subscribe to iMDB Pro, you can read off the names of the scriptwriters. And not only for Hardcore Pawn: Chicago. For all of them.

 

 

 

‘I didn’t know you were legit’

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goldaLes Gold, the Hardcare Pawn guy, is promoting his new book, so he’s all over the interview shows this week. Here, on Fox Business News, he explains that the bankruptcy of Detroit is not good news for his pawn business there.

Our Maui pawn business is no different. Here at Kamaaina Loan blog, we keep trying to debunk common, but wrong, opinions about the business.

The Fox interviewer assumed that most pawn customers are desperate. That’s not true.

Besides, nobody,  but nobody wants to do business with people who are going to have no income. Not Les, not us.

Now, it is true that a fraction of a pawnshop’s customers are selling or borrowing on their last assets, and they are one step from destitution.

And pawn shops do do business with those people, helping stave off the wolf for another few days. What other business would touch them? Not one.

But while that is something pawnbrokers do, it is not how they prosper.

They — and we on Maui — do well when borrowers redeem their collateral.

It’s true that a pawn loan is somewhat less insecure than any other loan. The lender has his collateral already, unlike a mortgage lender, who, if the loan is not repaid, has to shell out money to start foreclosure, then sell the property and hope the return covers the balance. (Something that, as we all know, frequently did not happen since the Crash of ’08.)

The pawnbroker’s security is in house, but, as Les Gold explains, it costs him money to store and insure it, and if he forecloses on it, he still has the expense and trouble to trying to sell it. Since it is used goods, he will have to offer a bargain price.

It’s a system that works, but not perfectly.

People find it hard to believe, but a pawnbroker would always rather have the loan repaid. Then he gets his principal back with interest. If all has gone well, the customer is pleased with him and may come back to make a new loan sometime.

Contrast that with a pawn loan to someone with no further assets. The pawnbroker loses his principal and gets no interest. He may or may not be able to recover that by selling the collateral. And the customer may not be happy to have lost his (ring, surfboard, computer etc.)

(The pawnbroker will have an easier time, usually, if the collateral is gold or silver. Unless the price of precious metals has gone down during the 60 days he has been required by law to hold the item. This has been the case lately, as gold has dropped by hundreds of dollars per ounce. There ain’t no free lunch.)

Besides, the customer’s broke and out of assets, so he won’t be a repeat customer anyway.

Gold says redemption rates at his pawnshop and across the country average 90%. That might be a little optimistic over the long run, although redemptionr rates have been up in recent years. But 80% is a solid number year in and year out for most pawnshops.

And, remember, there is a fraction of borrowers who are getting rid of something they no longer care to have. They could just sell it outright, but sometimes they aren’t sure. So they pawn it, and when it comes time to reclaim it, they decide — even if they have the money to do so — that they don’t want it.

Call it values clarification.

The Fox interviewer is surprised by all this. “I didn’t know you were legit,” he tells Gold.

 

 

 

‘Is Pawn the new Prada?’

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midtownlogoIt is in Miami, according to this press release from the Jiminez Group. (Full disclosure: our Maui pawn shop, Kamaaina Loan And Cash For Gold) knows Jiminez well; we use their pawn business consulting services.)

“It’s like the Neiman Marcus of Pawn, the Mercedes-Benz of Pawn, the Tiffany’s of Pawn . . . you get the idea,” laughs President, Adriana Hernandez, “it’s the complete opposite of the dark, cluttered, seedy places you may have seen on Law & Order or in the movies.” 

Well, our Maui pawn shop is not dark and seedy, but nor is it the Neiman Marcus, Mercedes-Benz or Tiffany’s, either.

Somewhere in between, we like to think. You can indeed find Tiffany jewelry in our retail store at 42 N. Market St. , and Prada in our eBay store, safedeal. But no Mercedes-Benzes.

Pawn shops continue to battle their image as resorts only for down-and-outers. In a way, pawnbrokers should be proud to help down-and-0uters. Who else does? Not banks, that’s for sure.

But we keep trying to get out the message that pawn borrowing is a service that can suit the needs of everybody, from the person who’s out of work and hungry to the rich entrepreneur that Hernandez is angling for:

“It’s no different today. You’d be surprised at how many of our clients are visionaries or businesspeople who want to take their unused assets and trade them – temporarily – for the capital they need to invest in a new venture or project, and who were turned down by traditional banks. We offer a safe, cost-effective alternative for financing. The way we see it, we don’t make loans, we fund dreams, just like (Queen) Isabella did (to finance the voyage of Columbus) 500 years ago.”

In reality, the story about Isabella pawning her jewels is not historically correct, but kings and queens did pawn their stuff in the old days. Maybe they still do.

Here is another story about pawn’s bad reputation, this time in Roanoke, Virginia. The comments are interesting.

Somebody named Joe says what Kamaaina Loan Blog has often  referred to:

Pawn shops are governed by the state. They do not knowingly take in stolen merchandise, or they would lose their pawn license. A customer is required to have a valid State ID, and a complete description of the item, including the serial number if applicable, is entered into the shops’ computer system. At the end of every business day, all pawn shops report all of their transactions to the Virginia State Police. Once that information is submitted, the State Police enter the information in a data base so detectives from various counties can access the list for a match of possible stolen merchandise. Believe this; the thieves get caught.

Some people aren’t fortunate enough to have good credit. These folks might get in a bind and need some money to pay a bill or whatever. A pawn shop helps these people in times of need. In fact, pawn shops have been around longer than banks. Look it up.

Don’t worry, South Roanoke, the pawn shop will not cater to thieves and drug addicts as you so believe. They are legitimate businesses with educated owners and employees. Also, you never know, one day you might need a little loan to get you out of a tight spot.

Even if you don’t need a loan, try taking that one diamond earring — the one you lost the pair of under mysterious circumstances at the best party you ever went to (you think you remember) — to a bank and see what you get for it.

Then try us.

How your old gold becomes new again

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crucibleGold is recycled more than any other substance. Here is a 9-minute video showing how old jewelry is turned back into pure gold. The video isn’t the clearest, but the narration is OK.

At our Maui pawn shop, we melt down old jewelry in a small crucible. No matter what goes in, the product that comes out is almost always just under 60% gold (because of the average mix of 10-, 12-, 14-, 18- and 22-karat gold that people bring us).

That’s just a preliminary step. The video by The Precious Metals West Blog shows what happens next. We at Kamaaina Loan don’t do this; it’s an industrial process that uses a very nasty substance, aqua regia (a mixture of hot, fuming nitric and hydrochloric acids), that only pros with special equipment mess with.

Aqua regia dissolves gold; it is the only thing that will. This is how we recover diamonds. The gold is dissolved, but the diamonds are not affected.

This is safer than trying to pry diamonds from settings, which can break or chip them.

 

Education of a pawnbroker

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In principle, pawnbroking is simple. The borrower presents some portable collateral and the lender gives him money. Later, they settle up and reverse the exchange. If the borrower can’t pay, the broker keeps the collateral and tries to sell it to recoup his loss.

And most of the time, it is pretty simple. Probably three-quarters of the deals at Kamaaina Loan And Cash For Gold’s Maui pawn shop are for gold in one form or another, or silver  or other precious metals. Most of the rest are for familiar items like Playstations, iPods, surfboards or fishing poles.

But the residue? Some curious stuff comes over the counter.

A good place to find it in at 50 N. Market St., where we sell fishing gear, golf clubs and tools. Most of the tools are common enough: battery-powered drills are probably the most numerous item these days. (Corded drills are becoming rarities, almost.) But ask Bob to show you around and you’ll likely encounter a tool you not only don’t have but never heard of.

Today’s exhibit is a professional grout scrubber. Yes, it was new to  Bob, too. Turns out that for a big tiling job, with several tilers laying down tiles, it pays to have one worker follow behind them cleaning up the new floor with a power scrubber and massive sponge.

The one we have is made by Rubi, and while it’s used, our price is less than a third of the price for a new Rubi Spomatic 250 Electric Sponge.

That’s why it pays to stick your head in the door every few weeks, even if you’re not shopping for anything in particular. You never know when we’ll have something you never knew you couldn’t live without.

Crying all the way to the pawn, shop, no doubt

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So many people — 5,000 a day — want to check out the “Pawn Stars” store in Vegas that it’s creating a traffic jam and making it difficult to keep videotaping. Brent Montgomery, creator of the top-rated show, who was in Banff, Alberta, Canada for some reason, said

A long wait

A long wait

:

the popularity of the reality show has brought big changes to the family business on which it is based.

The daily number of customers at the World Famous Gold and Silver Pawn Shop depicted on the show has gone from 70 to 5,000.

“It’s made production hard because we can’t let them all in at one time because it starts to look like a studio show and not a reality show,” Montgomery told the Banff World Media Festival.

“We also have to make sure they’re not in the way. They all want to take pictures.”

At Kamaaina Loan’s Maui pawn shop, we get nervous about customer satisfaction if the line is longer than 2 people. But we are not very famous. Yet.

Too much aloha?

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So, is this the reason our Maui pawn shop wasn’t selected for a reality TV show? Are we too nice, too?

A Washington pawnbroker who was approached  by a show producer didn’t make the grade:

 

With TV cameras following her throughout the day, she treated Jodi Flynn and the crew to a lesson in firearms and taser use. “We all had a wonderful time together for those few days, and Jodi really enjoyed herself.”

After several days of filming, Jodi phoned Nancy informing her that Ben’s Loan wouldn’t make the cut. The official verdict: “She’s just too nice.” 

Jodi explained that while Nancy treated her customers with compassion, her staff was extremely caring and professional, and her customers love her, it’s not the sort of thing that audiences come to expect from reality television.

Coming next, “Jerry Springer: Pawn Broker”?

Big dog

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Here at Kamaaina Loan And Cash for Gold, we often brag about being Maui’s biggest pawn shop. But that’s big-frog-in-small-pond talk. DFC Global just announced it had bought a chain of pawn shops in Romania that will bring its total to  1,457.

Its press release says Romania has a long history of pawn loans, but the shops are quite small. 32 shops did a turnover of $9 million,  That’s less than $300K per shop. Even Maui’s smallest pawn shop probably does more than that.

DFC Global Corp. is a leading international diversified financial services company serving primarily unbanked and under-banked consumers who, for reasons of convenience and accessibility, purchase some or all of their financial services from the Company rather than from banks and other financial institutions.

 

Romanian pawn shops are similar to Maui pawn shops in that they primarily lend or buy gold, usually jewelry. However, they also make auto loans, which some pawn shops in America do, although not so much

 

Arizona loves to pawn

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Nationwide,  about one American in 5 uses a pawn lender to raise cash, according to the private financial regulator FINRA.

But for some reason, in Arizona it’s 1 in 4.

Old West Indian trading posts were, among much else, pawn lenders. But there couldn’t be enough trading post business to account for the difference.

Our Maui pawn shop has active accounts for around 1 in 10 Maui residents. The FINRA survey asked whether respondents had used a pawn loan in the past 5 years.

There are other pawn shops on Maui besides Kamaaina Loan, and we have some turnover in customers over 5 years, so Maui people might be close to Arizonans in using pawn.

Nationwide, there’s more pawning in the South. But that’s because most Southern states raised the ceiling on interest, not because Southerners are specially attuned to pawning.

 

 

Fair’s fair

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You may not realize it, but Hawaii law requires second-hand dealers to follow the same rules as pawnbrokers — keep records of all incoming merchandise, and of the IDs, addresses and other information about the sellers (or borrowers in the case of pawn customers).

The reason you may not know this is that island second-hand dealers routinely ignore the law and enforcement is slight. Pawnbrokers, and our Maui pawn shop for sure, follow the rules strictly.

Why not? Our owner helped write that statute decades ago.

If you think it makes little sense to require pawn shops to keep careful records to discourage fences but to allow second-hand dealers a free pass, the idea is gaining some currency. For example,  this Boston Globe story explains the outcry when police advised consignment stores — often selling expensive goods like Prada — that they, too, needed to cooperate in deterring thieves.

Reporter Beth Healey provides a good overview of the competing arguments, including one from a defense attorney about civil liberties. He’s going to lose that one.

Unusually, though, Healey ends by revealing one of the dirty little secrets of the anti-pawn shop mindset — it’s about scorning working people:

 

Goldstein [a pawnbroker] said that out of fairness, consignment stores should follow the same rules.

If stricter measures are being applied to people in less affluent neighborhoods with lower economic means, he asked, “Are they being implemented with people on Charles Street and Newbury Street?”