Aug 05, 2010 Matt Vitko
Cash America International announced Monday that it agreed to buy a 39-store pawn shop chain that operates in Washington state and Arizona. The $70 million cash and stock acquisition of Maxit Financial will bring to more than 1,100 the number of payday lending stores and pawn shops it owns and operates in the U.S. and Mexico. Cash America has added 244 pawn shops through acquisition in the last two years.
Pawn shops have been the focus of many payday lenders over the past few years, as they look to expand and diversify through new store openings as well as acquisitions. Pawn offers another alternative financing option for short term cash needs where a job and a bank account are not necessary. Unlike the payday loan where the loan is secured by a paycheck and the transaction is simple, the pawn shop loan depends on the value of the jewelry, guitar or tools the pawn shop owner is willing to give a consumer.
The finance charges for a pawn shop are similar to that of a payday loan. Pawn shops typically give you a month to repay while a payday loan is usually due on your next payday, but can be as long as a month. Both are similar as far as extensions go. If you cannot repay the full amount of the balance by the due date, you can just pay the finance charge and have the due date extended. Payday loans can be extended until your next payday and another month can be added with a pawn shop.
Pawn shops certainly have their place as an alternative finance source for individuals and have been a part of the economic landscape for thousands of years. The new Wall Street Reform and Consumer Protection law includes not only Payday loans, but also pawn shops under the regulatory powers of the new Consumer Protection Bureau.
How the regulators take on this age old business will be interesting.