What is a pawn shop? – All Star Pawn Shop

A pawn shop or pawnbroker is a shop or business who loans money to people who bring in items of value which they leave with the pawnbroker. Once pawned, these items are called pledges, pawns, or simply collateral. While many items can be pawned, pawnshops typically accept jewelry, musical instruments, home audio equipment, computers, video game systems, televisions, cameras, power tools and other relatively valuable items as collateral.

If an item is pawned for a loan (also referred to as being “hocked”), there is a mutually agreed upon period of time within which the pawner may redeem it for the amount of the loan plus a pre-determined amount of interest. The amount of time and rate of interest are governed by law and the pawnbroker’s policies. If the loan is not paid or extended within the agreed upon time period, the pawned item will be offered for sale to other customers by the pawnbroker. Unlike other lenders, the pawnbroker typically does not report the defaulted loan on the customer’s credit report, since the pawnbroker has physical possession of the item and may recoup the loan value through outright sale of the item. The pawnbroker also sells items that have been sold outright to them by customers. Some pawnshops are willing to trade items in their shop for items brought to them by customers.

To prevent thieves from using pawnshops as a way to get money from stolen goods, many communities have laws requiring that people who bring in valuable items to the pawnshop have to show identification, such as a driver’s licence.

In spite of early Roman Catholic Church prohibitions against charging interest on loans, there is some evidence that the Franciscans were permitted to begin the practice as an aid to the poor. Pawn brokerage arrived in England with William the Conqueror. In 1338, Edward III pawned his jewels to raise money for his war with France. King Henry V did much the same in 1415. The Lombards were not a popular class, and Henry VII harried them a good deal. The Lombards are, however, credited with the origin of the traditional three sphere symbols that is still associated with pawn brokering today. The traditional pawnbrokers’ symbol of three spheres suspended from a bar is attributed to the Medici family of Florence, Italy, owing to its symbolic meaning of Lombard. This refers to the Italian province of Lombardy, where pawn shop banking originated under the name of Lombard banking. The three golden spheres were originally a symbol medieval Lombard merchants hung in front of their houses, and not the arms of the Medici family. It has been conjectured that the golden spheres were originally three flat yellow effigies of byzants, or gold coins, laid heraldically upon a sable field, but that they were converted into spheres to better attract attention. Most European towns called the pawn shop the “Lombard”. The House of Lombard was a banking community in medieval London, England. In actuality though, it is thought that the three spheres originally have nothing to do with money lending and were not designed to represent coins, gold, or anything of monetary value at all. According to legend, a Medici employed by Charlemagne slew a giant using three bags of rocks. The three-ball symbol representing these rocks became their family’s crest. Since the Medicis were so successful in the financial, banking, and money lending industries, other families adopted the symbol. Throughout the Middle Ages, coats of arms bore three balls, orbs, plates, discs, coins and more as symbols of monetary success. Saint Nicholas, the patron saint of pawnbrokers, has also been attributed with some of the history of this famous symbol when according to legend, Nicholas gave a poor man’s three daughters each a bag of gold so they could get married.

In 1603 an Act against Brokers was passed and remained on the statute-book until 1872. It was aimed at the many counterfeit brokers in London. This type of broker was evidently regarded as a fence. Queen Isabella of Spain pawned her jewelry to finance Christopher Columbus’s first voyage to the New World.

Crusaders, predominantly in France, brokered their land holdings to monasteries and diocese for funds to supply, outfit, and transport their armies to the Holy Land. Instead of outright repayment the Church reaped a certain amount of crop returns for a certain amount of seasons, which could additionally be re-exchanged in a type of equity.

A pawnbroker can also be a charity. In 1450, Barnaba Manassei, a Franciscan monk, began the Monte di Pietà movement in Perugia, Italy. It provided financial assistance in the form of no-interest loans secured with pawned items. Instead of interest, the Monte di Pietà urged borrowers to make donations to the Church. It spread through Italy, then to other parts of Europe. The first Monte de Piedad organization in Spain was founded in Madrid, and from there the idea was transferred to New Spain by Pedro Romero de Terreros, the Count of Santa Maria de Regla and Knight of Calatrava. The Nacional Monte de Piedad is a charitable institution and pawn shop whose main office is located just off the Zocalo, or main plaza of Mexico City. It was established between 1774 and 1777 by Pedro Romero de Terreros as part of a movement to provide interest-free or low-interest loans to the poor. It was recognized as a national charity in 1927 by the Mexican government. Today it is a fast-growing institution with over 152 branches all over Mexico and with plans to open a branch in every Mexican city.

In the west, pawnbroking existed in the Ancient Greek and Roman Empires. Most contemporary Western law on the subject is derived from the Roman jurisprudence. As the empire spread its culture, pawnbroking went with it. Likewise, in the East, the business model existed in China 3000 years ago no different from today, through the ages strictly regulated by Imperial or other authorities.

In Hong Kong the practice follows the Chinese tradition, and the counter of the shop is typically higher than the average person for security. A customer can only hold up his hand to offer belongings and there is a wooden screen between the door and the counter for customers’ privacy. The symbol of a pawn shop in Hong Kong is a bat holding a coin.The bat signifies fortune and the coin signifies benefits. In Japan, the usual symbol for a pawn shop is a circled number seven (7) because “shichi”, the Japanese word for seven, sounds similar to the word for “pawn.”

Malaysia, a multi-race country, where Malaysian Chinese comprises 25% of total population, initiated the pawnbroker business. Nowadays, the majority of pawnbrokers in Malaysia are managed by Malaysian Chinese. In Malay, pawn is called “pajak gadai”. A valid and licensed pawnshop in Malaysia must always declare themselves as a “pajak gadai” or a pawn shop for their company registration. They must also fulfill the requirements of the Ministry of Housing and Local Government which states the pawn counter must not be higher than 4 feet, is bullet-proof, has stainless-steel counters/doors, strong rooms with automatic locks, safes, equipped with fully computerized system, CCTV, alarm, and pawnbroker insurance.

In the Philippines, the operation of pawnshops is managed by private businesses and is duly regulated by the Bangko Sentral ng Pilipinas. Pawn shops usually accept gold jewelry, appliances, gadgets, etc. Many pawn shops in the Philippines have adapted other services into their nationwide branches like Tambunting Pawnshop. Services like international and domestic remittance, insurance, bills payment, b2b money collection, e-loading for mobile phones, ticketing, and even banking are not unusual to see in a regular Filipino pawn shop.

In India, the Marwari Jain community pioneered the pawnbroking business, but today others are involved; the work is done by many agents called “saudagar”. Instead of working from a shop, they go to needy people’s homes and motivate them to become involved in the business. Pawn shops are often run as part of jewelry stores. Gold, silver, and diamonds are frequently accepted as collateral.

Pawnbroking is also a traditional trade in Thailand, where pawn shops are run both privately and by local governments.

In Sri Lanka, pawnbroking is a lucrative business engaged in by specialized pawnbrokers as well as commercial banks and other finance companies.

In Indonesia, there is a state-owned company called Pegadaian which provides a range of conventional and Sharia-compliant pawnbroking services across the archipelago. The company accepts high-value items such as gold, motor vehicles, and other expensive items as a collateral. In addition to pawnbroking activities, the company provides a range of other services, such as a safe deposit box and gold trading services.