US cities act to curb growth of pawnshops

As a member of one of the world's oldest professions, David Wilson, a pawnbroker, is sensitive to the way many people view his chosen trade.

Sleepy middle-class neighborhoods, in particular, look down upon a business that takes stuff in hock for cash, Mr. Wilson admits.

But he's trying to change that perception. He vacuums the carpet at his tidy Capital Cash store twice a week and keeps no guns there. He even calls it a "pawn store" instead of a pawnshop. "Everybody needs money," he says, "but I want to lend a favorable impression of that transaction."

Wilson is one of a number of pawnbrokers who are sprucing up their image in an attempt to banish the often well-earned stigma that pawnshops are seedy, dangerous places and a symbol of last resort in an uncertain economy.

At the same time, Raleigh and dozens of other US towns and cities are taking steps to limit the number and location of pawnshops as they have begun to flourish beyond city limits. "What's happening is that pawnshops are escaping the normal boundaries where we're supposed to keep them," says Lendol Calder, an Augustana College history professor and author of "Financing the American Dream."

Origins of the pawnshop

Pawnshops date back at least 3,000 years. The Medicis dabbled in pawn, as did Queen Isabella of Spain, who put the royal jewels in hock to finance Christopher Columbus's trip to the New World. Alternatively, easy, high-interest lending has been a concern since the Hammurabi Code, which limited the interest on hocked silver to 20 percent per annum (today's pawnshops offer around 22 percent).

"Pawnshops began as kind of an alternative to usurious lending, and it was often done by charitable organizations and even churches," says law professor Bob Lawless, a credit expert at the University of Illinois College of Law. "But I'm not sure the pawnshop industry is seen as particularly consumer-friendly right now."

• Here in Raleigh, the city is seeking to tighten zoning rules to keep its resident-to-pawnshop ratio at or below the current 1 for every 19,000 residents.

• The city of Plymouth, Minn., raised pawnshop licenses to a prohibitive $12,000 a year.

• Jacksonville, Fla., is trying to force aggressive lenders, including pawnshops, to cut interest rates.

• Last week, Prince George's County, Md., capped the number of pawnshops at 31 and refused to renew revoked or abandoned licenses after the county council heard testimony that up to $1 million in stolen goods moved through the local pawn community every year.

"I don't think any neighborhood wants a pawnshop to open up next door," says Eric Olson, a Prince George's county councilor.

Pawnshops draw in middle-class

Municipal planners, for their part, worry that pawnshops are not only indicators of a declining economy, but that their presence invokes a "self-fulfilling prophecy" that the economic realities in a particular neighborhood will continue to worsen, says Jean Ann Fox, consumer protection director at the Consumer Federation of America in Washington.

Yet these days planners see more people using pawnshops who don't appear to be traditional customers. One of them is Monica Martinez. A computer programmer, the Raleigh resident had always stayed away from "seedy" stores, but has become a regular customer at Capital Cash where she's selling off a stash of jewelry to pay a hefty tax bill. "It's either this or leave the country," she says.

Number of pawnshops increase

There were 6,900 pawnshops nationwide in 1988 and 11,226 today, according to the National Pawnbrokers Association. Surprisingly, most of those, by number but not per capita, are located in the suburbs, according to the Brookings Institution in Washington. Flat wages and mounting debt are problems that drive even socialites in Beverly Hills, Calif., to pawn their Pradas. "Financial insecurity has really spread up the income ladder," says Brookings fellow Matt Fellowes.

Meanwhile, the pawnshop industry says it's changing in response to the new suburban realities. One vision of the pawn industry's future can be found in Pawn America, a 15-store chain based in Burnsville, Minn., where shiny floors, professional displays, and an upbeat attitude make the stores seem like a cross between "a Caribou Coffee and a Best Buy," says Michael Deering, a Pawn America spokesman.

"For pawnshops to be, say, a Starbucks of credit, they are going to have to appeal to a market that has maxxed out its credit cards, which would take one big economic downturn," says Mr. Fellowes. "Could they reinvent their brand? Yes, but it'll take some time."