Consumer - The A- Z of Money Shops
Tuesday, 31 March 2009
Tina Leonard will be explaining how pawn broking works, how these money shops are regulated and where you stand as consumer.
Tina will also be telling us about a new modern chain of stores called Cash Converters, who offer a service of exchanging goods for money, a service very similar to pawnbrokers.
Pawnbrokers were almost extinct in Ireland and there are only three traditional pawnbrokers left in Ireland, all in Dublin City.
The traditional shops are seeing a sharp rise in business since the recession started with consumers pawning luxury items to the same extent as they were ten years ago.
The pawnbroker symbol of three golden balls was once a familiar sight in towns, large and small across Ireland.
Today there are only three traditional pawnbrokers left, all in Dublin city, and they all operate as jewellery shops as well. In addition there is a chain called Cash Converters, some of whom carry out services similar to pawnbroking, although they do not like to be called such.
What is pawnbroking?
Pawnbroking is a system of lending money on 'portable security' i.e. your belongings, and is one of the oldest professions in the world. Basically you give your goods to the pawnbroker in exchange for money and then you buy back the goods for that amount plus an interest fee. It is a form of credit and is the same as going to your bank manager looking for a loan and giving some security or collateral against it. It is a regulated financial service in the same way as banks and insurance companies are.
Early in the 19th century there was only one pawnbroker in Ireland, but by 1833 there were 52. In 1865 there were 312 but they declined in the last century as the population grew in affluence.
In 1872, the Pawnbrokers Act was passed in Ireland by the Union Parliament (Irl and Eng) and this repealed all previous laws on the subject. Subsequently there was the Pawnbrokers Act 1964 and the Consumer Credit Act 1995, (as amended by the Central Bank and Financial Services Authority of Ireland Act 2003).
So pawnbroking is regulated by law and by the Financial Services Regulator. It is a financial service and any enquiries or complaints can be dealt with by the Financial Regulator and the Financial Ombudsman. You have to receive a licence to set up as a pawnbroker (as with any financial service), and your interest rate has to be approved.
1) Traditional Pawnbrokers
There are only three remaining pawnbrokers in Ireland today and they are all in Dublin City Centre.
Pat McCarthy has been running McCarthy Pawnbrokers and Jewellers on Dublin's Marlborough Street for thirty years and the pawnbrokers has been there for 100 years.
According to Mr. McMarthy they are now back to the same levels of business they had ten years ago, so the effects of the recession are very apparent for his business. Also, people are leaving things in longer and buying less. This means that he is even more discerning when it comes to not accepting some items, as he has to make sure it is something he can sell if the owner cannot buy it back. The most popular item is jewellery, also some musical instruments. All are held under lock and key in safes. He has regulars who pawn the same thing again and again.
ID is required when borrowing and to safeguard against taking stolen items, they will not take a woman's item from a man for example. They also have access to police records of stolen goods.
The charge is 2% - 3.25% interest per month. So if you borrow €100, for example, against something worth that amount, you can leave it in for four months and then pay €100 plus €13 interest to get your property back. Or you can just pay the interest and keep the item in and get a new 'ticket'. Or you can decide you don't want it back, you owe nothing further after the interest has been paid and then the pawnbrokers owns the item and can sell it on.
2) Modern Money Shops
A new type of shop that combines pawnbroking with buying, selling and some other financial services such as cashing checks, is currently expanding. This is a franchise called Cash Converters and there are 2 stores in Dublin, 1 in Cork and several others around the country. There are 130 stores in the UK and the aim is to have 145 in the UK by the end of the year.
Cash Converter's motto is 'We Buy - We Sell - We Loan Cash'. They look and feel very different to the traditional pawnbroker as they have a retail display area with all the second hand goods you can buy, focus more on electricals, and market themselves as a cheap place to buy second hand goods.
You can sell an item outright to them for a third of it's market value. They sell on the goods as a second hand shop would. You can also sell your goods to them under a 'buy back' scheme which is essentially the same as pawning the item. As with the traditional pawnbroker, ID and proof of address is required.
At Cash Converters on Thomas Street in Dublin and you can buy the item back after 28 days plus 30% interest. There is no limit on how long you can extend this for and the interest remains the same. At the moment the Dublin store is offering no interest payment for the first 28 days for goods brought in before the end of April. There is a limit of €100 value per person and €500 per household for this deal.
Cash Converters on Thomas Street say that mobile phones are their biggest area, followed by TVs, digital cameras, play stations / X boxes, jewellery, lap-tops and musical instruments. They have seen an increase in people selling items with a corresponding decrease in people buying items. For example, they are not taking engagement rings at the moment because people aren't buying them.