Cash is king for the pawnbroker

Oct 8 2008 by Andrew Baldwin, Huddersfield Daily Examiner

‘The stigma of using a pawnbroker has long gone and in today’s borrowing society it is looked upon as entirely acceptable’

‘‘The credit squeeze has seen the chain’s profits almost double in the year as would-be borrowers are turned down by high street lenders’

TO the uninitiated, they seem like something from another age.

Pawnbrokers are traditionally seen as the province of the desperate or economically downtrodden who need a quick source of cash to tide them over in an emergency.

But that view may need to be revised in the light of the kind of customers now availing themselves of the service.

This has seen property magnates and wealthy women handing over jewels worth up to £30,000 every week. This compares with pawned items fetching an average of £10 to £70 about a decade ago.

Some of these people are not strapped for cash in the way that others understand. Instead, they want to pay for an exotic holiday or a new outfit, with 85% reclaiming their pledges.

But the same impetus for visiting a pawnbroker operates whether they are rich or poor – they need a quick bit of cash to get them out of a hole.

It also shows that the credit crunch is beginning to bite even those who were previously largely immune to such economic forces.

One pawnbroker in the middle of Huddersfield – Herbert Brown in King Street – has seen a new type of customer in recent weeks.

One woman pawning a necklace to pay utility bills was on her first visit.

She said: “I thought it would be shaming. But they put me at ease. Not at all what I thought.”

The sign of the three balls is outside but in a more discreet way, as part of a logo.

Customers receive between 20 and 50% of the cash value for their jewellery and pay interest until redeeming the item.

Nine out of 10 customers do buy the jewellery back once they have funded what they need.

The stigma of using a pawnbroker has long gone and in today’s borrowing society it is looked upon as entirely acceptable.

Herbert Brown was bought last year by Albemarle & Bond, which has 112 pawnshops across the country.

Profits are up massively in hard times.

The credit squeeze has seen the chain’s profits almost double in the year as would-be borrowers turned down by high street lenders have come to them for loans.

Annual profits rose by 47% last year to £10m and annual revenues were up by £46.9m, an increase of 43%.

The pawnbroker – which is listed on the Alternative Investment Market – has been one of the success stories of the year as a result of the banks refusing to take loan risks.

Chairman Charles Nicolson says: “The pawn loan book has increased by 24% since this time last year.

“In the current economic climate we are very happy with the increased proportion of the business which is being generated by pawnbroking, where the loans are secured against gold jewellery and diamonds.”

Sales of second-hand jewellery accounted for 75% of overall business. Total sales of ex-pawn jewellery almost doubled in 2008 to £20m, compared with £11.5m last year.

Chief executive Greville Nicholls says: “You will always come across anecdotes about the city executive who comes in to pawn his Rolex to pay the school fees – and that’s probably true – but it’s not what we’re about.

“We have a huge number of individual loans of relatively small amounts of money and are therefore as efficient as possible.”

Mr Nicholls added: “This time last year we saw storm clouds gathering and decided to tighten our underwriting criteria so we were not swamped by a tidal wave of bad debt.

“We believe that in this difficult economic climate we are as well placed as anybody to weather the storm.”

Outside the Huddersfield shop, there were still some people who were a bit suspicious about the whole thing.

Gary Manning, 48, from Dalton, said: “It’s a bit Dickensian, isn’t it?”

June Austin, 54, who lives in Paddock, said: “You used to hear about dad pawning the watch for the weekend. Does it still go on?”

For those daunted by the prospect of going into a pawnbroker, Borro.com was launched recently, enabling people to hock valuables online.

Borro lends up to 40% on pledged valuables and charges 6% a month on loans of £1,000 and 4% for higher amounts.

Founder and chief executive Paul Aitken says: “We allow people to lend themselves money through the temporary release of equity from their personal assets – all from the comfort and convenience of their own home.

“We are proud of this innovative and radically better-value solution that we have created for people with a short term cash need.”