Reggie Pendleton was laid off last week and needed money to buy his wife and two young children Christmas gifts. So he turned to an increasingly popular option in this deepening recession -- a pawnshop.
On Tuesday, the former technology firm recruiter walked into Collateral Lender Inc. in Beverly Hills clutching a stainless-steel Rolex he had bought in better times for $3,300.
After an inspection by one of the store's appraisers, Pendleton was offered a $400 loan. He can buy back the timepiece within 4 1/2 months at a monthly interest rate of 18%.
Pendleton, 43, was hoping for more money, but a holiday without presents was unthinkable. So the Culver City father took the cash and headed for the mall to buy toys and jewelry for his family. "This will be the toughest Christmas," he said.
People have long turned to pawnshops as a source of ready cash during the holidays. Patrons bring in items of value and exchange them for money.
In turn, the shops hold the items for a state-mandated period. During that period, customers can reclaim their items by paying back the loan plus interest. But after that, the lender is free to sell them and keep the profit.
This year business is up, an indication of how much tougher this season has become for some. Collateral Lender has seen a 20% surge in customers over the last three months or about the same period the stock market tanked.
Traditional lenders have seized up, and people of all walks of life are handing over their diamonds, purses and golf clubs to make their next mortgage payment or, in some cases, pay their employees for the holiday season, pawnshop workers say.
"This whole period now is nuts," said Tal Shmargal, owner of Collateral Lender. "We have people taking loans just to keep their business afloat."
It's a trend that's been reported nationally as the nation's economy continues its downward spiral.
Two of the nation's leading publicly traded pawn companies -- Ezcorp Inc. and First Cash Financial Services Inc. -- are among just a handful of stocks that have risen this year, up 31% and 20%, respectively.
"For a lot of people, we're the only source for money," said Dave Adelman, president of the National Pawnbrokers Assn. and owner of Jerry's Pawn Shop in Atlanta. "They can't go to a bank and get money because they won't lend. . . . Most definitely pawnshops are more busy. This time of year we're doing very well."
