For Richer Or Pawner – The Rise Of The Posh Pawnbroker
“The first thing I pawned was a diamond brooch I’d had for years, it was small but worth about £500.” In return for handing over her jewellery Linda was given £200, it might seem like a fair deal but this was not a sale.
Linda’s brooch was collateral on a low-interest loan and she could be reunited with her diamonds at any time by paying back the £200 and a little extra: “it’s easy to pawn, buy it back and then re-pawn it again”, she says: “everything becomes and asset for you to trade.”
Pawning items in return for cash loans was once for poor, working class families who struggled to stretch the weekly paycheque. Now though, the industry is seeing an increase in the number of wealthy customers pawning items to meet financial shortfalls.
Even with comfortable salaries, a growing number of affluent people are finding their money tied up in assets, leaving them with little ready cash should they be hit by surprises expenditures. “I’ve been using them to borrow money for three or four years”, says Linda: “if a bill comes and you can’t make it, pawning just helps to make ends meet”.
“We get people who borrow money from us to put in the bank in order to avoid going overdrawn and to protect their credit rating”, says Nathan Finch, Managing Director of Pickwick Pawnbrokers. The chain has nine locations across the south of England, including four in London. These stores, like all pawnbrokers businesses, offers customers cash loans secured against items of their property.
Traditionally these loans have been for small amounts, with customers leaving jewellery as collateral. Once the loan is paid with interest the customer gets their property back, if they fail to pay back the loan or renegotiate the contract, the pawnbroker has the right to sell the item on.
“It’s borrowing money from yourself”, explains Finch: ”the debt is limited and is essentially paid the moment the loan is taken out”. Unlike payday lenders or bank loans, pawnbrokers are not able to send bailiffs after customers and if the customer’s property happens to sell for an amount greater than the amount loaned plus the agreed interest this surplus has to be handed to the customer.
Most pawnbrokers are happy to lend sums in the hundreds, or sometimes thousands, of pounds in a process that can take as little as an hour. This convenience, combined with the legal protections afforded the customer, have seen a recent rise on the number of well-off customers walking through pawnbroker’s doors. “If people find themselves needing to borrow money, then the cost of borrowing isn’t just about the price, you have to think of the ease, speed and convenience”, says Finch.
Across the pawnbroking industry there is a trend that shows asset-rich-cash-poor professionals turning to pawnbrokers to keep their finances flush. “We have a particular customer of ours”, Finch says, “with a large business employing about 300 people. With the big salary goes the big house, expensive school fees and the expensive gifts for the wife. If the unexpected happens, even the wealthy can still be left in the lurch.”
These affluent customers use pawn transactions as short-term bridging loans, rather than turning to their banks. A £100 loan secured against a luxury watch might cost the customer £8 in interest charges, but to going overdrawn on a current account might cost £20 in charges.
Finch has also loaned cash to businesspeople who pawn personal items to cover shortfalls in their business finances. “It’s the same problem at any level of business, if you’re a builder, plumber or property developer; the staff need paying at the end of the month, even if your clients haven’t paid you,” he says.
Over seeing the industry is the National Pawnbrokers Association (NPA), which was established in 1892 and has been setting standards and rules of practice for pawnbrokers ever since. The body also studies trends in the industry, which it estimates to be worth £500 million a year and to be growing at 10% annually. James Watkins, NPA Public Affairs Manager says the majority of loans area paid back with the customers’ items returned: “the average loan amount is £250 and 88% of all agreements are fully repaid.”
Despite the relatively low loan amount, Watkins reports the biggest rise in customer numbers has been with the comfortable middle classes and there are now “just over 100 stores that cater to the A and B demographics”.
This growing demand for short-term finance from well-off customers has created a wave of interest from the media, which has in turn accelerated interest from potential customers. “We don’t have an awareness problem, we have a relevance issue, some of our wealthier clients didn’t think we were tight for them”, says Pickwick’s Nathan Finch.
He attributes the growth of high-end pawnbroking with a change of attitude among the population, “what has changed is the awareness of the industry, it’s made us more palatable or acceptable,” he says, “in the past some of our customers wouldn’t have thought that it was for them.”
The pawn industry has been featured in several documentary shows in recent years, allowing the public to see how transactions work and dispel myths about the respectability of the business. Finch and Pickwick appeared in Channel 4’s Posh Pawnbrokers, but it is the exploits of Prestige Pawnbrokers in Posh Pawn that have made the most headlines.
Cameras follow Prestige’s charismatic Managing Director James Constantinou, a property developer who now loans large sums against exotic items. The show has seen Prestige value helicopters, luxury yachts and props from James Bond films. “We’ve had million pound watches and rare antiques, you never know what’s going to show up”, he says.
Constantinou started Prestige during the financial crisis of 2008, having seen friends struggle after banks placed tighter restrictions on credit. “I had a lot of wealthy friends cut off by the bank. They were used to getting a £1,000 extension on a loan, suddenly all their loans are called in and they were in trouble.”
Prestige has taken a prominent role in opening up the pawnbroking industry to new customers: “some of these families have been doing this for hundreds of years and doing it with honour, but the industry was a little stagnant”, Constantinou says. “The business needed kicking into the 21st Century and websites are a fantastic tool for resale.”
Whilst many pawnbrokers are now adopting technology to reach out to customers, explain the loan process and promoting their business, the industry relies mostly on repeat customers. “The show has done a lot to show the public how the system works for them”, says Constantinou, “I never turn anyone away, you never know when they might want to come back for more. We go from £40 loans up to hundreds of thousands.”
Hopkins and Jones is another pawnbroking business that specialising in lending at a higher level. “The average loan is about £200-300 in this industry; we’re more like £2000 to £3000, which is obviously more in the luxury products range,” says Jim Tannahill, consultant with Hopkins and Jones. The company handles a wide range of expensive items as collateral: “we’re looking at the premium brands; Rolex, Patek Philippe, Cartier and IWC. With jewellery you’re talking about diamonds, rubies and sapphires, gems and antique jewellery.”
For Tannahill’s customers, borrowing more than the average, protection from exorbitant interest rates or aggressive bailiffs is a major draw: “I won’t be debt collecting, it’s a pre-paid loan in effect,” He says. “All we can do and all the contractually do is take our loan plus our interest, anything over and above that goes back to the client.”
Tannahill has noticed the increase in wealthy customers returning to pawnbroking again and again: “what we’ve found is that once you deal with someone, you’ll deal with them again. You’ve provided a solution that’s been quick; and easy and people will repeat that transaction.”
Nathan finch of Pickwick suggests that pawnbrokers are meeting a demand from affluent customers that isn’t catered for elsewhere: “a bank is always looking for a reason not to lend you money,” he says, “pawnbrokers are always looking for a reason to lend you the money you need.”
Linda is one such customer; she has traded many items over the years and will do so again. “I really do feel pawnbrokers are quite fair, it saves a lot of people stress”, she says. Linda’s experiences means she would happily recommend pawning items to friends and doesn’t see any stigma attached to the industry, “It’s not like it was in the 50s and 60s, it’s very acceptable now. A pawnbroker would be so much better than these payday lenders.”