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MARKET COMMENT
By
Carburton Street, London -- I once had a desk in an office that overlooked a pawnbroker. But it took me almost three months to work out that the interesting looking shop across the road was in fact a pawnbroker. This was because to all intents and purposes it appeared to be no different than any other retail establishment that you would find on the high street. It had bright dazzling lights and well-dressed window displays that were always stocked full of fascinating and unusual merchandise. The shop also had a welcoming feel about it and this was a far cry from the traditional image of pawnbrokers that is normally portrayed in the movies and on the television. But there was one noticeable difference about that shop. And this was the not infrequent visit by the boys in blue. On one occasion a very enraged customer was dragged screaming and shouting from the shop. I can only surmise that the police were tipped off by a member of the staff that someone was, perhaps, about to dispose of some stolen goods in exchange for ready cash. Those who are fans of gangster movies will know that the practice of selling stolen property is known as fencing. Clearly pawnbrokers are keen to clean up their sleazy image and rid themselves of the notion that they are convenient outlets for stolen property. These operators are desperate in their attempt to portray their businesses as places where customers can go for an unexpected short-term loan. In return for that loan, the pawnbroker will advance cash but only if sufficient collateral is provided. Sufficient in this case could be a discount of almost 30% on the actual market value of the goods. Furthermore the interest payable on that loan can be high and rates of 10% to 30% per month are not unusual. It is this penal rate of interest that often prompts customers to default on their loans. However, Albemarle & Bond (LSE: ABM), which posted interim results today, maintain that 85% of those that use its pawnbroking service repay their loans. But it is the other 15% who default on their loans that will provide the company with a regular supply of stock for their retailing operation. Today, Albemarle and Bond, the only quoted pawnbroker on the London Stock Exchange, said pre-tax profit jumped 54% to £1.8m on sales that improved 28% to £9.4m with like-for-like sales 24% higher. The company said total loans, which include pawn loans and payday advances have grown by 28% and retail sales have increased by 30%. The surge in demand for pawnbroking services should be a worry for all of us. It should be seen for what it is, namely a lack of education in financial matters. We should all be able to live from one pay cheque to the next without having to resort to a visit to the establishment that advertises its services through the Three Golden Balls. Careful budgeting, learning to live below our means and saving for the unexpected are key to our financial well-being. But for those that have no choice but to use the services of pawnbroker then a quick visit to the licencing body, namely the Office of Fair Trading which offers a shoppers fact sheet on the subject, is highly recommended.