Transcripts

The Pawn Shop Business Is Picking Up

PAUL KANGAS: While business for retailers is slowing, some other sectors are picking up steam. The pawn shop industry is undergoing a surge in popularity as Americans rush to sell their treasures or borrow against their value. Jeff Yastine takes a look.

JEFF YASTINE, NIGHTLY BUSINESS REPORT CORRESPONDENT: These are the signs of the times -- pawn shops. In a booming economy, they might be considered a lender of last resort. But in today's economy, it's the pawn shop business that's booming. At the 50-year-old Morningstar's pawnbrokers in downtown Hollywood, Florida, father and son Louis and Eric Morningstar noticed the pickup in business over the past 18 months as the housing downturn gradually took hold. Some people come here to sell; others come to borrow.

LOUIS MORNINGSTAR, OWNER, MORNINGSTAR'S JEWELRY & PAWN: Unfortunately, with the economy being the way it is today, things with the real estate market, it's filtered down through all different types of businesses in the country. The pawn industry is riding the crest of a wave, so to speak--

ERIC MORNINGSTAR, MORNINGSTAR'S JEWELRY & PAWN: We get lower class to middle class, lots of realtors, real estate agents - just a lot of people trying to pay their bills and make do, especially with the increase in gas prices and fuel.

YASTINE: Nowhere is the trend more evident than in the share prices of the nation's publicly held pawnbroker chains, like E-Z and Cash America. Those stocks are near two-year highs as investors react to the surge in loans. Industry consultant Jerry Whitehead says gold, in the form of jewelry, coins and bullion, is one of the most popular assets people are pawning. He says they're either selling it to raise cash, or borrowing against its value for a pawnbroker loan.

JERRY WHITEHEAD, OWNER, PAWNSHOP CONSULTING GROUP: The traffic, the amount of product that we're buying and lending on, has increased substantially. To give you one metric, I would say that most of my clients have seen about a 50 percent increase across the board in lending and buying activity of that one commodity, which is the gold, the metal, a significant increase in that.

YASTINE: The national credit crunch is also contributing to growth in the pawn business. As banks have curtailed their lending, it's forced even the wealthy to come in and use their hard assets like Rolex watches, diamond rings, cars and even boats as loan collateral to meet their short- term cash needs.

MORNINGSTAR: Recently, we made a six-digit loan on a person's boat. He was a manufacturer of boats from out of the country and he found a cash problem and we came to his need.

YASTINE: Experts say the pawnbroker industry is counter-cyclical, doing well even if the broader economy does not. But shop owners say they're as eager as anyone else to get the economy back on an even footing. Until that happens, many Americans, rich and poor, will continue to turn to pawnbrokers in their quest for short-term credit. Jeff Yastine, NIGHTLY BUSINESS REPORT, Hollywood, Florida.