Frequently Asked Questions
- How does a pawn work? A pawn is really a term for a collateral loan. Pawnbrokers lend cash on products worthwhile varying from gold, diamonds, guns, jewelry, musical instruments, televisions, electronics, tools and household products. Some pawn shops may specialize or focus on certain products. Loans derive from the requirement for collateral. Every time a customer pays back the lent funds, their products are then returned to them. Clients can choose to surrender their collateral as payment in full. Pawn shops may offer extensions/renewal (where permitted by law).
- Why would someone go to a pawnbroker to get a loan? Pawnbrokers provide the consumer a fast, convenient and private method to borrow money. A short-term cash need could be met without any credit checks or legal consequences when the loan isn’t paid back. Pawnbroking imposes a discipline on the customer that other financial lending companies don’t. Pawn loans don’t cause individuals to overextend credit or go into personal bankruptcy.
- How much should I expect for a loan on my item? Loan amounts vary according to the value of the item. There is no minimum dollar amount allowed on a pawn transaction but the maximum amount may be set by state pawn laws. Your loan amount will be determined according to other factors as well such as demand and condition of the item. Not all pawn stores are the same and price will vary.
- How do you determine the value of the item? Pawn shops base the value of the item on current appraised value, its current condition and the ability to sell the item. Pawnbrokers use research tools that they have at their disposal to determine an item’s value and get you the most money for the item. The appraisal process varies depending on the type of item—for example, jewelry is evaluated differently than a DVD player. All items that pawn shops buy or pawn are tested to ensure that it works properly.
- How can I be sure the merchandise I purchase at a pawn store isn’t stolen? Less than half of one percent of all pawned merchandise is identified as stolen goods. That’s because customers must provide positive identification and a complete description of the merchandise. This information is then regularly transmitted to law enforcement, which dramatically decreases the likelihood that a thief would bring stolen merchandise to a pawn store.
- Are pawnshops regulated? Yes, Pawnbrokers are governed by all of the major federal laws that apply to entities designed as financial institutions. The federal laws that regulate the pawn industry are Patriot Act, Truth in Lending Act, Equal Credit Opportunity Act, as well as Data Privacy and Safeguard of consumer information as part of the Federal Trade Commission (FTC) Rules. Pawn shops that deal in firearms are regulated by the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF). Pawn shops may also be Federal Firearms License holders. States have regulated the pawn industry for decades, and most pawnbrokers are licensed and regulated by local authorities as well.
- Are pawns rates excessive? No. To provide their service, all lenders must charge rates commensurate with the size and duration of the loan, collateral, risk and recourse. Pawn transactions are small-dollar, short term loans with no hidden charges.
- Do pawn customers enjoy the same protections under federal law that customers of other financial institutions enjoy? No. Pawn transactions are the only type of consumer credit that requires reporting to local law enforcement agencies. In many states this reporting is required daily, and must include extremely sensitive personal information about the consumer (i.e. ethnicity, gender, address). Much of this information qualifies as “non-public personal information” under federal privacy law and is entitled to protection as such.
- Do most pawn customers lose their merchandise? On average, about 80 percent of all pawn loans are repaid. Repeat customers make up a majority of the business, similar to any other lending or retail establishment. Pawnbrokers establish relationships with their customers because they often borrow against the same items repeatedly. Pawnbrokers offer non-recourse loans, looking only to the item being pledged to recover their investment if the borrower chooses not to repay the loan.