Local pawnshops swap cash for collateral
By Víctor Manuel Ramos
STAFF WRITER
Newsday (c) December 29, 2002
It was the morning after Thanksgiving, and many Long Islanders were packing into stores on the busiest shopping day of the year.
Francisco Grijalva, however, was at Eastern Numismatics, a pawnshop on Bay Shore’s East Main Street, trying to save an 18-karat gold ring he pawned several months ago. The interest and new ticket fee of about $20 were 27 days late, and pawnbroker Ken Levy could have legally auctioned the ring.
Grijalva, 47, did not want to lose the ring because it reminded him of his native Ecuador, where he bought it years ago. He had hocked it for about $100 to pay credit card debt, getting a loan ticket for the ring. Plus, he held tickets for another $500 in loans.
When Levy reminded him of the late payment, Grijalva adjusted his Yankees baseball cap and leaned down to speak softly through the tiny holes on the bulletproof Plexiglas. He wanted four more days.
“Hasta el Martes, please?” he asked.
“Mañana,” Levy told him, “one more day.”
Grijalva, a regular pawnshop customer since he lost his carpentry job a year ago, agreed and walked away satisfied.
“You pawn stuff to get a little bit out of the debt you incur,” Grijalva said in Spanish. The Bay Shore resident, who now stuffs envelopes for a direct-mail company, explained why he pawns his jewelry instead of selling it at market value. “You bring your jewelry and you just get a small part of its value, but it helps you to stay afloat.”
Grijalva’s plight is not unusual; pawnshops have always been a quick way to raise cash without necessarily losing sentimental possessions. But local pawnbrokers — there are six registered shops on Long Island — report an uptick in business as the economy spirals downward. And during the holiday season, business was particularly brisk.
Levy — who is legally called a “collateral loan broker” — says he has seen a 28 percent increase in loans this year over 2001.
Nationally, the pawn business is strong, too. There are even three publicly traded pawnshop companies on the NASDAQ and the New York Stock Exchange that are based in Texas, also home to the industry’s national association.
“After this past summer we have seen an increase in lending,” said Veronica Cantwell, owner of William J. O’Neill Sales Exchange, a business on Patchogue’s East Main Street that is the oldest pawnshop on Long Island. “But it is different from the last recession. Because of the interest rates being so low, people are refinancing mortgages, and when those reserves run out they will come to us.”
At O’Neill Sales Exchange, business has been good enough to keep the place running for 28 years. The shop has diversified to offer layaway plans where a customer can put money toward shop-owned items, with the risk of losing the cash if the total is not paid on time. But the bulk of business is still pawning, and customers keep coming.
Steve Joyce, 33, a security guard from East Patchogue, took some of his girlfriend’s gold necklaces and rings there to get himself “out of the barn” and pay some bills.
Jerry Marshall, a North Shore resident, said he preferred pawning his Nikon 35mm camera to withdrawing $200 from the bank.
After breaking up with her boyfriend, who helped with the bills, Roslyn Wilson of Westbury used a white gold ring and a gold ring with a ruby stone — one a gift from her cousin, the other from her dad — to collect enough for her outstanding car payment.
East Meadow resident John Schmitt, 50, put up his Omega watch and gold chain to pay utility bills. He said he had bad credit.
Efraín Sánchez, a 49-year-old Colombian immigrant in Bay Shore, pawned all his gold chains because he could not pay his $1,300 rent after sending money to his family back home.
Referred to as “the poor man’s bank,” pawnshops are basically loan brokers, where the principal of any credit is guaranteed by the collateral — the item that is hocked. Several decades ago, used clothing was among salable goods at pawnshops, but shops today seek jewelry, and only very occasionally appliances and musical instruments, in exchange for currency. Unlike Southern states where fewer restrictions apply, New York does not allow pawnshops to take weapons as collateral, and the shops see no profit in “odds and ends” items with little resale value.
After the broker or gemologist appraises the items and makes an offer — which is less than the market value of the goods — the customer is given cash and a loan ticket that details the item hocked, the loan amount and its due date. The transaction is usually over in less than 10 minutes, with minimum paperwork.
By law, New York pawnbrokers charge a maximum interest rate of 3 percent a month. Over a 12-month period, that adds up to an annual rate of 36 percent, significantly higher than the costliest credit cards that hover around 23 percent a year.
Those rates, though, are low compared to what pawnshops are allowed to charge in several other states such as Florida, Georgia and Texas, where interest rates can reach 20 percent or more per month.
But many customers seeking cash don’t have a credit card or, if they do, won’t risk a bad credit rating when they can’t make the minimum monthly payment. Instead, they just quit making interest payments and lose their items with no other consequence.
In fact, a pawnshop customer who defaults on payments could return the very next day and hock more jewelry, usually with no questions asked from the broker. New York pawnshop customers, in addition to interest, pay a ticket fee of $3 for any loans less than $100 and $5 for loans greater than that amount. Its holder could sell a pawn ticket to anyone wishing to pay the balance and redeem any pledged articles.
Unredeemed items must be auctioned publicly if their value surpasses $1,000, or privately if they fall below that threshold. In private auctions the brokers usually buy back the jewels themselves to resell them at higher retail value, but they can only keep the balance of the interest due and any other costs related to holding and disposing of the item. Any surplus from the item auctioned has to be returned to the customer or to the state if the customer is not found.
Loans are given for four months, but the broker could extend them another four months if the customer pays any interest due and a new ticket fee. Some customers renew items for years, paying interest until they can be redeemed.
Rona Nino, 35, of Sayville, was excited to finally redeem a large TV set she had hocked for $250 a year and a half before. She said her husband, who had been out of a warehousing and trucking job, was now employed selling mortgages. She parked her cream white SUV in front of O’Neill Sales Exchange so two employees could carry the set to the trunk.
“I feel like I’m getting a Christmas gift,” she told the clerk. “I still don’t know where to put it in the house.”
She said the money she got from the pawn helped her to pay some bills during those rough days, while her appliance was safely kept. “This is my safe-deposit box,” Nino said, pointing to the shop. “That’s the way I like to think about it.”
Despite Nino’s positive experience, many brokers say pawnshops’ reputations are the biggest turnoff to potential customers.
“The number one misconception about pawnshops is that they are dark, dirty places where people sell stolen merchandise,” said Scott Thompson, who owns the Empire State Pawn on Hempstead Turnpike in East Meadow. “My primary customer is not the drug addict on the street corner. Believe it or not, [my] average customer is a woman who got divorced, comes with an engagement ring or some other jewelry so she could survive while things clear up…. Sometimes it’s people who lose jobs.”
To make people feel safe, customers at Thompson’s shop are “buzzed in” to a well-lighted room. A dark carpet is lined with chairs. With the pastel pink countertop, the space looks like a waiting room, magazines and all. Video cameras record activity, and a thick bulletproof glass shields the clerk.
There were as many stories as customers lined up at Thompson’s Empire shop on a recent Friday afternoon, but most of them declined to give their names in fear of being recognized by friends or co-workers.
A Levittown electrician said he had not found work for months. He ran out of his savings when he made his car-insurance payment. To buy gas for the car, he was down to taking back and pawning the jewelry he had given his girlfriend.
Richard, 41, who declined to give his last name, was there with his visibly embarrassed teenage daughter because he had gone through a divorce that left him penniless. He said he needed money to pay the tolls to get to his Westchester County job as a restaurant chef. It was not his first time there. Once while walking out of the pawnshop, he said some teenagers in a car stopped and shouted at him: “Loooooser!”
Like the Empire pawnshop patrons, most customers fit the profile of someone who lives paycheck to paycheck and many times has to use debt to offset other obligations. The most recent nationwide study, prepared for the industry in 1998 by the Credit Research Center of Georgetown University in Washington, D.C., found that pawnshop customers are typically from minority communities and face many life and economic challenges.
“The pawnshop customer,” the survey found, “…is likely to be a young male, probably nonwhite, who may have graduated from high school but did not graduate from college. He may be currently married, but more likely has had the disruption of divorce, separation or widowhood or has never married.”
On Long Island, some brokers have noticed that a lot of their new customers are immigrants, largely from Latin America, who may not have bank accounts or credit, and support families back home. But some customers are middle class and have homes.
A Merrick woman in her 60s was at Empire State Pawn because her husband lost work. She had to come out of retirement to work at a hardware store so their house would not go to foreclosure. Because she had a job she was too tired to do the dishes and was hocking jewelry — including her grandfather’s rare pocket watch and her mother’s antique ring — to buy herself a dishwasher. She got $230, not the $300 she hoped for.
“I don’t think we’re unusual that we have $300,000 worth of equity in the home, but we have no money,” she said of her family.
Police actively scrutinize pawnshop records to deter “fencing” — the sale of stolen goods. State law requires pawnbrokers to keep a log matching customers to pawned goods. The log is open to the property crime sections of local police departments, which are mailed daily lists of hocked items. The listings are fed to databases kept by the Nassau and Suffolk police departments. “We do our best to try and keep the shops honest. If they buy property and they don’t enter it they will get a summons for that,” said Det. Sgt. Lucy Guido, of the Nassau Police Department’s Crimes Against Properties Squad.
Although police could not provide specific figures, they said it was not uncommon to find jewels from burglarized homes at pawnshops and second-hand stores. Any items determined stolen are returned to the owners.
“We do recover quite a bit of stuff,” said Det. Sgt. Karl Ritter, with the property recovery section of the Suffolk Police Department. “The pawnshops are very good. They comply.”
Pawnshop owners say it is in their interest to cooperate, because they are striving to change the unflattering image people have of their businesses.
Cantwell set up her Patchogue pawnshop so that it looks like a mix of a jewelry store, a music shop, a hardware store and a bank. Outside, the storefront looks better than some others on East Main Street, with some jewelry, appliances and tools on display under a dark green awning.
Despite a couple of new pawnshops, there is no proliferation here, in part because of the tough regulatory environment in the state, higher costs to run any type of business, and restrictive zoning. There are only two licensed pawnshops in Nassau and four in Suffolk, according to police records in both counties.
“We are a dying breed on Long Island,” said Michael Schiano, who took over Pawnbrokers Sales & Loan Inc. in the Village of Hempstead from his father. “It’s a very tough business with a lot of paperwork involved. The money doesn’t turn around right away.”
The Pawnbrokers Association of New York, a trade group, has most of its members in New York City, with about 40 pawnbrokers registered statewide. Only two of those are on Long Island. The group employs a lobbyist to defend its interests in Albany.
But longtime brokers such as Gerald Modell, who is president of the local association and owner the fourth-generation family pawnshop Modell Financial Inc., based in Manhattan, say market forces will guarantee the existence of pawnshops for a long time to come.
“The fact is that when people are laid off, when people have economic difficulties and bankruptcies are increasing, we are the last resort to many people,” said Modell, also on the board of directors of the National Pawnbrokers Association. “Hopefully, they get out of their difficulty. Not that we are Robin Hoods, but if they lose their property we lose their business, so we do not want people to lose what they give us.”