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Pawn shops were hit hard by pandemic, but inflation giving the industry a boost
RICK ADAMCZAK
Special to the Legal News
Published: August 25, 2022
COVID-19 and accompanying government actions were not kind to the local pawn shop industry, but in recent months inflation is helping to drive back business to those shops, according the president of the Ohio Pawnbrokers Association.
“We lost about 50 percent of our business. There’s been an uptick lately, but we’re still down about 30 to 40 percent,” said Raphael Tincher, referring to his family’s pawn shop, Ted’s Pawn Shop, in Norwood, near Cincinnati. “COVID kind of wiped out the pawn business … usually the pawn shop industry can weather most economic downturns.”
Tincher said pawnbrokers typically benefit from economic downturns and recessions, but that wasn’t the case two years ago when the COVID-19 pandemic and government shutdowns of several industries in many states resulted in a recession.
“All of these people were getting stimulus money. Usually people come to us to borrow and they all disappeared because they were getting money from the government and our regular customers disappeared, too,” he said.
Tincher said many pawn shops around the state have suffered significant financial losses since the start of the pandemic and at least two-to-three pawn shops in Ohio have gone out of business.
“The pawn business has been suffering for two years,” he said.
Soon after the new year began, however, skies started to brighten some for the industry as gas prices spiked and inflation jumped.
“Now we’re starting to see a lot of people really need money because of inflation. People come in and talk about gas prices, food prices and higher utility bills,” said Tincher. “We started to see an uptick in business that probably started in February as gas prices went higher.”
He said pawnbrokers can often sense an upcoming economic downturn before many other industries.
“We could all see things going bad back in 2006, 2007, before it was declared a recession. We saw people come in who never came in before,” said Tincher.
Despite how pawn shops are often portrayed in movies and TV shows, where characters needing money quickly “sell” their items to pawn shops, the overwhelming number of pawn shop patrons “use pawn shops as their bank,” said Tincher.
“We’re collateralized lenders … A guy will bring in his guitar because he needs gas money and the next week he comes back in to get the guitar back,” he said. “The practice goes back a few thousand years to China.”
Tincher said most of their customers are people who want to get some quick cash.
“They’re people who want to borrow money, but don’t want to ask their friends or family or can’t get it from a bank,” said Tincher.
Typically, a customer will visit a pawn shop to put up an item, perhaps a musical instrument or piece of jewelry, as collateral for what is, in essence, a loan.
While rates vary from state-to-state, in Ohio pawnbrokers charge 6 percent interest and a 6 percent storage fee per month.
“So, if someone comes in wanting $100, when they come back in a month to get their item, it’ll cost them $112,” said Tincher. “Most people do usually come back and get it. We have about a 90 percent redemption rate. We like that because they can bring it back again.”
He said jewelry is by far the most popular item exchanged at pawn shops.
“But it depends on the location. Out in rural areas items such as tools, firearms, even tractors are common,” said Tincher.
He said many people might be surprised to learn how regulated the industry is.
“We are licensed and regulated by the state and sometimes cities have regulations, too, and then there are federal privacy laws, anti-money laundering laws. There’s a lot of paperwork,” said Tincher.
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