PAWNBROKING (from pawn, OHG. plant, Ger. I'fand, pledge, from OF. pan. pawn. pledge; usually considered identical with OF., Fr. pan, piece of a garment; more probably from OF. pawn Sp. apandar, to plunder, apanar, to take away + broking; connected with AS. brucan, OHG. bruhhen. Ger. brauchen, to use, need, Lat. frui, to use, enjoy). The business of lend ing money on the security of personal effects left in the possession of the lender. Pawning has existed in some form in all ages and among all peoples. It is much older than banking, with which it was originally connected. The Chinese, Greeks, and Hebrews borrowed on pledges. In media-val times pawnbroking was synonymous with usury. In Europe the business was carried on at first by Jews and later by Lombards. Pawn broking is a legitimate business, but since the expense of administering small loans is very great, the pawnbroker has often been allowed to charge as high as 100 per cent. where the regu lar rate of interest is only 6 per cent. Recogniz ing the great disadvantage under which the poor borrower labors, efforts have been made to carry on the business in the interest of the borrowers. This effort has taken the form of monts de piete on the Continent. France is especially successful in maintaining these institutions. They are asso ciated with the town councils, hospitals, and charity bureaus. When endowed they charge no interest, and the highest interest is 12 per cent. The Paris institution acts as the poor man's safe deposit, as it has excellent facilities for storage and makes a practice of disinfecting goods. The objections to its methods are: (1) the amount of time the system takes; and (12) the undervalua tion of goods. Belgium follows French methods. The pawnbroking business has been controlled since 1618. The 'limits de pike: are managed by councils and charity administrators. while their funds are borrowed from the charity department.
Germany has royal. municipal, and private pawn shops. The private pawn shops are regu lated and any city may prohibit them. The mu nicipal pawn shops are usually in connection with the savings-bank and are self-supporting. In Austria-Hungary the private pawn shops are in the majority. The Imperial Pawn Shop of Vien na. founded in 1707 by .Joseph 1., is now self supporting, but, because of the origin of its capi tal. one-half of its profits go to the poor. The re mainder is used in extending the business. In Spain the moat de piste is connected with the savings-bank. Denmark regulates its pawn shops. Sweden has had successful private companies since 1880. Few pawn shops are found in Switz erland, only one in Berne. Saint Petersburg and Moscow are the only cities of Russia maintain ing municipal pawnshop:.
The charter of the Bank of England gives that institution power to lend on plate and non perishable commodities at 5 per cent. In 1695 the directors seriously considered establishing pawn shops. Pawnbroking was first regulated by James 1., then under George Ill. The law of 1872 is very favorable to pawnbrokers, but since 1894 there has been an increased interest in plans for improving the position of those who borrow money on pledges. General Booth proposed a scheme, hut the funds were not at hand to de velop it.
In the United States the business has until recently been entirely in the hands of private pawnbrokers, who do business under State regu lations or municipal ordinances. The State regu lations may provide for a license, a bond, regu lation of interest charges, methods of sale, and the disposition of the surplus. The city ordi nances usually place the pawn shops under police control, providing for daily inspection or daily reports. The laws are generally inadequate. Only a few States forbid a charge above the legal rate of interest. Where a sale of goods requires an advertisement and by auction, the law is fre quently evaded or not enforced. It is very sel
dom, if ever. that the borrower receives any surplus from the sale of his goods. The difficul ties in regulation arise from the character of the business and the lack of ordinances. Since pawn broking can exist only in large centres of popula tion, the problem of regulation has been one of local rather than general interest. The ignorance or pride of the borrowers prevents them from making necessary complaints to the authorities. Low licenses invite a motley crowd of pawnbrok ers. Where the regulations permit only four or five pawn shops to exist, as in Providence, Wash ington, or Baltimore, they are respectable, but the large number of shops in Boston and Phila delphia cannot be easily controlled. Sonic of the maximum charges are: Baltimore. 30 per cent.; Boston, 132 per cent.; Buffalo and Chicago, 120 per cent.: Cleveland, 300 per cent.; Pitts burg, 210 per cent.; and Providence, 180 per cent. The smallest pawns do not pay pawnbrok ers even at 100 per cent. Municipal pawn shops were proposed for Philadelphia in 1816 by Dr. Mease. The oldest philanthropic concern in the United States is the Pawners' Bank of Boston, started in 1859, which underwent many losses and discouragement,. It is now the Collateral Loan Company. and pays a regular dividend. in 1891 Dr. Greer of Saint Bartholomew's Protestant 'Episcopal Church in New York City started a pawnbroker's shop in hi, parish. Out of this de veloped the Provident Loan Company, which opened its doors May 21, 1894. at 279 Fourth Avenue. The company is incorporated, with a board of fifteen directors, and has a sub scribed capital of *100.000. Only jewelry and articles of considerable value, but small in bulk, are received. Bedding and furniture are barred because of lack of room. As a result the people reached are independent workers, who need money to tide over a period of sickness or lack of work. One per cent. a month. or one-third the legal rate, is charged. In competition with the Provident Loan Society. pawnbrokers have reduced their charges, sometimes even lower, or they have advertised that they will lend at the same rate as the Provident Loan Society. The report for 1902 states that $3.866.325 was lent on 130,1.58 pledges; the average amount of each loan was $29.70: and the average amount lent per day was $12,942.70. The average loan of the pawn shops is much lower. sometimes being as low as $1.41 in one month. More than 99 per cent. of the pledges were redeemed. This enter prise pays 6 per cent. on the capital.
After opposition from the pawnbrokers. who were well organized. Illinois passed a compromise measure, authorizing lending societies. but only permitting loans on personal property and limit ing the capital to $50.000. The State Pawners' Society opened its office in Chicago November 1, 1898. The society has a board of directors elected by the stockholders, with two additional 1111`111lieri selected respectively by the Governor and the Mayor. The maximum interest charged is one per cent. per month. with all additional charge of one-half per cent. for storage and insurance. The pressure for loans has been heavy. The society pays G per cent. dividends. At the time the office opened there were 67 pawn shops in Chicago. The Chattel Loan Association of Baltimore. es tablished May 12. 1898. expects ultimately to do a pawithroking business. The Worcester Collat eral Loan Association, the Workingmen's Loan Associations of Boston and Providence, the Provi dent Loan Company of Buffalo, and the Hebrew Free Loan Association of New York deal with chattel mortgages and indorsed loans.
BIBLIOGRAPHY. United States Bulletin of De. Bibliography. United States Bulletin of De. partment of Labor, No. 21 (18991. For Great Britain. Report of Her Majesty's Representatives .ihroad on Systems of Paienbroking in Various Countries M8941. Sce .NIONTs DE PIETE.