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How Pawning Works

Are pawn shops stocked with items that were stolen?

No. Pawn shops are actually the worst place to and sell stolen merchandise, despite what you see on television or in the movies. Pawn shops are highly regulated, work very closely with local and federal law enforcement officials, and train their staff to be on the lookout for and identify stolen property. In addition, pawn shops in the State of Maryland are required to report all items taken in to a central data base that is viewed by Law Enforcement.

Are pawn shops regulated?

Yes. Pawn shops have been regulated for decades, and most pawn brokers are licensed and regulated by local authorities as well. According to the Department of Labor, Licensing, and Regulations (DLLR) the pawn industry is one of the most regulated in the State. We have our Federal Firearms License(FFL) because we deal in firearms and we are also regulated by the Bureau of Alcohol, Tobacco, Firearms (BATF). Additionally we are regulated by the Maryland State Police because we also have our Regulated Firearms License.

About Pawning

A pawn broker is an individual or business (pawnshop or pawn shop) that offers secured loans to people, with items of personal property used as collateral. The word pawn is derived from the Latin pignus, for pledge, and the items having been pawned to the broker are themselves called pledges or pawns, or simply the collateral.

If an item is pawned for a loan, within a certain contractual period of time the pawner may redeem it for the amount of the loan plus some agreed-upon amount for interest. The amount of time, and rate of interest, is governed by law or by the pawn broker’s policies. If the loan is not paid (or extended, if applicable) within the time period, the pawned item will be offered for sale by the pawn broker. Unlike other lenders, the pawn broker does not report the defaulted loan on the customer’s credit report, since the pawn broker has physical possession of the item and may recoup the loan value through outright sale of the item. The pawn broker also sells items that have been sold outright to them by customers

Assessment of items

The pawning process begins when a customer brings an item into a pawn shop. Common items pawned (or, in some instances, sold outright) by customers include jewelry, electronics, collectibles, musical instruments, and tools. In some states in the U.S., pawn shops with firearms licenses sell pistols and rifles to customers who meet state and federal acquisition criteria. In other states and other countries, such as Canada, Ireland and the UK, pawn shops do not sell firearms. Gold, silver, and platinum are popular items–which are often purchased, even if in the form of broken jewelry of little value. Metal can still be sold in bulk to a bullion dealer or smelter for the value by weight of the component metals. Similarly, jewelry that contains genuine gemstones, even if broken or missing pieces, have value.

The pawn broker assumes the risk that an item might be stolen. However, laws in many jurisdictions protect both the community and broker from unknowingly handling stolen goods (also known as fencing). These laws often require that the pawn broker establish positive identification of the seller through photo identification (such as a driver’s license or government-issued identity document), as well as a holding period placed on an item purchased by a pawn broker (to allow time for local law enforcement authorities to track stolen items). In some jurisdictions, pawn shops must give a list of all newly pawned items and any associated serial number to police, so the police can determine if any the items have been reported stolen. Many police departments advise burglary or robbery victims to visit local pawn shops to see if they can locate stolen items. Some pawn shops set up their own screening criteria to avoid buying stolen property.

The pawn broker assesses an item for its condition and marketability by testing the item (in the case of electronics or instruments) and examining it for flaws, scratches or other damage. Another aspect that affects marketability is the supply and demand for the item in the community or region. In some markets, the used goods market is so flooded with used stereos and car stereos, for example, that pawn shops will only accept the higher-quality brand names. Alternatively, a customer may offer to pawn an item that is difficult to sell, such as a surfboard in an inland region, or a pair of snowshoes in tropical or sub-tropical regions. The pawn shop owner either turns down hard-to-sell items, or offers a low price. While some items never get outdated, such as hammers and hand saws, electronics and computer items quickly become obsolete and unsalable. Pawn shop owners must learn about different makes and models of computers, software, and other electronic equipment, so they can value objects accurately.

To assess value of different items, pawn brokers use guidebooks (“blue books”), catalogs, Internet search engines, and their own experience. Some pawn brokers have trained in identification of gems, or employ a specialist to assess jewelry. One of the risks of accepting secondhand goods is that the item may be counterfeit. If the item is counterfeit, such as a fake Rolex watch, it may have only a fraction of the value of the genuine item. Once the pawn broker determines the item is genuine and not likely stolen, and that it is marketable, the pawn broker offers the customer an amount for it. The customer can either sell the item outright if (as in most cases) the pawn broker is also a licensed secondhand dealer, or offer the item as collateral on a loan.


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