A Brief History of Pawnbroking

Pawning has long been a source of capital for people in times of need, as well as a means of financing business ventures. Considered mankind's oldest financial institution, pawnbroking can be traced back at least 3,000 years to ancient China, and references to pawnbroking have been found in the earliest written histories of Greek and Roman civilizations.

The House of the Lombards operated pawnshops throughout Europe in the Middle Ages. The symbol for their operations, three gold balls, still remains a trademark of pawnshops today. For a time, certain usury laws imposed by the Church prohibited charging interest on loans and limited pawnbroking. But because of problems in the banking system and economic necessity, pawnbroking made a resurgence. During the 14th Century, the House of the Lombards even counted royalty, such as King Edward III of England, among their clientele. Many of the first leaders in the banking industry had roots in pawnbroking. And today, statutory regulations of banking and finance are based on the legal foundation established by pawnbrokers.

Pawnbrokers are also known as collateral loan brokers because they make loans based purely on the intrinsic value of the collateral, not on the customer's credit history. If the loan, or at least the interest, is not paid off during a specified term (usually three to four months), then the item is forfeited and may be resold by the broker.

A typical transaction begins with a potential borrower bringing an item he/she wishes to pledge into a pawnshop. The pawnbroker then determines how much to loan the patron for the item. Loans are paid out at a rate of about one-third to one-half of the price the broker can expect to receive for the sale of a good during the worst times to assure that a profit will be made.

Pawnshops continue to be a source of convenient credit for individuals in need of a short-term loan.

Some Pawnbroking Facts

• Membershipin the National Pawnbrokers Association has risen from 50 members in 1988 to more than 3000 members today.
• In 1911, there were 1,976 licensed pawnbrokers in the nation, or about one for every 45,700 citizens.
• There are between 12,000 and 14,000 pawnshops in operation throughout the Unites States today, that's roughly one for every two commercial banks.
• Pawnshops made about 35 million loans in 1988 and as much as 10 percent of the adult population is served by pawnshops each year.
• Between 70 and 80 percent of all items pawned are redeemed.
• According to Forbes magazine, May 1993, 25 million households representing more than 75 million people, do not have a bank account. People without accounts find it extremely difficult, and most likely impossible, to obtain a credit card or loan from any other legitimate source than a pawnbroker.