Pawns in the economic game

Pawnbrokers, once seen as relics of tenement Dublin, are booming in these hard times. And a whole new kind of customer is passing under the iconic three brass balls in search of a quick injection of cash

FOR MANY PEOPLE, the pawn shop is a relic of tenement Dublin, something we experienced in the pages of James Plunkett’s

Strumpet City

or the plays of Sean O’Casey. The act of pawning went out of fashion during the Celtic Tiger years, but the hard times mean business is booming, up between 10 and 15 per cent in the past 12 months.

Cash and cash flow is king and with liquidity all but inert, the pawn shop can offer an instant fix for the cash-strapped.

Back on the radar now, the pawnbroker is attracting an entirely new kind of customer – the white-collar worker. But the pawn shop beloved of the rare auld times, complete with brass balls outside, has cleaned up its act. It no longer takes clothing, not even the designer kind.

“Ours is a standard core business of jewellery and watches,” explains Pat Kearns of Kearns’s Pawn Office on Queen Street, Dublin. The object of the exercise is to offer these items as collateral against a loan of money, offered at simple interest of about 2-3 per cent per month for a fixed period of four months and seven days. Eighty-five per cent of pawned items are redeemed. The remaining 15 per cent are sold at auction.

“People have tried to pawn boats and cars but we don’t take them,” says Pat Carthy of Carthy’s pawn office on Marlboro Street, Dublin, where three brass balls have hung for the past 100 years. They’ve seen a lot of action, from Michael Collins’s cortege to some damage from a stray bullet during the 1916 Rising.

Carthy’s takes jewellery, watches and musical instruments (it once held the instruments of trad band The Fureys) but common sense prevails among the modern pawnbrokers. “Those stories about us taking anything, from coffins and false teeth, are just rubbish,” laughs Kearns.

“Cash is king” may be a tired cliche, particularly for the cash strapped. But for those of us whose cards have been declined at cash machines and supermarket counters, the pawn shop offers a short-term loan option. But don’t think that the pawnbrokers will solve your big-money issues. With an average pledge of some €200, it’s merely a quick fix, a rainy-day solution.

“We don’t loan more than the estimated wholesale price,” says Kearns apologetically. This means that anyone with a lot of fine jewellery might be unpleasantly surprised by its cash value.

I offered my white gold, diamond and ruby art deco-style eternity ring, given to me on the birth of my son. It would raise €200 if I wished to pawn it. It had a purchase price of 10 times that.

Carthy is reluctant to take diamond rings. “In the current climate they don’t sell at auction. Loans on gold have gone up, loans on diamond rings have gone marginally down. The second-hand value of diamond rings has deteriorated.”

A woman who married well and recently found herself cash-strapped on the far side of a divorce discovered this when she tried to pawn her wedding and engagement rings recently.

“It’s harder than you imagine,” Sarah [not her real name] says. “From reading books you believe you could bring in anything and they’ll buy it, but in reality they’re actually very particular. Because my designer rings didn’t have the standard stamps on them they weren’t interested.”

Sarah chose to sell hers at auction, using the same auction houses that one of the pawnbrokers uses. “I got marginally more that I was offered from the pawn brokers.”

Users of pawnbrokers, then, can expect some rude awakenings. That rock that almost took the eyes out of your envious friends may not offer the return on investment you hoped for. Musician NC Lawlor pawned a wedding ring eight or nine years ago. “I remember getting about one third its value. It wouldn’t be my first port of call for cash and I haven’t been back,” he says.

Gold is what pawn offices really, really want, says Carthy. “The price has gone up, which means the price of stock has increased. Plus, gold can be scrapped. You can melt it down and sell it very easily.”

“I’ve seen people recently that I haven’t seen in years, especially builders,” says Kearns. “And another new market is the immigrants – Poles, Africans and Eastern Europeans. They’re pawning a very different type of jewellery. African’s prefer 18ct gold whereas most Irish pawn 9ct gold.”

PADDY O'SULLIVANis an unemployed web designer who prefers the buy-back offer at Cash Converters to the traditional pawn office. He's 22 and uses his Sony laptop to leverage money for going out. He estimates it is worth about €500 but is happy to take the €70 Cash Converters offers to hold the device for a month. In return they charge him 15 per cent interest on the loan.

These loans represent 50 per cent of Cash Converters’ business, says Kit Sadgrove, the franchisee for two Cash Converter stores in Dublin. “Cashflow is now a problem for the white-collar worker who might traditionally have asked his or her bank to extend their overdraft. We offer a wider range of items of value to pledge than the pawn offices whose main business is jewellery – from the third TV in your house, to the gaming consoles your kids never play with. We are the lender of last resort.”

At the moment, Sadgrove is reading James Plunkett's Strumpet City. "The pawnbroker has had a long history of lending to the poor and always treated his clients with respect. That hasn't changed. What has changed is the profile of the customer."

Pawnbroker licences are issued by the National Consumer Agency (NCA). Currently, there are only three licensed brokers in the country, all of them in Dublin: Kearns, Carthy’s and John Brereton’s on Capel Street.

THIS MAY BEabout to change. The NCA says it has had several recent queries from businesses enquiring about setting up a pawnbroking business.

The credit squeeze has made people everywhere think about alternative sources of credit. The pawnbrokers’ increase in business isn’t just a Dublin phenomenon. Profits at UK pawnbrokers Albemarle Bond soared by 19 per cent in the last six months of 2008. And in the US, photographer Annie Leibovitz recently made headlines because she borrowed approximately $15.5 million (€12.25 million)from Art Capital, a so-called art pawnbroker, against some property and the rights to her body of work to pay the mortgages on all her homes.

Compared to the UK, pawn offices in Dublin represent relatively good value short-term loans. The UK’s National Pawnbrokers Association says rates there vary more widely, varying from 2-8 per cent, with a minimum contract period of six months.

However, not everybody would advise this option. Visiting a pawnbrokers is a panic reaction to a situation, says Michael Culloty of Money Advice and Budgeting Service (Mabs), which recommends that people don’t let their situation get so grave. “Face the situation today and create a factual budget so you know where you stand and explain your situation to your creditors,” says Culloty.

How pawning works

To pawn is to borrow X amount of money for Y amount of time against a piece of property, typically jewellery or a watch. You still own your property.

The typical contract is for four months and seven days and can be renewed at the end of that period. An extension in effect creates a new contract that requires a new ticket.

Pawning something is like getting a short-term loan, usually offered at 2-3 per cent simple interest per month for the fixed period. After that time if the owner doesn’t come back to repay the loan and claim their goods, the pawn office can give it to a third party to sell at public auction. The pawnbrokers are precluded from selling the items themselves.

To pawn an item you will need to present photo ID such as a driver’s licence or passport and/or the receipt or proof of purchase.

You should note that the credit crunch has affected the resale value of jewellery. Dont expect to get the value you paid. You will only be lent money on the resale value of the item – and the second-hand jewellery market is like the second-hand car market right now.

The brokers are polite and understanding. “We don’t bite,” says Pat Kearns of Kearns’s pawn office.

Pat Carthy’s pawn office on Marlboro Street, Dublin, has taken some unusual items over the years, including a bronze sculpture, featuring 12 of its original 13 heads, reputed to have been discovered in Africa in the 1920s. It was pawned with a 2000 Sotheby’s New York catalogue that valued it at between $3,000 and $4,000.

Trad band The Fureys pawned some of their instruments 20 years ago but they came back for them.

Ronnie Delaney’s Irish Olympic medal was pawned by his brother, says Pat Carthy, but that was before his time. The brother was going on holiday and was afraid it would be robbed.