Pawnbroker

A pawnbroker is an individual who offers secured loans to people by taking items of personal property as collateral. A pawnbrokering entity is called a pawnshop or pawnbrokerage. While many items can be pawned, pawnshops typically accept jewelry, musical instruments, coins, gold, silver and firearms. Home-audio equipment, computers, video-game systems, televisions, cameras, and power tools became pawnable as the world entered the Information Age. The items pawned to the broker or shop are themselves called pledges, pawns, or simply the collateral.

If an item is pawned for a loan (colloquially "hocked" or "popped" or "up the spout"), 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. In the United States the amount of time and the rate of interest are governed by law and by state commerce-department policies. Pawnbrokers have the same license as a bank, which is highly regulated. If the loan is not paid (or extended, if applicable) within the time period, the pawnbroker will offer the pawned item for sale to other customers. Unlike other lenders, the pawnbroker does not report the defaulted loan on the customer's credit-report, since the pawnbroker has physical possession of the item and may recoup the loan value through outright sale of the item. Pawnbrokers may also sell items that have been sold outright to them by customers. Some pawnshops are willing to trade items in their shop for items brought to them by customers.

The first pawn shops were in ancient China about 3,000 years ago. Pawnbrokers, often working independently, would offer short-term credit to peasants. The business model existed 1,500 years ago in Buddhist monasteries, no different from today, strictly regulated through the ages by Imperial or other authorities.^{[citation needed]}

In the West, pawnbroking existed in the ancient Greek and Roman civilizations. Most contemporary Western law on the subject is derived from the Roman jurisprudence. As the empire spread its culture, pawnbroking went with it.

In spite of early Roman Catholic Church prohibitions against charging interest on loans, there is some evidence that the Franciscans were permitted to begin the practice as an aid to the poor. In 1338, Edward III pawned his jewels to raise money for his war with France. King Henry V did much the same in 1415. In 1603 an Act against Brokers was passed and remained on the statute-book until 1872. It was aimed at the many counterfeit brokers in London. This type of broker was evidently regarded as a fence.

Crusaders, predominantly in France, brokered their land holdings to monasteries and diocese for funds to supply, outfit, and transport their armies to the Holy Land. Instead of outright repayment, the Church reaped a certain amount of crop returns for a certain amount of seasons, which could additionally be re-exchanged in a type of equity.

A pawnbroker can also be a charity. In 1450, Barnaba Manassei, a Franciscan friar, began the Monte di Pietà movement in Perugia, Italy. It provided financial assistance in the form of no-interest loans secured with pawned items. Instead of interest, the Monte di Pietà urged borrowers to make donations to the Church. It spread through Italy, then to other parts of Europe. The first Monte de Piedad organization in Spain was founded in Madrid, and from there the idea was transferred to New Spain by Pedro Romero de Terreros, the Count of Santa Maria de Regla and Knight of Calatrava. The Nacional Monte de Piedad is a charitable institution and pawn shop whose main office is located just off the Zócalo, or main plaza of Mexico City. It was established between 1774 and 1777 by Pedro Romero de Terreros as part of a movement to provide interest-free or low-interest loans to the poor. It was recognized as a national charity in 1927 by the Mexican government. Today it is a fast-growing institution with over 152 branches all over Mexico and with plans to open a branch in every Mexican city.

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, tools, and, depending on regulations, firearms, gold, silver, and platinum, 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.