News In Focus
6 September 2010
Pawnbrokers on the rise
The number of pawnbrokers in the UK has trebled in the past seven years to 1300, fuelled by the increasing use of high-interest ‘pay-day loans’, according to a report by The Metro newspaper.
The report puts the value of the pawnbroking and pay-day loan industry at £2billion per annum. Much of the growth is ascribed to the ease with which consumers can access these small – typically under £300 – short-term loans, compared to more traditional bank credit.
Financial planner and FT columnist, Jonathan Davis commented: “The situation now is worse than it was in the 1930s. The banks, who up until three years ago were literally throwing money at everyone, whether it was credit cards or mortgages or personal loans, are not doing so any longer. They are running on empty.”
Anecdotal evidence suggests pawnbrokers are seeing a growing number of middle class customers using their services. This picture of broadening appeal is backed up by research from Bristol University – on behalf of the National Pawnbrokers Association – which suggests 76 per cent of customers are aged between 20 and 49, while two thirds of them are women.
Concern has been raised that the very high rates of interest associated with pay-day loans – sometimes up to 2000% - exploit the desperation of those already in a dire financial situation.
However, the industry argues it provides both flexibility and a means of freeing up cash from unused items. It is also at pains to overcome the “Dickensian” stigma with which it is sometimes associated, pointing out areas in which pawnbroking has modernised in recent years.