President Obama continues to tout his jobs bill, though it hasn’t been getting much traction in Congress. Still, there are a few industries that have been growing without government help: tech, healthcare, and interestingly, pawnshops.
The History Channel’s reality TV show “Pawn Stars” reflects how pawnshops are adapting to today’s economic reality: They now cater to higher-income people who just a few years ago were buying expensive watches, not borrowing against them.
KALW’s Callie Shanafelt takes us to one such pawnshop in Millbrae.
CALLIE SHANAFELT: At first glance, Numis International looks like a discount jewelry store.
JACOB NOTOWITZ: I have people who come in sometimes and they’ll say, “Do you know where the pawnshop is?” And I’ll tell them that it’s right here and they’ll be surprised.
That’s Jacob Notowitz. His father – endearingly known as Uncle Al, opened the shop as a coin store in the early ‘60s. Now more than half of the people who walk through their door come into the shop to get a pawn loan. Like Gordon Winter.
GORDON WINTER: I ran out of money I didn’t have the means to make it to the end of the month. I have a lot of other instruments here at the pawn as well.
Winter says this as he picks up the 1978 Fender precision bass guitar he pawned four months ago. Winter is a former musician and has been unemployed for the last three years.
WINTER: I worked for Xerox for six years and was laid off.
Now he lives off a trust fund from his parents, but when he doesn’t have money to pay his bills he borrows from Numis International for about a 10% finance fee. If he doesn’t repay the loan and fee within four months, the shop can sell his guitar.
WINTER: I wanna hang onto my instruments. I’ve had ‘em almost all my life so I always make sure I pick ‘em up or pay the finance charge before the date runs out. I’ve never let anything lapse – that’s for sure.
If he did let the loan lapse it wouldn’t affect his credit score. Winter would lose his guitar and that would be the end of that.
The simplicity of the pawn loan is probably why it’s one of the oldest financial instruments in the world. Queen Isabella of Spain famously said she would pawn her royal jewels to fund Columbus’s journey to the New World. But Jacob Notowitz says the new customers who are showing up at his shop aren’t funding adventure.
NOTOWITZ: Five years ago they were in excellent shape and unfortunately they’ve run into hard times and it’s taken them a long time to run out of their savings.
Notowitz says at the beginning of the recession his average customer was in their 30’s or 40’s...
NOTOWITZ: They were either out of college and had a job. They were kind of the first to be let go.
Now their average customer is in his or her 40’s or 50’s, and many have never pawned anything before. They’ve never had to.
NOTOWITZ: You’ll find that they come in with a Rolex that was $28,000 new – a nice man’s President Rolex – and they need to borrow $6,000 and that works, we can do that.
A lot of these people have been out of work for years. But Notowitz’s customers aren’t just the long-term unemployed. One recent customer borrowed $15,000 to pay his employees.
NOTOWITZ: He’s a contractor. Over the last couple years everything slowed down for him. He still has jobs but if you get work done on your house you maybe make a deposit but you definitely don’t pay the whole thing up front.
While Notowitz loans out anywhere from $25-$500,000, the average loan is about $200-$300. The most common items pawned and bought at his shop are jewelry and collectible coins. Gold is especially in demand.
NOTOWITZ: We’re getting tons of new customers who are doing that. They are buying gold as a hedge against the downfall of the dollar. They’re buying gold against the downfall if the stock market drops because they’re scared to put their money there. Or the return on their interest for savings is so low.
DONNA: How much is gold an ounce at right now?
NOTOWITZ: Gold’s doing at $1,800 an ounce. On something like this we work on about 8% cost.
Donna, who asked to not include her last name, came to the shop today to sell gold chains and earrings.
NOTOWITZ: If you were to sell these today, I’m assuming everything here is 14 carat, I do have to check it – you’d get just under $400 on these items.
DONNA: Okay, I’d like to do that.
NOTOWITZ: Let me figure exactly, and I get you an exact number, okay?
People may think a lot of what ends up in pawnshops is stolen, but Notowitz says buying and selling gold is highly regulated.
NOTOWITZ: The last thing I need is a thumbprint very softly – put the center of your thumb right there. Go like this… It evaporates, it’s not ink.
DONNA: Wow – do you need a feet print too?
NOTOWITZ: Three drops of blood, your first born.
Each customer selling gold has to leave a thumbprint, and the item is held for 30 days while it’s reported to the police.
NOTOWITZ: Criminals don’t bring stuff to our store. What they do is they’ll bring it to a jewelry store that doesn’t report, which is in my opinion and the law, is totally illegal. They go to flea markets where there is no reporting. And they sometimes even go to a jewelry store that melts it for them and they then take it back and its just a lump of gold and you can’t describe the item its completely lost its identity.
Here though, things keep their identity because people often pawn what’s most valuable to them. That’s what keeps Notowitz’s business stable and growing. There’s no better insurance policy for a pawn than our tendency to identify with things we once could afford and our desire to some day have them back.
In Millbrae, I’m Callie Shanafelt for Crosscurrents.
Have you ever visited a pawnshop? What was your experience? Let us know on our Facebook page. This story originally aired on November 7, 2011.