Go Figure: ‘Hardcore Pawn’ Shop Offers Financial Education

Seth Gold has seen a lot of struggle. His family has been in the pawn shop business since the 1940s, and in the past six years the Golds have chronicled the buying and selling of peoples’ stuff at his American Jewelry and Loan on the TruTV reality show Hardcore Pawn. Beginning this week the family has one more thing to offer: lessons in credit management and other aspects of personal finance.

Gold’s Detroit pawn store is teaming with Junior Achievement of Michigan, Greenpath Financial Wellness and Operation HOPE to host a financial education seminar. This is a one-time event. But Gold expects they will repeat it in the future and maybe even turn into a regular feature. “The response to this idea has been outstanding so far, and I hope to continue doing what we’re doing,” Gold said. “This is really just the beginning.”

Pawn shops are part of an alternative financial world that includes payday lenders, as well as more shadowy credit operations. They are popular with the unbanked, whose ranks total 20 million adults in the U.S., according to the Federal Deposit Insurance Corp. The number is even higher–40 million–according to an estimate from Operation HOPE, which puts the number globally at 2.5 billion.

Financial literacy advocates like John Hope Bryant at Operation HOPE and Junior Achievement have long supported measures to help migrate these unbanked from alternative finance to the mainstream, where fees are lower and more transparent. So it is a bit unusual for a pawn shop owner to join the effort to shift  customers into the mainstream.

“I don’t think this is something people initially expected from us,” Gold said. “But we wanted to be part of the conversation.” Gold said he was inspired to get involved after a recent Detroit-area chamber of commerce event where financial literacy surfaced as an issue time and again.

Pawn shops are not payday lenders, Gold notes. Payday lenders charge annual interest in excess of 400%–a predatory rate that Gold says he wants to point out to his customers. Pawn loans come with stiff interest rates as well. But they have a big advantage over payday loans, Gold notes. Because pawn loans are given on the basis of collateral, the loan is considered paid off if the customer never pays a dime of the loan and the shop owner takes ownership of the collateral. So it has no impact on your credit score.

“An informed customer is the best customer,” Gold said. “I don’t see this as losing business. There are always going to be other options out there, whether I do this or not. But there’s a big need to understand what options are available.”

Posted in International, Success Stories on October, 2016