Fate lends pawnshops a hand Hard times bring in customers seeking alternatives to banks

Livingston's Loan Office, a pawnshop at Baltimore and Ga streets, extended its business hours starting in December to deal with the growing number of patrons wanting to put up their possessions for collateral in exchange for a fast loan.

"I'd come in the morning and there would be several people outside already waiting for us to open," said Joseph Triplett, the pawnshop's manager. "A lot of it is poor people who need $25 to pay their phone bill, but we're also seeing the middle-class guys who were pretty comfortable last year but aren't so comfortable anymore."


A sign of the times.

Demand for quick and borrowed cash has increased at Baltimore pawnshops as the economy slumps into a recession. Their burgeoning business comes at the same time other retailers and lenders are reporting big slowdowns because of the economy.


Credit extended to consumers fell in December -- the first time in almost two years -- giving another example of people's belt-tightening and need to watch money.

"I'm hearing more and more from my customers that the reason they need cash is because they have been laid off or can't find a job," Mr. Triplett said.

Unemployment in Baltimore reached almost 10 percent in December, fueled largely by layoffs in manufacturing, the state reported recently. Unemployment in Maryland rose sharply for the second straight month in December, to 6 percent.

As a result of widespread economic hardship, pawnshop owners say their clientele, often thought to be confined to the poor, is expanding. Small-business owners struggling to meet payroll and middle-income people who have recently lost their jobs are finding the shops a favorable alternative to banks' often long and extensive credit checks, they say.

Pawnbrokers in the city are seeing an increase of suburban residents frequenting their shops as well.

"An antique dealer from Howard County came in and unwrapped four pieces of ivory -- primitive carvings of alligators and women," said Stephen Davis, owner of Steve's Market Brokers Ltd. on East Monument Street. "She needed capital so she could continue buying for her shop. Now, if the $125 I paid her for them could help her, imagine what's going on in the rest of the economy."

Maryland pawnbrokers get 3 percent interest a month on the instant cash loans that they make in exchange for jewelry, videocassette recorders, stereos and other merchandise.

But there is a flip side to the rising number of loans pawnbrokers are making these days. That's because a pawnshop makes money in two ways: The most common way is to accept items as collateral for loans, but if the merchandise is never redeemed, the pawnbroker becomes a retailer, selling an array of goods at low prices.


For example, a pawnshop might lend $30 for a solid-gold wedding band that might have cost the wearer $150. If the debt is not paid in a specified period, between one and three months, the shop could resell the ring for about $60. But the tight economy is causing the retailing side of pawnbrokers' businesses to drop off markedly while inventory is piling up because of unclaimed goods.

Betty Payton, spokeswoman for the Fort Lauderdale, Fla.-based National Pawnbrokers Association, said 70 percent to 90 percent of pawned items are redeemed "under normal circumstances, but that percentage declines when a recession takes it toll."

"I'm overstocked," Mr. Davis said of his shop. "In the last year my loans have gone up 20 percent, but my sales on unclaimed merchandise have gone down 20 percent."

The showcases at Steve's Market are crammed with surveying and navigational equipment from small companies going bankrupt, and with camcorders and gold jewelry that were Christmas presents, Mr. Davis said.

And, in what he considers a glaring example of hard economic times, Mr. Davis said he has seen customers bring in scrap and broken gold jewelry to sell for a few dollars.

"I never saw that before," he said. "I'm getting about 20 ounces of scrap a month, which I have to have shipped to a refinery to melt down."


The buildup in inventory is making many local pawnbrokers adjust the way they do business. Some say they have begun paying less for items if they already have an overabundance in stock or if they know the merchandise won't sell. The pawnbrokers also have resorted to deep discounting of their goods -- which are usually priced low to begin with -- to get items out of the store.

The pawnbrokers say the way they least favor for dealing with excess inventory is to turn away customers looking to pawn an item.

"If you're in the business of making loans, you've got to keep making them or your business goes out the door to the competition," said Charles Weiner, owner of Consolidated Gold & Diamond Brokers on East Monument Street.

The National Pawnbrokers Association concedes that brokers sometimes must turn away customers looking for loans because HTC they can run out of money if not enough inventory is being sold to replenish the coffers.

Many pawnbrokers consider their relationship with their loan customers to be a social one as well as a business one.

"A lot of times we are these people's only resort. They need money and they need it fast to pay for necessities," said Mr. Triplett of Livingston's.


Despite the inventory problems pawnbrokers can have in a recession, area shopkeepers say an unusual number of new shops have been opening in the area. Jacqueline Lampell, spokeswoman for the Department of Licensing and Regulation, said the state has issued 35 new pawnshop licenses since July, the start of the state's fiscal year, 14 more than last year at this time.

One new pawnbroker in town, Mickey Scherr, said merchandise sales have been brisk at his Southside Brokers shop at Cross and Light streets since he opened just before Christmas. He said he attributes that, in part, to the fact that the area has been gentrifying and middle-class customers come in to bargain hunt, while poorer customers are staying away because they don't have the money to buy things, even at a discount.

Most of Baltimore's pawnbrokers are in working-class neighborhoods.

The Baltimore City Pawnshop Squad, part of the police department, said there has been no rise in the number of items stolen to be pawned.

"This is a reputable business, a monitored business; we help police," said Steve Sussman, owner of the Northwestern Loan Co. on Pennsylvania Avenue. "We're a way for ordinary people to get by."