Pawnshops Flourish in Hard Times, Drawing Scrutiny
Time
January 14, 2010
Morrissey, Janet
Increased unemployment rates and the high price of gold are contributing to an expanded pawnshop customer base. According to David Crume, president of the National Pawnbrokers Association, loans have risen 20 percent to 25 percent. The short-term loans, which are usually one to three months in length, are given to customers in exchange for merchandise that is used as collateral or purchased outright at a low-ball price. Despite the fact that they are far more expensive than a credit card or bank loan, pawn loans are appealing because they are faster, require less paperwork, and do not affect personal credit. Three publicly traded pawnshop companies experienced gains in the 2009 fiscal year and are on the same track for 2010: First Cash Financial with a projected 16 percent growth and Cash America and EZCorp with projected 20 percent growth each. Pawnshop owners do face some opposition in the form of payday lending legislation. Many businesses in the industry, including the three public companies, offer these short-term loans with 10 percent to 20 percent interest rates over a two-week period. With many states creating legislation to cap the interest rates, it is becoming increasingly difficult for payday lenders to turn a profit. These restrictions have caused many companies to cease payday lending --including First Cash, which sold all 22 of its payday outlets on the West Coast.
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