billddrummer (57.98)

I Got My Drums Out of the Pawnshop. Now I Need Cymbals.

September 23, 2009 – Comments (4) | RELATED TICKERS: CSH

Last week I was able to buy my drums from the pawnshop that has been holding them since June 2008.

The store is an outlet of Cash America (CSH), and has three outlets in the Reno/Sparks area.  All of them offer pawn loans, payday loans, title loans, prepaid Visa cards, Western Union payment options, a retail store that sells jewelry, electronics, musical instruments, CDs, DVDs, tools, weapons and virtually anything else with value as a used product.

I had to buy back my drums because I let the pawn ticket lapse.  The state allows you to buy back your goods for the amount of the pawn ticket plus interest (3%/month in NV) and sales tax.  The kicker is that you can never pawn the items again.

Of course, you can take them to another pawnshop if you want (or need) to.  Thankfully, I don't think I'll need that particular service immediately.

An interesting situation is occuring with local pawnshops.  Some of the shops are refusing to pawn construction tools.  Normally, there would be a demand for power tools at the end of the construction season (September/October).  Journeymen would pawn their tools at the end of the season, let them sit at the pawnshop for 120 days, get them out of pawn in the spring, and use them during the summer. 

Not this year.  The 'busy season' didn't materialize, many construction workers abandoned their tools, and the pawnshops are stuck with a lot of inventory they didn't expect.

Jewelry presents its own set of challenges.  Many casino workers would pawn their jewelry during the winter months when times were slow in the gaming business.  They would renew their tickets until spring, when tips rose, then take their items out of pawn during the summer, when the casinos were busy and tips were better.

Not this year.  Summer was one of the worst on record, gaming revenues dropped for the 24th consecutive month, and some of the local casinos laid off dealers during the summer, an unheard of reaction to a recession that has whipsawed nearly every industry in this state.

Meanwhile, companies like CSH continue to give people payday loans (only $15-$20 per $100 per week--of course that's a 403%-469% APR), title loans (we need an extra key, so that we can repo your car if you don't pay us on time), and pawn loans (give us a $300 PS3--we'll loan you $30 for 120 days at 3%/month).

A tenuous economy, job insecurity, cash flow pressures, high debt servicing requirements, and a sense that there's no way out is trapping millions of Americans into the cycle of high interest debt.

Be thankful you haven't become a victim of this cycle.  But if you're an investor, it makes sense.  Unless you think that Congress will pass the bill currently languishing in committee that would restrict consumer loan interest to 15% APR (House version) or 36% APR (Senate version). 

In my opinion, if this bill passes, it would prevent a large swath of consumers from accessing any sort of credit.  Companies like CSH, MoneyTree, and a host of smaller companies provide banking services to the unbankable.  Now, I'm not saying that those consumers couldn't eventually become 'normal' bank customers, but some people shouldn't be in normal banks (just like some people shouldn't own houses).

Most of those folks aren't Foolish.  But I was one of them for many years.  Now, at last, I'm pulling out of the hole I've dug for myself, and am feeling like I have more control over my personal finances than I've had in some time.

My next purchase?  Cymbals to replace the ones I lost to the pawnshop.  I'll probably buy used ones from a local retail store.  I don't trust craigslist.

Fool On!

Bill