Pawnbrokers Work Closely with Law Enforcement
YOUNGSTOWN, Ohio -- It’s a foolish or desperate thief indeed who tries to sell what he stole to one of the eight independent pawnbrokers in the Mahoning Valley.
At the pawnbrokers’ annual dinner Wednesday, police officials, state regulators and the president of the Ohio Pawnbrokers Association, Lou Tansky, praised the eight members for their prompt and detailed cooperation with law enforcement agencies in the Mahoning Valley.
About half the audience of 100 were police officers who work with the pawnbrokers to solve burglaries and cases of theft, including identity theft. Theft has become more rampant of late in Columbiana County, an officer there said, because of the increased abuse of heroin.
With their email alert system, the pawnbrokers’ ability to sense suspicious activity and the state laws instructing the brokers how to identify the goods they buy and hold, the eight brokers traffic in almost no stolen property. Only one-half of 1% that the eight buy turns out to be stolen. And that statistic carries an asterisk suggesting the figure is lower.
Said Tansky, in his fifth term as president of the state association, “From my travels around the state, I can tell you that pawnbrokers and law enforcement are envious of the relationship you have here and your ability to work together.”
The asterisk is this: Goods reported stolen and bought by a broker often turn out to be pawned by a member of the victim’s family or a neighbor. Upon learning that the relative, often an estranged spouse, has pawned the item, the victim declines to prosecute.
But the victim, noting the goods were stolen, often seeks to have the pawnbroker return goods without paying or reimbursing the pawnbroker. While Ohio law requires goods be returned to the victim no matter how the “new owner” acquired them, the courts have tended to order such victims to reimburse the pawnbrokers when the victims file civil suits.
“A stolen item that ends up in a pawnshop is easily identifiable and traceable,” Tansky noted, because the seller has to provide so much identification and fill out such a detailed description of the item on the ticket, including serial number, manufacturer and model.
So the question was raised, if pawnbrokers are not buying stolen goods, who are the fences? The answer, suggested Brian Landis, chief examiner of consumer finance in the Ohio Division of Financial Institutions (which oversee pawnbrokers), is Craig’s List, which is not subject to the Ohio Department of Financial Institutions. Other pawnbrokers suggested previous metals buyers who are exempt from regulation in the wake of a lawsuit they won against the Division of Financial Institutions. That judge’s ruling, favoring the precious metals dealers on First Amendment grounds, is on appeal.
The shops that advertise “We buy gold” are not licensed by the state nor do they have to report what they buy, the speakers iterated, nor do they have to keep what they buy the way pawnbrokers do. “More stolen goods end up at “We Buy Gold Shops,” Tansky asserted, and not just gold jewelry.
The popularity of shows on cable television about pawnbrokers has increased their popularity and business they conduct, Tansky posited. And in an economy where recovery remains slow, those who patronize pawnshops may well have exhausted their ability to borrow (any more) from banks, thrifts, credit unions and credit-card issuers.
For the benefit of those in the audience unfamiliar with role pawnshops play, Tansky reminded them, “Pawnshops are banks. Pawnbrokers are bankers.”
But they are banks-- and all banks are heavily regulated -- with a difference.
A customer of a commercial bank might or might not offer collateral for the loan he takes out. A pawnbroker not only requires collateral, he takes physical possession of that asset until the loan is repaid. So if a commercial bank lends customer money to buy a car, the bank holds title while the customer drives the car.
If a customer offers a pawnbroker his car as collateral, the pawnbroker takes possession of the car -- but not the title; the law prohibits that -- until the loan is repaid.
Where a commercial bank can charge fixed or variable rates, pawnbrokers can charge only 5% interest on the value of the goods taken as collateral and a $4 per month storage fee.
In addition, the law requires that the customer pay the broker more for the item of collateral than he received as a loan.
And should the borrower default, among the steps a commercial bank can take is reporting that default to a credit-reporting agency such as Equifax. A pawnbroker does not. He simply offers the item -- usually jewelry, electronics, a computer or coins -- for sale in his shop.
The redemption rate on $100 loans is 70% to 80%, Tansky reported.
Among the unusual items Tansky has taken as collateral was half bottle of Viagra owned by the late James Brown, “The Hardest Working Man in Show Business,” and a monkey. More precisely, his father took the monkey as security and then took the monkey home. His mother tolerated the animal all of one night, he said.
Copyright 2013 The Business Journal, Youngstown, Ohio.
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