Inside the world of the Pawnbroker

Jim Kneller, manager of H&T Pawnbrokers in Fareham, checks for hallmarks
Jim Kneller, manager of H&T Pawnbrokers in Fareham, checks for hallmarks

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If there’s one trade that’s doing well at the moment, it’s pawnbroking. RACHEL JONES looks at the changing face of an age-old industry.

Andrew Sedgall has accepted all kinds of things as security for a loan, but he had to draw the line at a stuffed owl.

Andy Sedgall, manager of Cash Converters in London Road, North End

Andy Sedgall, manager of Cash Converters in London Road, North End

In his 13 years as a pawnbroker, he has seen it all – from the usual jewellery and watches to canoes, stuffed animals and even an OBE.

The manager of the Portsmouth Cash Converters says deciding what to accept and putting a value on it is an interesting business. But there are some strict criteria.

‘It’s quite surprising what some people bring in. We haven’t taken the stuffed animals. And we have rules about certain things. We wouldn’t take weaponry, for example.

‘But something like the OBE, that had historical value. It was only a small loan and we had a pretty good idea the person was going to come back through the door.’

But the average customer still pledges the far more predictable and traditional jewellery in order to secure a loan. Pawnbrokers will use a range of acid and precious stone tests to determine the value of jewellery.

But for Andrew, the most interesting thing about the business is the customer. ‘We see so many different people, from so many different walks of life. And we always hope our service can help them out.’

The pawnbroker can to a certain extent gauge the state of the economy by how many and the kind of people who come through their doors.

While the majority of people using pawnbroking services are still those who find it difficult to get hold of any other credit, the customer base is growing.

But John Nichols, chief executive of pawnbroking and gold-buying group H&T, says there are many reasons why the centuries-old trade is a booming industry once again.

‘At the moment the price of gold is high, that could have something to do with it,’ he says. ‘People have no use for a broken chain and think “I might as well sell it”.

‘But I think the reason why we have a rise in people using these services, is availability and visibility. Our shops are modern and professional and we’re out there in the high street. It’s a far cry from the days of going down the side of a jeweller’s into a dingy, badly lit room.’

Andrew hopes that more people feel they can trust the pawnbroking industry, which must adhere to regulations laid down in the 70s.

‘Pawnbroking is as old as the hills and there’s always been a personal relationship between the lender and the client.

‘We want to keep that personal service but also show that we’re a national brand with a responsibility to the customer.

‘I don’t think we’re going to improve the image of the pawnbroker over night, but we’re always trying to improve things to make ourselves more accessible and convenient.’

The basis of pawnbroking remains the same – people pledge goods to secure a loan and receive them back on repayment.

But most businesses, including Cash Converters, offer different services including buying goods and cheque cashing.

Andrew says that, contrary to the beliefs of some, the pawnbroker wants clients to receive their goods back.

The National Pawnbrokers’ Association says it is in the pawnbroker’s, as well as the client’s, best interests if the loan is repaid. Reports suggest about 88 per cent of goods are redeemed.

But Richard Talbot, director of national money education charity Credit Action, says: ‘For a one-off emergency, pawnbroking is fine as a credit source. But using these services repeatedly can be an indication of a bigger debt problem and of someone not living within their means.

‘In those cases, we would always encourage people to seek advice.’

Obtaining a loan by pawning goods is generally considered as a viable short-term option which is quicker and more convenient and flexible than many bank services. But longer term, it can be an expensive way of borrowing.

And Richard believes that credit unions are a better way of accessing more flexible lending for short periods.

Getting one of these loans, however, depends on the borrower being a member of the credit union and having demonstrated a record of saving. Richard advises anyone with longer-term debt problems to seek advice from the Consumer Credit Counselling Service on 0800 138 1111.

Inside the shop

Closely inspecting a gold bracelet with a pocket magnifier, Jim Kneller demonstrates the expertise of his traditional trade.

But he is in a thoroughly modern high street shop, in West Street, Fareham, which shows how pawnbroking has moved into the 21st century.

To value the gold, he carries out a range of acid tests that determine authenticity and carat and an electronic diamond tester takes care of the precious stones.

And then he can input all the details, as well as the condition of the goods, into a database and come up with a value.

Jim is a manager for H&T pawnbrokers. Outside the Portsmouth branch hangs three balls – the traditional symbol of the pawnbroker which has also been adopted as part of the company’s name and logo.

But things are very different from hundreds of years ago. ‘I don’t think a lot of people these days would know what the symbol meant,’ says Jim. ‘Things are very different. All our shops look like proper high street shops, hardly the image of the back street pawnbroker. But we still like to get to know our customers and some of them have become friends.’

Jim has been in the business for 14 years, four of those with H&T, which also buys gold and offers other financial services. He now knows a piece of gold when he sees it, although he always carry out the tests. Similarly, he can often tell when people are trying it on.

‘Some people think it is the real thing and it turns out to be gold-plated or something.’

But other clients have had surprises, earning or borrowing more than they thought, especially as the price of gold is at an all-time high. Just a gramme of gold will fetch £5.

Jim says the image of the pawnbroker is changing and it is becoming a far more mainstream borrowing option.

‘We want our customers to have their goods back and selling is an absolute last resort.’

Jim says his customers are usually extremely knowledgable about the process and there are never nasty surprises.

In the short-term, borrowing from a pawnbroker is an easy option for many people.

Jim says: ‘A woman came in recently because her cat had gone missing. She’d found it half starved and with a broken leg and it needed an operation, so she decided to pawn her diamond ring because she needed the money.’

How it works

Pawnbroking is a loan secured on an item of value for a six-month period.

The pawnbroker, who earns interest on the loan, makes an on-the-spot evaluation of the goods and agrees the sum with the customer.

The customer is given pre contract information, detailing different types of loan, and then signs a document including rights and protection under the Consumer Credit Act 1974 and the terms and conditions of the loan.

A customer has the right to give notice to withdraw from the agreement within 14 days and also to make full or partial early repayments.

They are also entitled to redeem property by payment of the original loan plus the amount due at any time during the contract period.

When the loan and the interest are paid, the goods are returned to the customer.

If the customer has not repaid the loan during this time and it is over £100, he or she will receive notice that the property is due to be sold giving a further statutory period of 14 days in which to redeem.

But there will normally be an option to renew the loan by the payment of interest only and by the rewriting of a fresh agreement.

If the goods are sold, the pawnbroker must obtain the true market value on the date of sale and where the proceeds of sale are greater than the amount due to the pawnbroker, the balance is due back to the customer.

Only where the loan is for less than £75 does the pawnbroker gain title to the goods where the customer has not repaid.

Pawnbroking: A history

The origins of pawnbroking lie more than 3,000 years ago with the Chinese.

The industry as we know it today can be traced back to the noble Medici family in 15th century Italy. When the family was split in two, one half became bankers and the pawnbrokers. The pawnbroking side took with it half of the family crest, which incorporated the now instantly recognisable sign of the pawnbroker – the three golden balls.

It is pawnbroking we have to thank for the discovery of the Americas – Christopher Columbus’s voyage was funded largely by the proceeds from pawning Queen Isabella of Spain’s jewels.

In late 19th century and early 20th century Britain there were nearly as many pawnbrokers as public houses.

There are currently more than 1,200 pawnbroking shops in the UK, compared with 800 in 2003.