For richer, for poorer, Utah pawn and payday businesses boom
Cash-strapped consumers hocking personal items at pawn shops or obtaining loans at payday lending stores are making for a booming business.
Just this month, one of the larger pawn operators in the world purchased for $11.8 million seven Utah shops that had operated under the Colorado-based Jumping Jack Cash brand. A third company, Cash America the largest U.S. pawnshop operator also controls seven other Utah stores.
Although the majority of pawnshops are independently owned, big corporations are making inroads. And whether that's a good thing for Utah stores and their customers depends on who is doing the talking.
For their part, representatives of Ezcorp aren't saying much publicly about its expanding footprint along the Wasatch Front and southern Utah, which also includes 17 payday loan stores. Ezcorp, based in Austin, Texas, operates more than 500 pawn stores in the U.S. and Mexico and 500 payday loan stores in the U.S. and Canada.
Eric Fosse, president of the Ezcorp's North American Operations, did not return telephone calls for comment, and several company executives and store managers referred inquiries to others in the firm. A representative did respond but referred to news releases in answer to questions.
In a statement announcing the acquisition of the Utah stores, Fosse said it "gives us an immediate and significant pawn presence in the Salt Lake City area. Salt Lake City is a very attractive area for us, and these pawn stores complement our existing EZ Loan Services stores in Utah."
He added that the purchase, along with the acquisition of 15 Mister Money pawn stores in Iowa, Wisconsin and Illinois for $18.5 million, "enables us to leverage our existing operational structure, while giving us a solid base for continued expansion."
By any measure, the pawn and payday loan operations are good business for Ezcorp, which, in its fiscal quarter ending March 31, reported earnings per share of 63 cents, an increase of 31 percent over the same period last year. Net income was $31.8 million, up 34 percent, and its net revenue of $131 million was up 19 percent.
The company also has significant investments in Cash Converters International Limited, which franchises and operates a worldwide network of 600 stores in 21 countries that offer financial services and pre-owned merchandise, and Albemarle & Bond Holdings PLC, one of the United Kingdom's largest pawn-broker businesses, with more than 140 stores.
Anecdotally, the Wasatch Front has generated plenty of business for pawnbrokers in the years since the economic downturn began.
Mike Katsanevas, owner of Crown Jewelers and Pawn in South Salt Lake, has seen transactions increase by 40 percent since the middle of 2008. Initially, pawned items were dominated by air nail guns for framing and finish guns for interior work as the construction industry bottomed out. Today, he said, white-collar customers are more in vogue, pawning and selling jewelry and other high-end personal possessions.
"Folks also are using us for short-term loans, perhaps two or three times a year," Katsanevas said. "Generally, up to 92 percent of our customers will pay off their loans and pick up their property. But with what we're getting in pawned items, I don't see any letup in this horrible economy."
Through all the ups and downs, Todd Hills, owner of the seven Jumping Jack Cash-owned stores, has decided that it's time to go in a different direction. He sold his shops to Ezcorp and is "closing out our presence in Utah, at least for now," he said, adding that he plans to open an online pawn business called Pawngo. "The pawn business has been around for some 3,000 years, so it's about time we started using some technology."
As for traditionalists, Mark Reich, owner of the Hy and Mike's pawnshops in Midvale and Tooele, will continue to operate his stores as an independent.
He contends that independent owners have stronger ties to local communities than chain stores. "Like any business, locally owned companies usually give more personal service," Reich said. "Private owners also are more likely to care about the community and go out of their way to do what they can for their customers."
Pawnshops can be independently owned, franchised or corporately run. They are monitored by the municipality where they reside and regulated by the state.
Katsanevas, who leads the state advisory committee for Secondhand Merchant Dealers, says Utah has nearly 150 pawn shops, and most perhaps as many as 130 are family-run.
By contrast, there are 273 payday lending stores in Utah, and another 65 lenders offering payday loans over the Internet.
There's also a difference in the types of loans offered through pawn shops and payday lending stores.
Typically, pawn loans are based on the value of the item the consumer brings to the store. Interest ranges from 7 percent to 20 percent for the first 30 days, for an annualized rate of 85 percent to 240 percent. Items are redeemed when the loan is paid off, or forfeited. Payday lenders in Utah typically charge interest of 500 percent or more, or $20 for every $100 loaned for two weeks.
Before deciding on a loan, consumers should compare the cost of other credit alternatives in terms of annual percentage rate and the possibility of late fees and penalties, said Jerry Jaramillo of the Utah Department of Financial Institutions. There is no usury limit in Utah, which means there is no limit to how much interest any financial institution may charge.
Jaramillo said payday loan firms are encouraged to display on counters a pamphlet that explains consumer protections. Payday loans may be less costly than overdraft and late fee charges imposed by other financial institutions if paid back on a short-term basis, according to the brochure, "Consumer Guide to Payday Lending in Utah."
Yet a study released in February found that four of every 10 small-claims cases in Utah are filed by payday loan companies trying to collect from customers with more than 58,000 such cases filed in the past five years. The number raises questions about industry assertions that most loans are paid on time and are affordable, according to the study by the Coalition of Religious Communities, an advocacy group for the poor in Utah.
As for the pawnshop, there seems to be no slowdown for one of the world's oldest financial institutions.
In the United States, there were about 6,900 pawnshops in 1988 one for every two commercial banks compared with as many as 14,000 stores today, according to the National Pawnbrokers Association.
Pawnbroking can be traced back at least 3,000 years to ancient China, and it has been found in the earliest written histories of Greek and Roman civilizations.
And remember the nursery rhyme "Pop Goes the Weasel." A shoemaker's tool, the weasel, was pawned or popped, so "that's the way the money goes, Pop! goes the weasel."
Twitter @ DawnHouseTrib
From pawns to paydays
• Utah has nearly 150 pawn shops, with most perhaps as many as 130 family-run.
• By contrast, there are 273 payday lending stores in Utah, and another 65 lenders offering payday loans over the Internet.
Source: Secondhand MerchantDealers, state of Utah
To learn more about loans, visit http://www.dfi.utah.gov and look for consumer tips under general information.