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pawnbroker

pawnbroker, one who makes loans on personal effects that are left as security. The practice of pawnbroking is ancient, as is recognition of the danger it involves of oppressing the poor. In fact, the Bible provides the poor with a number of safeguards against oppression from their creditors. According to Ex. 22.25–27 and Deut. 24, 6, 12, 13, 17, pawnbrokers may not practice usury, may not take necessities of life as security, and in general must not take as a pledge any article whose loss would severely injure the borrower. In the Middle Ages, Christians generally were forbidden by the church to lend money at interest, and pawnbroking was left largely to the Jews as one of the few means of a livelihood open to them. Lombards also engaged extensively in moneylending, however, and in London, the financial center is still called Lombard St. In some Latin American and European nations pawnshops are operated under religious, charitable, or municipal auspices. The most famous such pawnshop is Vienna's Dorotheum, founded (1707) by Emperor Joseph I and still run by the state to provide the poor with easy credit at low rates of interest. In Great Britain and in American states, pawnbroking is regulated by usury laws. Pawnshops are predominantly found in low-income areas, where residents are often unable to establish other types of credit.

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pawnbroker

pawn·brok·er / ˈpônˌbrōkər/ • n. a person who lends money at interest on the security of an article pawned. DERIVATIVES: pawn·brok·ing / -king/ n.

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Pawnbroker

PAWNBROKER

A person who engages in the business of lending money, usually in small sums, in exchange forpersonal propertydeposited with him or her that can be kept or sold if the borrower fails or refuses to repay the loan.

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pawnbroker

pawnbrokerbalalaika, biker, duiker, Formica, hiker, mica, pica, pika, piker, striker •blocker, chocker, docker, Fokker, interlocker, knocker, locker, mocha, mocker, ocker, quokka, rocker, saltimbocca, shocker, soccer, stocker •vodka • polka •concha, conker, conquer, Dzongkha, plonker, stonker •Oscar • Kotka • Knickerbocker •footlocker •caulker (US calker), corker, hawker, Lorca, Majorca, Minorca, orca, porker, squawker, stalker, talker, walker, yorker •deerstalker • jaywalker • sleepwalker •streetwalker • hillwalker •shopwalker •Asoka, broker, carioca, choker, coca, croaker, evoker, invoker, joker, mediocre, ochre (US ocher), poker, provoker, revoker, Rioja, smoker, soaker, soca, Stoker, tapioca •judoka • shipbroker • stockbroker •pawnbroker • troika

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pawnbroking

pawnbrokingbacking, blacking, packing, sacking, tracking, whacking •ranking, spanking •nerve-racking •marking, sarking •making, taking, undertaking •matchmaking • dressmaking •haymaking •lacemaking, pacemaking •peacemaking • filmmaking •printmaking • cabinetmaking •moneymaking • merrymaking •winemaking • home-making •shoemaking • toolmaking •bookmaking • troublemaking •backbreaking • heartbreaking •strikebreaking • housebreaking •breathtaking • painstaking •piss-taking • stocktaking •self-seeking, unspeaking •licking, ticking •freethinking, shrinking, sinking, unblinking, unthinking, unwinking •Mafeking • finicking • politicking •liking, Viking •self-cocking, self-mocking, shocking, stocking •stonking • bluestocking • Hawking •sleepwalking • streetwalking •hillwalking • firewalking •soaking, Woking •pawnbroking • thought-provoking •booking, Brooking •onlooking •spelunking, trunking •motherfucking • bloodsucking •bollocking •hardworking, working •erl-king • tear-jerking • metalworking •outworking

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Pawnbroker

Pawnbroker

What It Means

Often referred to as the “poor man’s bank,” a pawnbroker is someone who offers monetary loans to borrowers in exchange for a pledge, or pawn, of personal property. Items that are commonly pawned include jewelry, guns, musical instruments, and electronic equipment. The pawned item serves as collateral (that is, a form of security, or a guarantee: the borrower must repay the loan in order to collect his or her property). The pawnbroker (also known as a collateral lender) agrees to hold on to the property for a set period of time, usually a few months, and charges the borrower some rate of interest on the loan. Interest is a percentage added to the amount of the loan. For example, if Larry borrows $100 at 8 percent interest, then he must repay a total of $108 when the loan comes due.

If the borrower defaults on the loan (meaning he or she fails to repay it) during the agreed-upon period, then the pawnbroker takes ownership of the property and is free to sell it. A pawnbroker may also buy an item outright with the intention of reselling it at a profit. In this case, the original seller of the item receives cash with no repayment obligation. A pawnbroker typically operates out of a storefront known as a pawnshop.

Although there are some high-end pawnbrokers who deal with large sums of money, the average pawnbroker usually lends relatively small amounts of cash (often less than $100) to people who need immediate funds for a car repair, a medical bill, or some other unforeseen expense.

When Did It Begin

The practice of pawnbroking has existed throughout much of human history. In China the trade is 3,000 years old. In the ancient city of Babylon people used their crops, gold, silver, and other collateral to take out loans from merchants. Pawnbrokers were also known to have existed in ancient Greece and Rome, and regulations established by those civilizations have served as the basis for the modern legal framework surrounding the trade.

During the Middle Ages (about 500 to about 1500) in Europe, the Catholic Church prohibited charging interest on loans, citing the Bible’s dictum against usury (the practice of charging interest). Still, pawnbroking was practiced by people outside the religion. In fifteenth-century Rome the Franciscans (a religious order associated with St. Francis of Assisi) began to offer loans to the poor in exchange for some form of pledge (with minimal interest), in order to protect the poor from usury and other abuses by corrupt pawnbrokers. This kind of charitable pawnbroking institution was called a monte di pietà (which literally means “mountain of pity”; later it became better known by the French term mont-de-piété ).

The rise of pawnbroking in Europe during the Middle Ages may be traced to the wealthy Lombardy region of northern Italy; thus, pawnbroking is also known as “Lombard banking.” The symbol of the pawnbroker, a configuration of three balls, or globes, suspended from an arcing bar, was originally used by the Lombards to identify their lending houses. Later the symbol became associated with the Medicis, a powerful banking (and pawnbroking) family in Florence, Italy, who adopted the three balls as part of their family crest.

In the United States pawnshops were certainly established by the early 1800s, if not earlier.

More Detailed Information

When a customer pawns an item, he or she receives a pawn ticket (a kind of receipt), on which the terms of the loan are printed. The ticket states the name of the customer, his or her contact information, a description of the item, the amount borrowed, the interest rate, the amount of any service charge associated with the loan, and the date of the repayment deadline.

It is important to note that when a borrower pledges an item of his or her property as collateral for a loan, the pawnbroker will only lend a percentage (usually 30 to 50 percent) of the resale value of the property. For example, if a customer needs a loan of $100 and the pawnbroker lends 50 percent, the customer must be able to pledge an item or items whose estimated resale value is at least $200. One of the benefits of the pawnbroking system is that a person cannot borrow more than he or she can pledge in property; therefore, he or she are unlikely to become seriously overextended in debt.

Another principal benefit of borrowing money from a pawnbroker is that a person can use his or her property to guarantee the loan, rather than relying upon his or her credit history. (Credit history is like a financial report card: it contains information about a person’s borrowing and repaying habits for such things as credit cards, school loans, and home mortgages; it also itemizes “risk factors” associated with a potential borrower, such as late payments, evictions, and recent bankruptcy filings. Traditional lending facilities, such as banks, always check a person’s credit history before agreeing to lend him or her money.) People who borrow from pawnbrokers often live without much financial security; they may have bad credit histories, or, if they have never had a credit card or taken out a bank loan, they may simply have no credit history at all. By providing immediate cash with minimal paperwork, the pawnbroker provides a valuable service for a significant segment of the population who may not have the option to borrow money through other institutions.

In most countries where pawnbroking is prevalent, there are legal limitations on the rate of interest that may be charged on a collateral loan. In the United States pawnbrokers must be licensed and follow various regulations at the federal, state, and local level. At the federal level, pawnbrokers are regulated by both the Federal Reserve Board (which oversees the U.S. banking system) and the Bureau of Alcohol, Tobacco, Firearms, and Explosives. Also, under the Patriot Act of 2001, U.S. pawnbrokers are required to check their customers against the Treasury Department’s database of known terrorists.

There are also regulations to prevent thieves from selling stolen goods to pawnbrokers. These regulations include a waiting period (usually about 30 days) between the time a pawnbroker buys a piece of property and the time when he or she is free to resell it; this allows time for stolen items to be tracked down by the police. Most states in the United States also require the pawnbroker to file regular police reports listing the items that have been pawned in their shop and their customers’ driver’s license (or other state-issued ID card) numbers, Social Security numbers, and physical descriptions. In some states pawnbrokers are required to take a picture or thumbprint of every pawn customer. According to the National Pawnbroker’s Association, less than 1 percent of items that come through pawnshops are stolen.

Recent Trends

During the 1980s and 1990s the pawnbroking industry in the United States grew rapidly. According to a study by economist John P. Caskey that was published in the Journal of Money, Credit, and Banking in 1991, there were an estimated 6,900 pawnshops in the United States in 1988 (which means there was about one pawnshop for every two commercial banks). A study conducted in 1998 by Robert W. Johnson and Dixie P. Johnson of the Credit Research Center at Georgetown University stated that the number had nearly doubled, to 13,000.

All of these researchers attributed the rapid proliferation of pawnshops in the United States at the end of the twentieth century to the ongoing rise in the number of people living in poverty. The Georgetown study demonstrated that low-income individuals are more likely not only to be ineligible for loans from traditional lending institutions (such as banks) but also to distrust these institutions, preferring to make purchases and pay bills with cash and money orders. Another reason for the growth in pawnbroking during these decades was the relaxation of laws regulating pawnshops. This allowed pawnbrokers to charge a higher rate of interest on their loans, and as a result pawnbroking became a more lucrative business.

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