Virus twist: Pawn shop sales up, loans down

ALLIANCE — For 30 years, Alliance Loan Co. has been a hot spot for people to sell or buy goods or get a quick cash loan.

Their busiest season for collateral loans is now, in summer, when people take vacations or shop for back-toschool supplies and clothes. That’s true for most years.

But this is 2020; nothing has been ordinary.

“It has been different,” said Greg Fauver, owner of the Alliance store and the Geauga Pawn Shop in Geauga County. “We are not back to normal yet, but we are getting there.”

Pawn shops, like Fauver’s, encountered unexpected results at the height of Ohio’s stay-at-home orders in April and May during the COVID-19 outbreak.

There were increases in sales and loan paybacks but a decrease in loans.

“We all expected loans would increase and sales would decrease,” said Cyndee Harrison, marketing director for the 10,000-member National Pawnbrokers Association. At least 30 are in Ohio. “What we found was the opposite.”

About 30 million people nationwide use pawn shops annually; most are family owned businesses. Pawn shops add about $3 billion into the U.S. economy, according to the U.S. Census Bureau.

“When they get a pawn loan the worst that can happen is they forfeit merchandise,” Harrison said. “There is no credit check and no credit damage. It doesn’t have an impact on their credit history.”

Harrison said the stay-at-home orders motivated people to buy firearms and electronics. Stimulus money and the extra $600 federal subsidy for unemployment provided them with the revenue.

It helped that pawn shops were deemed essential.

“A lot of retails were closed but pawn shops were opened because we are lenders,” Harrison said. If a person needed a laptop to work from home, they could buy an inexpensive one at a pawn shop.

“I think people were looking for good deals,” Fauver said.

David Digman, manager at Morris Pawn Shop in Canton, said his store reopened retail services May 8.

“We sold a video game system every couple days.”

Ironically, it was the lending side of the pawn business that saw significant decrease during the stay-at-home period with fewer people requiring quick cash.

Harrison said collateral loans were down 50% nationwide.

That trend has started to reverse as stimulus money and federal unemployment subsidy benefits have been spent or expired.

“It does seem in the last month the loans are starting to pick back up,” Fauver said.

Harrison cited federal data that 40% of American households do not have enough savings to cover $400 in unplanned expenses such as a car repair or prescription cost.

“Millions,” are either unbanked or underbanked, Harrison said, which means, “they don’t have access to traditional banks, so they turn to alternative lending,” such as pawn shops.

She said people on average borrow $150 from pawnbrokers in collateral loans. The redemption rate of people paying back the loan and getting their item back is 85% nationally.

Harrison said pawnbrokers saw “very high” increase in loan paybacks during the stay-at-home period of the pandemic because people had the extra money.