Pawnbroker
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A pawnbroker offers monetary loans in exchange for an item of value to the given pawn broker. The word pawn is derived from the Latin pignus, for pledge, and the items having been pawned to the broker are themselves called pledges or pawns, or simply the collateral.
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[edit] How the pawning process works
Within a certain contractual period of time, the pawner of an item may purchase it back for the amount of the loan plus some agreed upon fee. If the time elapses without payment, the pawnbroker is allowed to sell the pledged item to recoup the amount of the loan, which may have only been a fraction of its actual market value. Pawnbrokers often have a large number of formerly pawned objects for sale at their place of business, called a pawnshop, whereby they may recoup money that had been loaned out on an item subsequently forfeited by a pawn customer.
Pawnbrokers can also purchase an item outright for cash with no repayment expected; these sometimes need to be held for up to 30 days by law before they can be offered for sale. Because of the risk to the pawnbroker of receiving stolen property, and the interests of the community in not allowing a legitimate businessman to act as a fence, laws to protect both these parties exist in some jurisdictions in the United States through the means of a hold placed on an item purchased by a pawnbroker. If a hold law is in effect, it will last up to approximately 30 days, depending on location.[citation needed] Such regulation is necessarily imperfect. Unscrupulous pawnbrokers buy goods from strangers with few questions, or turn a blind eye to certain customers, despite state laws in the United States that require a state issued ID card, Social Security number and physical description of a customer. Some local governments in the United States require a picture or thumbprint to be taken of the pawn customer. Though many people believe that pawn shops are filled with stolen items studies have shown that it is less than 1/10th of 1% (according to the National Pawn Brokers Association) and though some claim that the nature of the business necessitates that some of the items will be stolen goods--many stolen items are just too common or too difficult for the authorities or even theft victims to identify and prove former ownership.[citation needed]
[edit] Items of value
Pawnbrokers are often willing to take in many types of items including jewelry, electronics, musical instruments, firearms, vehicles and tools. Gold is considered an item that is never to be turned away, because even if the item is of relatively low value it can still be sold in bulk to a smelter as scrap gold.
When an item is pawned the pawn broker will typically loan out however much money the customer needs, though considerably less than the resale value of the collateral. Of course no pawnbroker is going to loan more than the value of an item being pledged and in most all cases it will be a fraction of the value. This is so the pawnbroker can make money on the item in the event the customer doesn't come back for the item and the pawnbroker must resell it.
The required time between forfeiture and sale of an item is usually 30 days plus a grace period that may be as long as three months. For some items, such as electronics that drop in value as new and improved models come out, pawnbrokers must offer a lower loan to be certain that they can recover the costs associated with the loan while making a profit. Other items, such as gold, must be valued in keeping with the daily fluctuations in market value.
[edit] History
[edit] Ancient world
In the west, pawnbroking existed in the ancient Greek and Roman Empires. Most contemporary Western law on the subject is derived from the Roman jurisprudence. As the empire spread its culture, pawnbroking went with it.
Likewise, in the East, the business model existed in China 3000 years ago no different than today, through the ages strictly regulated by Imperial or other authorities.
[edit] Middle Ages
In spite of early Roman Catholic Church prohibitions against charging interest on loans, there is some evidence that the Franciscans were permitted to begin the practice as an aid to the poor.[citation needed]
In England the pawnshop came in with William the Conqueror, with an Italian name, Lombard. In 1338 Edward III pawned his jewels to the Lombards to raise money for his war with France. King Henry V did much the same in 1415.
The Lombards were not a popular class and Henry VII Tudor harried them a good deal. In the very first year of James I Stuart an Act against Brokers was passed and remained on the statute-book until Queen Victoria had been on the throne thirty-five years. It was aimed at the many counterfeit brokers in London. This type of broker was evidently regarded as a fence. It is also known the queen Isabel of Spain pawned her jewelry in order to send Christopher Columbus out to what he believed was going to be western India.
[edit] Modern time
The Chinese conditions are decidedly favorable to a borrower. He may, as a rule, take three years to redeem his property, and he cannot be charged a higher rate than 3% per annum.[citation needed]
In the United Kingdom typical high street pawn interest rates vary between 5% to 12% gross per month and the average annual equivalent rate is 85%.[1]
The pawnbroker in the United States is generally subject to considerable legal restriction.[citation needed] Each state has its own regulations regarding pawnbrokers, generally regulating the amount of interest that is allowed to be charged on a collateral loan. In Massachusetts, a 2007 Boston Globe investigation suggested 10% monthly interest was not uncommon.[2] In the state of New York, interest at pawnshops is limited to 4% per month.[3]
[edit] Symbol
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The pawnbroker's symbol is three spheres suspended from a bar. The three sphere symbol is attributed to the Medici Family of Florence, Italy, owing to its symbolic meaning of Lombard. This refers to the Italian province of Lombardy, where pawn shop banking originated under the name of Lombard banking. The three golden spheres were originally the symbol which medieval Lombard merchants hung in front of their houses, and not the arms of the Medici family. It has been conjectured that the golden spheres were originally three flat yellow effigies of byzants, or gold coins, laid heraldically upon a sable field, but that they were converted into spheres to better attract attention.
Most European towns called the pawn shop the "Lombard". The House of Lombard was a banking family in medieval London, England. According to legend, a Medici employed by Charles the Great slew a giant using three bags of rocks. The three ball symbol became the family crest. Since the Medicis were so successful in the financial, banking, and moneylending industries, other families also adopted the symbol. Throughout the Middle Ages, coats of arms bore three balls, orbs, plates, discs, coins and more as symbols of monetary success. Pawnbrokers (and their detractors) joke that the three balls mean "Two to one, you won't get your stuff back".
Saint Nicholas is the patron saint of pawnbrokers. The symbol has also been attributed to the story of Nicholas and the three bags of gold.
[edit] Pawn shops in Asia
In Hong Kong it follows the Chinese tradition, and the counter of the shop is typically higher than the average person for security. A customer can only hold up his hand to offer belongings and there is a wooden screen between the door and the counter for customers' privacy. The symbol of a pawn shop in Hong Kong is a bat (the animal) holding a coin (Cantonese: fuk shu tiu kam chin; in Chinese letters: 蝠鼠吊金錢). The bat signifies fortune and the coin signifies benefits.
In Japan, the usual symbol for a pawn shop is a circled digit seven, as "shichi", the Japanese word for seven, sounds similar to the word for "pawn" (質).
In India, the Marwari Jain community pioneered the pawnbroking business but today this phenomenon will be changed; this work is done by many agents called "saudagar". They play role as a freely not in shop style. They reach needy people's homes & motivate them to involving in system. It is a general practice to run a pawn shop as part of jewelry store. Gold, silver, and diamonds are especially accepted as collateral.
Pawnbroking is also a traditional trade in Thailand.
[edit] See also
- Consignment shop
- Lombard banking
- Cash America, a large United States chain of pawnshops
[edit] Sources and external links
- This article incorporates text from the Encyclopædia Britannica Eleventh Edition, a publication now in the public domain.
- Roath's Pawn Shop: History of Pawnbroking.
- Online Directory for US Pawn Shops.
[edit] References
- ^ Pawn Shop Rip-off. www.thisismoney.co.uk (2004-11-12). Retrieved on 2007-01-02.
- ^ Roberson, Donna (2007-04-30). State fails to curb usurious pawnshop rates: Little oversight as poor bear brunt. Boston Globe.
- ^ Fernandez, Manny (September 14, 2007). Cash to Get By Is Still Pawnshop’s Stock in Trade. New York Times. Retrieved on 2007-09-14.
