Pawnshop Growth Reflects Economic Conditions

By Robinson, Robin | THE JOURNAL RECORD, June 2, 1990 | Go to article overview

Pawnshop Growth Reflects Economic Conditions


Robinson, Robin, THE JOURNAL RECORD


If you think banks, savings and loans, credit unions and finance companies are the only sources of credit in Oklahoma, think again.

Pawnshops play an important role in consumer finance, especially for consumers on the lower rungs of the economic ladder, according to a study published in the Federal Reserve Bank of Kansas City's Economic Review.

Oklahoma, with 369 pawnshops in 1988, had more pawnshops per million people - 113.1 - than any other state, and the number grew to 383 pawnshops during 1989, according to Prett Cowley, administrator of the Oklahoma Department of Consumer Credit.

That dubious honor reflects economic conditions in the state since oil prices tumbled in 1982, according to John McClure, deputy administrator of the department.

"It provides a source for people who used to be able to borrow from Oklahoma's banks and savings and loans and credit unions, but can't any longer," McClure said. "It allows them, when the need arises, to come up with small amounts of cash to get them through."

Most pawnshop customers have high credit risk, denying them the ability to borrow on an unsecured basis, and need small loans - the average pawnshop loan in Oklahoma was $41 in 1987 - that traditional lenders don't make, the study said.

"You've got to remember, in most cases, the people who use pawnshops do not qualify for lenders," McClure said.

Some people have used the same pawnbrokers for years "that's their lender, their financial source," McClure said, because they are on a fixed income that wouldn't allow them to borrow from traditional sources. Between 70 and 80 percent of pawnshop customers return, the study said.

"They don't have to prove that they don't need the money to get the loan," McClure said, referring to bank lending procedures.

But customers pay a hefty interest rate for using a pawnshop.

Oklahoma pawnshops charge one of the highest rates in the country, charging interest rates of 240 percent on a two-month $51 loan, according to the Kansas City Fed study.

Some of the other states studied allow pawnshops to charge up to $5 in storage and insurance fees, but their overall interest rate on a two-month $51 loan was less than 95 percent, with New Jersey and Pennsylvania having overall interest rates of 36 percent. More than half of the states allow pawnshops to charge overall interest rates of more than 120 percent, the study said.

While New Jersey and Indiana have a legal monthly interest rate of 3 percent, Pennsylvania's rate is 0.5 percent and Oregon's rate is 3.9 percent, Oklahoma's is 20 percent of the first $150 borrowed, as set by the Oklahoma Legislature.

The rule of thumb in lending is the riskier the borrower, the higher interest rate they pay on loaned money. Oklahoma's default rate on the number of pawnshop loans is 22.2 percent, compared to 20.6 percent of the pawnshop loans made in Indiana, where the interest rate of 71.3 percent is much lower than Oklahoma's 240 percent. Oregon's pawnshop loan default rate was 13.9 percent, and its interest rate is 94.8 percent. The default rate based on the value of loans made by Oklahoma pawnshops was 19.6 percent, compared to 13.8 percent in Indiana and 9.3 percent in Oregon.

The higher interest rate hurts the consumer, Cowley said. When a pawnshop customer needs money to cover an emergency, they don't consider the interest rate on a loan, he said. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Pawnshop Growth Reflects Economic Conditions
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.