Nathan Finch, managing director of Pickwick Pawnbrokers in Dartford
Pawnbrokers are fascinated by objects. Glistening Rolex watches, gold wedding rings, ornate antiques which have outlived generations. It is a world draped in luxury, but pawnbrokers often deal with people on the brink of financial crisis.
For those with nowhere else to turn, pawnbroking can be a lifeline – and people are increasingly pawning their belongings for a quick injection of cash as the cost of living soars.
“People are really struggling to make ends meet,” says James Constantinou, the chief executive of the national chain of high-end Prestige Pawnbrokers. “Phones are ringing off the walls, with people from all walks of life and industries.”
Constinatinou’s business attracts high-profile customers with high-value items – designer handbags, Lamborghinis and diamond bracelets. But people across income brackets turn to pawnbrokers for loans, usually around 50 to 70 per cent of the item’s secondhand value. The average loan is £300.
“If pawnbroking became unavailable then it could have serious – bleak – consequences for some low-income households,” says Jake Shepherd, a researcher at the Social Market Foundation which published a report on the importance of pawnbroking last year. “For example by them having less scope to spend on essentials like food, heating or rent.”
More than 14 million people are living in poverty in the UK, and the cost of living crisis is threatening to push many more below the breadline. Energy bills have more than doubled in the space of a year, despite government intervention.
Average food prices are up 16.9 per cent on the previous year, often far higher for budget options. Food bank network the Trussell Trust saw record numbers of people seeking help between April and September in 2022, with 320,000 forced to turn to the charity’s food banks. Strapped for options, people are turning to pawnbrokers in spite of the risks.
The following is generally how it works. Belongings are handed over to the pawnbroker in return for a loan which is paid back with interest. By law, pawnbrokers have to keep the items for at least six months and many keep them longer. Customers can buy the item back sooner and pay less interest.
“Despite their high interest rates – and despite common belief that pawnbrokers are always exploitative — we were told that pawnbrokers provide a vital service to solving customers’ cash flow problems, particularly in the context of rising prices,” Shepherd adds.
Over 86 per cent of customers repay their loans, according to the National Pawnbrokers Association. There are no ongoing debt consequences for people who do not repay, because pawnbrokers sell the item to cover the debt. People who have pawned their items get any profit made.
Nathan Finch, the managing director at Pickwick Pawnbrokers in Dartford, says “there are no hidden agendas”.
“It’s a very common thing that people tell you their personal story about an item. We’re fascinated by jewellery and we’re fascinated by objects. We love it,” he says. And they respect the story and meaning which valuables can hold.
“It is very straightforward,” he adds. “I don’t want to sell people’s belongings. I’ve never particularly wanted to be a shopkeeper. I just want to earn money out of the interest.”
Finch says Pickwick is seeing a steady increase in pawnbroking customers, but people are also being more careful with their money so their retail jewellery business is slowing.
“Our customers come in and they say: ‘Things are a little bit tough at the moment’,” Finch adds. “Their electricity bills have gone up. They’ve got the dentist tomorrow. But often, it’s good things too – they’re going for a special weekend away with the girls or they’ve just seen a great bargain down the road.”
Historically, pawnbroking served a social need. “If people needed money and they were desperately poor, they had a couple of choices. They either went to the church or, if they had possessions, they went to pawnbrokers. It was really an aspect of British social history and it played a much-needed part in financing people prior to the introduction of the welfare state.”
And now it’s serving a social need again. Ray Perry, the chief executive of the National Pawnbrokers Association, says the frequency of loans has increased in recent months. People are coming back more quickly and there are new customers – partly because of the natural boom as businesses reopened after the pandemic, as well as the cost of living crisis and fluctuating value of gold.
“It is quite clear that people are definitely having to spend more money on utilities, food and travel,” Finch remarks. “There is no doubt that everyone is finding the cost of living that much greater.”
People often use pawnbroking because they believe they have little other option. “It is a vital lifeline to prevent people having to look at much less savoury alternatives,” Finch adds.
“Not everyone gets the same fair treatment from banks or from other lenders because it’s so much based on credit history. And if you have no option, or if you have limited options, then reluctantly people may look at an unregulated option such as loan sharks and that is to be avoided at all costs.”
According to the Vulnerability Registration Service, 1.2 million people turned to illegal loan sharks in the 12 months up to September 2022. Helen Lord, the organisation’s chief executive, says pawnbroking has its place with other legal high-cost credit options.
Pawnbrokers are registered with the Financial Conduct Authority and they are subject to the same responsibility as any other regulated lender. “This makes them a better option than going to a loan shark or unregulated lenders,” she adds.
But pawnbroking comes at a price – there are high interest rates, usually around 150 per cent. That is well above what you would find on an overdraft, credit card or guarantor loan. But pawnbrokers claim it’s more immediate, they won’t look at your credit score and the loans tend to be much smaller and more short-term than a bank would offer.
“For short-term funding, borrowing is actually less expensive than a bank,” Constantinou says. “It’s convenient and instant. There’s no credit checks, no proof of income required. You can get your money within 20 minutes. If you’re going to a bank, you’ve got to jump through hoops. And it doesn’t work in a lot of instances. It can take three or four months, and you probably won’t get enough.”
Lord advises that the first step, for people who are struggling, should be to approach organisations like StepChangeor Citizens Advice. They can direct people to further support if needed such as food banks, lower-cost borrowing options like credit unions, or the government’s “breathing space” scheme which allows respite from interest, fees, and court action to reduce stress.
Most pawnbrokers would advise people not to loan belongings that have a particularly sentimental value. Finch twists his late mother’s ring on his finger as he says he knows just how much an item can mean to someone.
She took her own life when he was just 17. She left behind a small nine-carat gold ring, her grandmother’s wedding ring, on the mantel. Finch never pawned his mother’s ring, although he was close once. He thinks it would fetch about £8 in a loan now, but it is worth so much to him.
“When we take possession of someone else’s item that may be cherished or sentimental, we absolutely understand its value as something to be looked after. This is not just jewellers looking after their stock. It is absolutely incumbent on us to treat it as though it were our own.”
Talking can be life-saving. Call Samaritans for free on 116 123, email email@example.com or visit the website. If you are struggling, get expert debt advice from StepChange or contact Citizens Advice for support. They can refer you to food banks and other organisations which might help. You can find more cost of living help for households here and get tips on how to cope with mental health struggles in the cost of living crisis here.
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