Are Pawn Shops the New Bank?
American Jewelry and Loan Owner, and star of ‘Hardcore Pawn,’ Les Gold on why the business at pawn shops is an indicator of how the economy is doing and how they fill the short-term lending void not filled by banks.
“We can tell you six months in advance how the economy is going. We have two lines, one line is for the people bringing in merchandise, one line is for people taking out their merchandise. When that line of people that are in the store that are bringing us stuff, and it’s long to the door, we know the economy is getting bad,” Gold told the FOX Business Network’s Maria Bartiromo.
Gold explained why short-term lending is such a big part of pawn shops’ business model.
“We do loans, we do about 1,000 loans a day. People think they come in and it’s one and done. Our people come in and we give them a fair price for their item, they come and they get it back.”
Gold said that most people who pawn their merchandise return because they are utilizing pawn shops as a short-term lender.
“Between 80% and 90% of the people that pawn their merchandise come back. We’re a short-term lender. You’re not going to go to a bank and get $50, you’re going to come to the pawn shop. You’re going to have to fill up your car Monday to get gas for the week, they’ll come to the pawn shop, get $50 and come back.”
Pawn shops are providing services for many Americans not available to them through the traditional banking system.
“People can’t just go to the bank and get money, there’s 25 million Americans that don’t have a bank account, don’t have a credit card. Where are they going to go, to their local pawn shop.”