Clunkers for money: pawnbrokers rely on Christmas business

The gold is stored in the cellar on high shelves, very inconspicuously packaged in transparent boxes. Necklaces, rings, bracelets, watches – a small fortune can be found in the premises of the municipal loan office in Mannheim. Everything is neatly labeled with the owner’s name, move-in date and loan amount.

If you need money, you can get quick loans with short terms in pawn shops in exchange for a bargaining deposit, such as jewelry or watches. There used to be more going on in the old vaults. But even today, pieces of jewelery are worth a seven-digit total.

“So far we have got away with the corona crisis with a black eye,” says the managing director of the lending office, Jürgen Rackwitz. During the lockdowns, the business with the pledge collapsed by around 20 percent, according to him. But now things are looking up again. «People were unsettled by all the back and forth. They prefer to pack their things under their pillows, ”says Rackwitz, who has been managing director of the municipal pawn shop since 2001.

There were no large sales during Corona

The pawnbrokers were allowed to open their houses even during the Corona restrictions, as they are considered to be systemically relevant. However, large sales did not materialize in this phase, as reported by the managing director of the Central Association of the German Pfandkreditgewerbes (ZDP), Wolfgang Schedl. “During the lockdowns, we had fewer loans. You couldn’t go shopping, you couldn’t go on vacation or go to the pizzeria. ” Because spending on such consumption fell, people also needed less money, says Schedl. With increasing corona easing, more customers then returned to the pawn shops.

According to the association, pawn shops in Germany pay out more than 630 million euros in loans every year. According to Schedl, there are no concrete figures on how the pandemic affected business. He believes, however, that the extent of the economic consequences of the pandemic will be felt even more clearly in pawn shops in the coming months.

There are also real slow-moving goods

In the 250 companies belonging to the ZDP, according to the association, well over 90 percent of the loaned items are released again. But there are also real «slow-moving». For example, a small cardboard box has been stored in Mannheim since 2004. Contents: porcelain. Worth loan: 50 euros. This is not economical for the customer, because interest and fees are incurred for the pawn loan. The pawn shop regulation stipulates that one percent interest is due every month. However, the fees involved are different. For loan amounts up to 300 euros, the fees are fixed. In the case of higher mortgage loans, they are freely agreed.

As a rule, the money is available from the pawnbroker after estimating the value of a piece of jewelry or a watch quickly and without a credit report. For people who are already in debt, a pawn shop is “sometimes the last option to get money,” according to the Baden-Württemberg consumer advice center. There is a risk here that providers will take advantage of the plight of their customers.

Check and knowledge of human nature

There are also dangers the other way around: Counterfeit gold or stolen objects are often on the counter in the Mannheim lending office, says Managing Director Rackwitz. “50 percent of the work at the counter is checking, 50 percent is human knowledge.” For example, employees can be shown how to set the date on expensive watches. In the case of musical instruments, they also ask for a short concert. «Somebody has put their guitar on the wrong way. The case was clear, »says Rackwitz.

Anything that is no longer picked up usually ends up under the auction hammer after six months. While the bidders are hoping for bargains or rarities, the auction is initially of no use to the pawnbrokers. If the proceeds are greater than the loan amount, the customer is entitled to the profit. If the customers do not collect the surplus within three years, the money goes to the state.

Although the corona pandemic has not exactly spurred the pawnbroker’s business, more money is likely to be needed again soon. According to the ZDP, there is a lot going on in the pawn shops during the holiday or Christmas season. “It’s bad when people bring the Christmas teddy in January,” says Rackwitz. A few lonely branded cuddly toys from the Swabian toy manufacturer Steiff are already sitting on the shelves of the lending office.