The Miami Herald

Pawn shops thrive in tough economy

When William Toro’s car stopped running a few years ago, he was short on cash and didn’t have easy access to credit. His solution? A visit to his local pawn shop, where he pawned his gold necklace for $625.

Toro’s answer to his short-term credit crunch is one that an increasing number of Floridians are finding. Since the recession, the number of pawn shops in the state has almost doubled, and they each conduct hundreds of transactions a month.

Having been laid off after he was diagnosed with a heart condition, Toro had to drive to the doctor every day and had neither the time nor the money for a mechanic. Armed with the loan, which he eventually paid back to retrieve his necklace, Toro bought a new battery and alternator. After installing them himself, his car was back in action.

The pawn shop came to the rescue again a few months ago when Toro’s utility company threatened to cut off his electricity if he didn’t pay up that day. Within 15 minutes, he had gone to the pawn shop, traded his gold bracelet for $240 and paid his family’s electricity bill.

“I don’t see anything wrong with pawn shops,” Toro said. “If you’re in a jam and there’s something that can help you, why not use the resources that are available?”

It’s no secret that the recession hit Florida hard. The foreclosure rate is the seventh highest in the country and unemployment hovers at 10.6 percent—fourth worst in the nation— leading more people to pawnbrokers just to get by. In effect, Florida has become the pawn capital of America, with 1,280 of the 10,000 pawn shops in the country, according to the National Pawnbrokers Association. With an unemployment rate of 13.4 percent, it comes as no surprise that Miami-Dade County’s 198 pawn shops are more than any other county in the state.

“It’s not like you’re going through a credit check, putting up your first born as collateral,” Toro said. “Your collateral is what’s in your hand.”

Economic circumstances may be bringing more business to pawn shops. Before the recession, Florida had only 713 pawn stores, according to the 2007 Economic Census. Another factor could be the popularity of reality TV shows such as Pawn Stars..

“People are walking in who didn’t need to before,” said Ross Boghossian, whose family has owned Bella Pawn at 12 NW First Street since 1956. “We had a guy pull up in a Ferrari, and he needed a loan because he lost tenants from buildings and restaurants. He needed to pay for his mortgage, and since the banks aren’t lending, we’re people’s last option.”

There is something uniquely Miami about the popularity of pawning here, according to local pawnbrokers. There’s a lot of bling crossing over their counters.

During boom times, some people invest or buy real estate or cars. In Miami, much of that wealth bought glitzy jewelry and flashy watches, the stuff pawn shops thrive on, according to Andy Arcila, a pawnbroker since 1996.

“People here, what they call the bling bling, they love it,” said Arcila, the manager of Daddy’s Cash at 3033 NE Second Avenue. “We are showoffs. That definitely helps because there are more things to pawn.”

A purchase that may have been impulsive when times were good is an important asset now when times are tight.

“A lot of people are saying, ‘You know what, I bought this chain for $3,000 in the ‘80s,’ ” said Boghossian. “With the way gold prices are, now it’s worth $10,000.”

Many of Arcila’s customers at Daddy’s Cash pawn the same thing over and over again whenever they need money and time is of the essence. Rashaun Frasier, a bank teller from Pembroke Park, pawns her diamond earrings every two months. She goes to Daddy’s Cash, hands Andy her diamonds, gets about $200 to help with rent and bills, and two months later, she pays about $220 to get her earrings back. And the cycle continues.

“Nowadays, I can’t imagine living without a pawn shop,” said Frasier, 30. “Before it was no big deal, but now an extra dollar always helps.”

At the annual pawnbrokers association meetings that he attends every year, Arcila said he tells pawnbrokers from other states that his store does 700 to 1,000 transactions a month. He says they are stunned and say their stores get no more than 250 transactions a month. One reason for that, according to Emmett Murphy, spokesman for the National Pawnbrokers Association, is that pawn shop regulations differ state to state.

“Florida has a higher interest rate, and it’s less regulated on a local level,” said Murphy. In Florida, pawnbrokers can charge interest of up to 25 percent, compared to states like New York, where the maximum is just 4 percent.

Sixty days is the typical length of a pawn shop loan in Florida. With one of the highest permissible interest rates in the country, Florida’s pawnbrokers can make more money on the loans they deal. While pawn shops made most of their money in sales prior to the economic downturn, today it is a drastically different story. And although there is less of a market for selling expensive jewelry and electronics, there is no shortage of need for loans.

“We’re not in the business to buy stuff’ we’re in the business to lend money,” said Arcila, adding that his and other pawn shops in Miami rarely charge the maximum 25 percent in order to keep customers and stay competitive. “The more money we can lend, the more money we can make.”

Another factor that sets Florida apart from other states, said Murphy, is the large proportion of “unbanked” and “underbanked” people. According to a recent report by the Federal Deposit Insurance Corporation, there are 44 million Americans without access to traditional banking, and Florida has the fourth highest concentration of them. Across Florida, 7 percent of households fall into this category. In South Florida, the figure is 8.4 percent.

“These are people that need safety net loans,” said Murphy. “They’re borrowing money to get gas in their car or take their child to the hospital or get through to the next paycheck. So Florida is a very unique state and the pawn industry is very strong in Florida.”

Florida’s pawn industry also benefits from the popularity of pawn shops in Latin America.

“In the Latin culture,” said Arcila, who is from Medellin, Colombia, “pawn shops are part of life. I think Miami has so many pawn shops because Latins are really used to doing this. It’s not a strange business for us.”

While the reality shows Pawn Stars and Hardcore Pawn are opening the doors of the pawn world to mainstream society, there is still a perception held many people that pawn shops are havens for stolen merchandise. Yet in Miami, pawn shops are quite possibly the worst place a thief could go, thanks to a partnership between pawn shops and law enforcement officials.

“It’s actually one of the most clean-cut businesses,” said Boghossian. “When you come in here and leave your engagement ring or your Rolex, by law we’re governed to not only give you a receipt, but ask for your ID, your fingerprint and keep records of all of this.”

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