The History of Pawn Shops

People across the globe and over the centuries have all experienced one problem – the need for money. Let’s face it – life can be unexpected, and it’s not uncommon to suddenly find yourself in a situation where you need cash quickly. For more than 3,000 years, there’s been one simple solution: To pawn personal items for cash.

Throughout history, pawnbrokers have provided monetary loans in exchange for valuable items. These items are then held by the pawnbroker as collateral for a specific time, during which the item’s owner can repay the loan, plus interest, to retrieve their items. If the owner is unable or unwilling to buy the item back, the broker then has the right to sell the item to another buyer.

Today, there are more than 12,000 pawn shops in the United States. Their shelves are filled with an eclectic array of items, from the ordinary to the unbelievable. Each has its own unique story and past.

The first pawn shops

More than 3,000 years ago, pawn shops first emerged in ancient China. They served as a way to grant short-term credit to peasants in the local communities. In fact, as far back as the fifth century, the earliest Chinese pawnbrokers were established, owned, and operated by Buddhist monasteries. Wealthy lay people sometimes formed partnerships with Buddhist monasteries to open their own pawnshops and avoid property taxes, from which the monasteries were exempt.

Ancient Greece and Rome

Pawnbroking thrived in ancient Greece and Rome, allowing merchants to establish their own small shops or fund ships for trade. Many pawnbrokers were professional or semi-professional and operated from private shops. Under Roman law, certain items, such as clothing, furniture and “instruments of tillage” (i.e., farming equipment) could not be pledged for a pawn loan. The emperor Augustus took property that had been confiscated from criminals and converted the proceeds into an interest-free state fund from which the government could loan money to those who pledged valuables equal to double the amount borrowed.

The Middle Ages

Moneylenders and pawnbrokers were common in medieval Europe. Authorities often tolerated them despite opposition from the Catholic Church. As dissatisfaction grew with the industry, the Catholic Church placed more and more restrictions on charging interest. This eventually slowed, then stopped, the growth of pawn shops.

In Europe during the 14th and 15th centuries, these rules were relaxed to help increase business opportunities and provide short-term aid to the poor. Prominent families, such as the Lombards in England and the Medicis in Italy, grew to prominence as money-lending families. King Edward III famously pawned his jewels to the Lombards in 1338 to help finance a war against France. Henry V did the same in 1415. Queen Isabella of Spain is said to have put up her jewelry as collateral to fund Christopher Columbus’ expedition to the New World.

The start of regulations

The word “pawn” derives from the Latin word pignus, meaning pledge or pawn. For the working class, clothes were often their most valuable items. They could be pawned to meet their daily needs. Though most pawn shops were privately owned and operated, some public pawn shops were established in Europe. In the 18th century, charitable funds offered low-interest loans to the poor. Many people would pledge spare clothing as their collateral on Monday and retrieve them on Friday – payday – as a common way to make it through the week during the 19th century.

Modern legislation of the industry began in Europe with the Pawnbrokers Act of 1800. The act established provisions under which pawnbrokers operated for more than 70 years. However, as pawnbrokers grew increasingly unhappy with the act’s main provisions, the Pawnbrokers’ National Association and the Pawnbrokers’ Defence Association worked hard to create a more liberal version of the law. In 1870, the House of Commons appointed a special committee of pawnbrokers to provide evidence of their benefit to society. As a result, the Pawnbrokers Act of 1872 repealed all previous legislation related to pawnshops and established regulations to protect pawnbrokers who inadvertently sold stolen items. This act also set the amount of interest that could be charged on pawned items, and established the overarching guidelines for the industry, creating a pattern of regulation that continues today.

Pawn today

Today, many people depend on pawnbrokers to help them meet daily financial needs that other institutions simply cannot match. Pawn customers are hard-working families who periodically experience an unexpected need for short-term funds. Pawn loans help customers keep the rent paid, the electricity on and cars running on full gas tanks. Today’s pawn stores are attractive, welcoming places to do business. Most pawn shops are family-owned small businesses. They strive to remain connected to and engaged with their local communities. They offer friendly smiles, hassle-free transactions, and superb customer service. Reputable pawnbrokers comply with all federal, state and local regulations and laws. They work closely with local law enforcement to deter and prevent theft.

Three gold balls and a Santa connection

Traditionally, the pawnbroker’s symbol is three gold spheres hanging from a bar. This stems from St. Nicholas, recognized in America as Santa Claus, as the patron saint of pawnbroking. He is reported to have left three bags of gold so the daughters of a poor man could afford to marry. Later, the tradition transformed the bags into three gold balls, which became the world-recognized symbol of pawnbrokers.