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Who is to blame for Lebanon’s crisis? | Lebanon

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Inside a Beirut bank, a security guard wearing a face shield slipped a wooden plank in between the handles of a heavy glass door as a swarm of customers waited outside. “Close the curtains,” a teller ordered him from behind the counter. “We are closed!”

It was barely noon and I was one of the lucky ones to have made it inside after waiting in the parking lot all morning among the throngs of impatient depositors. Two bank employees wearing masks handed out withdrawal forms and had them signed on car hoods. They were heckled by some in the crowd who shouted and shoved, elbowing each other to squeeze through the front doors.

The scene I witnessed was mild compared to those that have unfolded in recent days and months: fistfights and jump kicks worthy of a WWE wrestling match. ATMs have been defaced and destroyed, and during the recent riots, some bank branches were attacked with firebombs, burned and gutted overnight.

It seems the coronavirus pandemic and social distancing have taken a backseat to the worst financial crisis Lebanon has ever seen, and this tiny Mediterranean country has seen many.

The street violence came as Lebanon’s currency had been falling like a rock, losing value every day, experiencing an over 50 percent drop in its purchasing power against the US dollar since last October, when an uprising began, drawing hundreds of thousands into the streets.

The protesters called for the downfall of the government and an end to corruption and demanded living wages, better healthcare, electricity and other essential services they have been denied. Instead, they, and the rest of the population who did not protest, saw their salaries slashed, bank deposits evaporate and the price of basic foodstuffs double.

Almost half of Lebanon’s citizens are projected to sink below the poverty level this year and the government estimates 75 percent of the population will require assistance. The Lebanese economy is now one of the weakest in the world, ranking only above Venezuela, according to a list produced by The Economist. All of this in a matter of months. How?

There always seems to be a simple answer, but it depends on who you ask.

Lebanon’s new prime minister, Hassan Diab, who came to power amid the protests that brought down the previous government, has blamed his predecessors, especially the Central Bank Governor Riad Salameh, an incumbent of 26 years, for the crisis. Diab accuses Salameh of pursuing unsound and untransparent fiscal policies.

The currency devaluation can be partly blamed on the country’s plummeting credit scores, which have been downgraded repeatedly in recent months, due to political turmoil and fears over the government’s ability to repay its mounting public debt, one of the highest in the world.

Diab also claimed that some $5.7bn was taken out of Lebanese banks in January and February of this year, despite capital controls, encouraging a widespread suspicion of foul play and preferential treatment for big investors.

But Governor Salameh rejected the claim, saying that $3.7bn was used for loan payments and $2.2bn was withdrawn mostly in local currency, so it could not have left the country. 

He claimed that the banks should be credited, not faulted for bailing out the state repeatedly over the last three decades and that the government has only itself to blame for its overspending and bankruptcy. This was compounded, he added, by Diab’s decision to default on a debt payment for the first time in March, which only sent more jitters into the market.

Indeed, it is difficult to imagine any financial system that could withstand such pressures: nearly every customer clamouring to liquidate their accounts as fast as possible. On the other hand, bank profits have soared on Salame’s watch, amounting to some $22bn since 1993, while wages and public services have stagnated or gone down.

The protesters, fed up with inequality and worsening living conditions, have blamed both Salameh and Diab and the entire political system of Lebanon, including nearly every politician and political party the country has ever known. That is quite a wide net in a political landscape that ranges from the far right to far left, pro-American to pro-Iranian: capitalists, communists, leftists, Islamists, fascists, neoliberals, post-colonial feudalists, militiamen, billionaires and bankers.

What all these actors have in common according to those in the streets is one simple word: corruption. It is a powerful, although intangible term. Its mere utterance evokes a certain catharsis with little need to elaborate. “Kelun Yani Kelun! [All means all!]” is the main protest slogan shouted at rallies and marches for more than six months now. Everyone must go. “A pack of thieves!” is the constant refrain.

This sentiment is echoed, albeit in more polite tones, in the dozens of articles and reports about Lebanon’s malaise published over recent months by Western media outlets and think-tanks. The culprit behind “endemic corruption”, they often report, is similarly singular and simplistic: the political class, the ruling elite or some variation thereof.

These terms are used so routinely and interchangeably, the paragraphs almost write themselves. They become bland and repetitive like any vague, overarching claim. Yet they also voice an inherently moralistic position.

The solution, analysts claim, is straightforward: admit wrong and “reform” the bad ways of the past, end the corruption, establish credibility, embrace transparency, accountability, the rule of law. Repent for your sins.

The consequences of inaction are similarly biblical: a perfect storm of wrath and rage, implosion, free fall, a big mess “teetering on the brink of economic ruin and political chaos” as the Washington Post recently put it.

But one thing these diagnoses tend to miss is detail: figures, names, a smoking gun to close the case on this alleged cesspool of depravity.

The evidence presented against “the corrupt class” even in the most reputable Western news agencies and newspapers is largely circumstantial: decrepit public services operating at a significant loss, an uncontrolled currency crisis, a lack of social welfare programmes, the high cost of living, unemployment, negative GDP growth. Are these really symptoms of bad moral behaviour from a handful of really bad men?

If corruption – or “thievery” as protesters call it – could cause this much damage, then why hasn’t it paralysed wealthier countries? In the United States, for example, it is not billions but trillions of dollars that are wasted every year, on inflated military and infrastructure contracts, corporate bailouts, failed projects and programmes, tax evasion and avoidance

There has been much criticism of Lebanon’s old patronage networks that keep power concentrated in the hands of the few. But how different are they to the unnecessary and politicised allocations of taxpayer funds by members of the US Congress to bring jobs and contracts to their local districts known as “pork barrel spending”?

Similarly, many have faulted Lebanon’s banking system as an elaborate Ponzi or pyramid scheme, in line with the stereotype of the unscrupulous Lebanese businessman. But how unique is debt risk and reshuffling in the world of business and finance?

Some Wall Street insiders have likened much of what goes in the stock market, the US Social Security Fund and even the Federal Reserve to a Ponzi scheme of sorts. Trillions of dollars evaporated from accounts during the subprime real estate crisis. Yet there was no currency collapse, no electricity shortages, no run on the banks in the US. And in terms of the much-vaunted accountability Lebanese officials are expected to face in order to save the country, rarely has a major Wall Street broker or banker ever been sent to prison.

Those now waving their fingers at Lebanon over its financial misconduct should be reminded that the architects of the country’s postwar economy came largely from prominent US financial institutions.

The late billionaire Prime Minister Rafik Hariri, who engineered massive reconstruction spending that racked up the national debt, surrounded himself with veterans of global financial institutions who spearheaded a “liberal” investment strategy to draw in foreign capital, marked by low taxes and little regulation.

Among the members of this dream team were former Finance and Prime Minister Foaud Sinora, who worked at Citibank, as well as Salameh, the Central Bank governor, who served as vice president of Merrill Lynch in Paris.

For decades, Hariri and his entourage and their policies were welcomed and praised in Western capitals. Salameh was even voted Central Bank governor of the year in 2009 by the Banker magazine, a subsidiary of the Financial Times, best central banker in the world by Euromoney in 2006, an award of honour from the French president, among other accolades. As recently as last year, he was given an “A” rating by Global Finance, outperforming his counterparts in several European countries including Switzerland and the United Kingdom.

Looking back, there is much criticism of these neoliberal policies evangelised by the global financial industry, and for good reason. They are top-down, market-driven equations that prioritise investors over workers, profits over social welfare programmes and the environment. But how can these policies explain Lebanon’s unique “mess” if supply-side or “trickle-down” economics have been implemented all over the world?

Could it be that neoliberal policies are far more damaging for small, war-torn countries that lack strong institutions, political stability, natural resources or major manufacturing industries? Such countries are already considered high risk, lack investor confidence and thus pay a high cost for borrowing.

Consider this on the individual level: how hard is it for someone to climb out of bad credit? It is easy to blame their poor decisions and upbringing. It is more difficult to examine the circumstances that led to their misfortune because this necessitates putting one’s own privileges under a microscope.

Like neoliberalism, corruption and cronyism are also not absent from most political and financial systems. But they too have a far greater impact when there is not enough money in the economy to keep people quiet.

Even if we were to dismiss all of the above, this still leaves the favourite scapegoat for Lebanon’s woes: sectarianism.

It is loathed particularly by younger generations, who grew up after the war and are rightly puzzled by its relevance and ability to empower a handful of parties to wield so much control over the state. But here too there are parallels to partisanship, an inescapable reality even in the most successful countries.

After all, it is not really sects or political parties that take decisions at the end of the day, but groups of influential persons at their helm, largely wealthy, largely male, those who sign the big contracts and help write the legislation that guarantees them. In developing countries, it is called clientelism, whereas, in more developed nations, it is known as lobbying, political action committees and excellent legal teams.

This may explain part of the reason why rich countries rank so low on corruption indexes: the language is different.

None of this is to say bad governance and stark wealth disparities should be ignored. But some perspective could help the ways we demand and fight for better systems.

Having spent several years investigating many Lebanese government problems – wasteful public works projects, overpriced telecommunications, unreliable electricity, destructive land use and pollution – I, like many of my colleagues, struggle to identify clear-cut, prosecutable charges of corruption and culprits, ie bad guys and bogeymen.

When we dive into the abyss of public sector failures, what we usually find instead are labyrinths and layers of structural problems that have been mounting for decades. These include outdated, malfunctioning infrastructure, understaffed and underfunded facilities, a lack of maintenance and monitoring.

These problems are further compounded by defunct or non-existent oversight bodies to act as a watchdog on industry and contracts, unclear jurisdiction and conflicting views from different government agencies over who is responsible, slow, ineffective and inaccessible courts.

Of course, this convoluted environment provides many opportunities for exploitation, but more often, this is done through legal loopholes and not the glaring robberies our imaginations can conjure.

Contrary to popular opinion, these are not necessarily problems wedded to personalities that are currently in power. It is not only their annoying mannerisms and snarky smiles that should draw our attention and ire, but hundreds of local and national elected officials and bureaucrats making thousands of decisions on a daily basis, voted in by millions of citizens, many enjoying some benefit from the “ruling class” and its patronage economies.

This discussion of power relations brings us to the final and perhaps most popular argument to explain Lebanon’s financial problems: warlords. Here is another visceral term, like corruption, in which we have become accustomed to depositing our well-justified anger and angst.

But once again, we must ask ourselves how we imagine political structures around the world were established, particularly those most economically powerful and admired today. Is a state not formed through war? By tribes and clans and militias and bloody battles between them?

One difference with Lebanon is that no victor prevailed, the warlords or “the founders” have not given up, the other side has not been conquered to make way for an “indivisible” nation built on the bones of its detractors.

In many ways, Lebanon is unfinished business. It is frozen in the embryonic stage of nation-building, the militias have evolved into parties, but only in name. No system keeps them in check, there is no higher power to adjudicate conflicts and settle jurisdictions, no agreed-upon law enforcement to have a rule of law. Each side can justify its transgressions as part of the ongoing battle.

Cynics will say this void is Lebanon’s fate, destined to be a wasteland, a chessboard where major powers can manoeuvre and manipulate to settle scores without getting their hands (or countries) dirty. The decades of nearly uninterrupted war, from its founding during World War II to the itinerant street battles, air strikes and assassinations of recent years testify to that. No side could have kept up the fight without external support.

Curiously, this militarism from foreign states is rarely included in analyses of corruption in Lebanon. In particular, the billions of dollars in destroyed infrastructure, inflicted upon roads, bridges and power stations over decades of Israeli air strikes using American-made bombs, the untold losses to tourism, shipping and other industries are almost never included in tallies of corruption and economic losses. Lebanon also pays the cost of foreign-funded wars in neighbouring countries, accepting more refugees per capita than any other country in the world, putting an undeniable added strain on already-collapsing employment, services infrastructure. 

All of these factors will continue to complicate Lebanon’s options going forward. The new government, consisting largely of unknown individuals and college professors, some of them advisors to political parties, have made some ambitious proposals. On the surface, their tone is more serious than their predecessors’ and they have been more responsive to public demands, arresting business owners accused of price gouging, and demanding a full audit of the central bank’s activities.

But they are being sharply criticised, particularly their bid to ask for billions of dollars in assistance from the IMF and their failure to call for immediate elections and rid the country of corruption more rapidly.

Indeed, the government’s every action should be scrutinised. Renewed demand for accountability and investigations is one positive aspect of the uprising culture the protests have helped inspire.

But analyses that fail to contextualise the daunting, historical, structural and geopolitical challenges even the best possible Lebanese government would face, are telling only part of the story.

Fear, like corruption, stability and creditworthiness are intangible indicators often assessed and determined by those in far more privileged and powerful positions than any politician or bureaucrat in Lebanon. Global institutions help determine the country’s fate but do not share its national interests.

As always, Lebanon will continue to face an uphill battle in attracting foreign capital, perhaps now greater than ever before. Not only are there the concerns about security – a stigma stretching back over 40 years – but also about the solvency of the country’s financial system, which has never faced a challenge of this magnitude even during the height of civil war shelling.

How realistic is it to expect Lebanon to build a competitive industry from an already weakened position with no natural resources, strong central government or significant technical know-how to call upon?

Aside from a few light industries, such as food, jewellery and paper, Lebanon simply does not make much, nor does it have the basic infrastructure to do so in major quantities. Tapping into the country’s abundance of nature and historic sites is also beset again by “confidence” concerns, travel warnings from the world’s most powerful nations and deep-set negative perceptions that have kept wondrous ancient and natural sites largely empty. US sanctions, and a ban on direct flights since the civil war, have not helped either.

There is some hope that potential oil production and renewed interest in cannabis growing (long banned under US pressure) could come to the rescue. Neither is anywhere near certain as the fact that new loans will bring renewed borrowing costs, new political strings attached with increasingly difficult and potentially dangerous conditions to meet.

All of these future developments and financial transactions should be followed closely. But in doing so, we should resist the lure of reductive conclusions to create neat paragraphs and easily digestible analyses and tired moralistic stereotypes that appeal to international audiences and publishers. Pointing the finger at localised bad behaviour avoids a more serious conversation about the injustices of global finance.

There are no easy answers to explain the story of Lebanon – it is essentially the story of many countries and peoples and circumstances that reflect our interconnected political and economic realities, shared vulnerabilities and darkest fears. Be wary of fairy tale narratives about villains and heroes and missed opportunities for happy endings.

The views expressed in this article are the author’s own and do not necessarily reflect Al Jazeera’s editorial stance. 



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Are There Mileage Limits on Rent to Own Cars?

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Rent to own cars, also called lease to own vehicles, don’t come with mileage restrictions. They can be a good option for bad credit borrowers who need a car fast. We cover how these agreements work, and how they’re different from other vehicle buying options.

Rent to Own Cars and Mileage Limits

Are There Mileage Limits on Rent to Own Cars?Traditional leased cars come with mileage limits, but rent to own vehicles don’t come with this restriction. Traditional leasing companies place mileage limits on their cars to preserve their value, typically so that they can be sold at a later date as pre-owned vehicles.

Many people think that leasing and rent to own cars are similar, but the truth is that they’re very different. Leasing involves making payments on a vehicle for around two to three years, and then returning it at the end of the lease. With rent to own cars, the main goal once you make all the payments is ownership.

Another large difference between leasing and rent to own vehicles is that leased cars are almost always brand-new vehicles. Rent to own cars are always used.

How Rent to Own Vehicles Work

To get into a rent to own vehicle, you need to find a dealership that offers in-house financing, also called buy here pay here (BHPH) used car lots. These dealers are also lenders, so they don’t rely on third-party lenders for financing. This also means that you usually get to skip the credit check.

Since there typically isn’t a credit pull, borrowers with poor credit may have a better chance of qualifying for a rent to own vehicle than a traditional auto loan or lease. The biggest factor that determines your eligibility for these agreements is your income. Some rent to own cars don’t require a down payment, but the payments are likely to be higher than an auto loan in the long run.

You also don’t have to worry about interest charges because rent to own agreements aren’t loans. You’re not borrowing an amount from a lender to pay for a vehicle – you’re making payments on the car to the dealership until you’ve paid what you owe.

Bad Credit Auto Loans vs. Rent to Own Cars

A big downside to rent to own vehicles is that there sometimes isn’t a chance for credit repair. If the dealer didn’t check your credit reports to determine your eligibility for the car, then they may not report your on-time payments. Anything that isn’t reported on your credit reports doesn’t impact your credit score, so it doesn’t help improve it.

Bad credit auto loans from subprime lenders, however, are always reported. These lenders do check your credit reports, but they consider more than that. Sometimes, credit reports can’t tell the whole story, so subprime lenders use other facets of your situation to determine your ability to repay a car loan. They examine your income and residence history, require a down payment, ask for personal references, and more.

Subprime auto loans are crafted for bad credit borrowers who want to get on the road to credit repair. While rent to own vehicles are a good short-term solution, it doesn’t usually solve the bigger issue: bad credit.

Repair the Root of the Problem With a Car Loan

When you’re struggling with poor credit, it’s tempting to go for a quick solution like a rent to own car. But if you want to repair your bad credit, consider subprime financing. These lenders are signed up with special finance dealerships, and we can help you find one in your local area.

Here at Auto Credit Express, we have a network of special finance dealers all over the country. Get matched to one near you by filling out our auto loan request form. There’s never an obligation, and we’ll get right to work!

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Pawn and loan stores aren’t doing great in the Covid-19 economy

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Perry Lewin has been in the pawn industry for 28 years, but he’s never quite seen a year like this one. Sales have skyrocketed at his store, Decatur Jewelry and Antiques, in central Illinois. Early on in the pandemic, people were scooping up TVs, guitars, gaming systems, laptops, whatever they could to stay occupied and educated at home.

“We couldn’t keep a bicycle in the stock to save our life,” Lewin said. Tools were flying off the shelves, as many households decided it was the “perfect time for a honey-do list.” He estimates his gun and ammunition sales are up by 500 percent. “You know what it was like back in March and April, scared as hell,” he said.

But that doesn’t mean the pawn business has been good in 2020. Even the Pawn Stars pawn stars are struggling. This, at its core, is a money business, not a stuff business. The bread and butter is in loans.

“What happened is our inventory started depleting rapidly, and that was the result of consumers not needing the services of a pawnshop,” Lewin said, explaining that his central loan operation has been way down for much of 2020. “They were not bringing items in to us either to sell or get a loan on, but they were mining everything from us.”

Pawnshops are a longtime fixture in the capitalist economy — one pawnbroker told me pawning is the second-oldest industry in the world. (He asked me if I knew what the oldest was; I assured him I did.) But they remain relatively misunderstood by much of the public, especially those who don’t use their services.

I spoke with pawnbrokers across the country about what the business has been like in this unprecedented year, and the picture that emerged was a microcosm of the economy that flies under the radar for many. Pawnshops, which were deemed essential during the pandemic, experienced panic-buying trends — guitars, guns, and gold — in real time. They also felt the impact the CARES Act had in getting money into people’s pockets and small businesses’ cash registers because it meant people didn’t need their loans.

“We have loans where customers who have been with us for a very long time — 10 years, 20 years even — are now redeeming stuff completely, which they’ve never done before,” said Eric Modell, president of Modell Financial, which owns a chain of jewelry stores and pawnshops in New York. “And they don’t say, ‘I have money from the government, here I am,’ but 20 years you’ve been paying interest.”

But now that much of that support has ended, loans are ticking up again. People are heading back to the pawnshop.

Guitars, gold, and guns

When the pandemic hit, a lot of people had similar ideas on how to pass the time at home and what they needed to buy to do it. They turned to Amazon, sure, but also pawnshops. Brokers say they couldn’t keep at-home entertainment items, musical instruments, laptops, and tablets on the shelves.

But people haven’t just been making their purchases to stay entertained and educated. They’re also buying to ease their panic.

Gun sales have been through the roof in 2020, and some of the pawnbrokers I spoke to said they’ve truly never seen such a sustained boom in gun and ammunition sales as they have now, especially among first-time buyers.

Troy Farr, who owns Texas Pawn & Jewelry outside of Austin, recalled going to one of his stores on a Saturday during the spring to see how things were going and discovered 42 guns had been sold, “which is a lot for a pawnshop.” Forty-one of them had been to new gun owners. “I don’t know why they wanted a gun for a virus that was spreading, but I didn’t ask them,” he said.

Supply chain problems in the pandemic have complicated what gun sellers would otherwise see as a pretty positive increase in firearms sales, especially when it comes to ammunition.

Rob Barnett worked at his family’s pawn operation in Huntsville, Alabama, before starting up his own shop in Fayetteville, Tennessee, and he has spent decades in the firearms business. He says he’s never seen supply in worse shape, and perceived hoarding has only made the situation worse. “Once people start perceiving there’s a shortage in the industry, people start to worry and start buying things they don’t want,” he said.

Guns aren’t the only thing people buy when they’re nervous — they’re also buying gold, the price of which has increased fairly steadily for much of the year.

“Even though the prices of gold had gone up on account of Covid, people still felt the stability of gold and were investing in gold,” said Jordan Tabach-Bank, the owner and CEO of the Loans Companies, a high-end pawn brand that operates in New York, California, and Chicago. When people think the world might be going to hell — and 2020 has given them plenty of reasons to think that — they buy gold.

“That is a trend that has happened since the beginning of time,” he said.

Loans are a much bigger part of the pawnshop business than you probably realize

Everybody knows the Hollywood pawnshop tropes — the creepy guy smoking behind the counter in a seedy corner store, taking a stolen television off someone’s hands, probably so they can go buy drugs. But that’s not the reality. For one thing, it’s easier to sell stolen items online because pawnshops are pretty heavily regulated. But in recent decades, the industry has also made an effort to remake its image.

Pawnshops are a collateral, non-recourse lender, which basically means loans are made not on someone’s credit history but on the value of an item — a TV, a ring, a hammer, whatever. The length of a loan and the interest rate on it often depends on the state.

For example, in New York, shops have to hold on to pawned items for four months and can’t charge more than 4 percent interest per month; in Texas, it’s one month at a 15 to 20 percent rate for most items. People can sell their items to pawnbrokers directly as well, but that’s generally not the business model and not what most people do.

Basically, you bring in your watch, get a loan on it, get a ticket for it, and come back to redeem your watch at some point in the future, paying off the loan plus interest. If you don’t come back to pay off your loan — or at least keep paying the interest payments (some people leave items with the pawnshop for years) — the pawnbroker gets to keep your watch and can sell it.

“Absolute worst-case scenario with us, you lose your ring, you lose your watch. We do not garnish your wages, we do not ding your credit, we don’t prevent you from owning a home,” Tabach-Bank said.

According to the National Pawnbrokers Association, there are about 10,000 pawn stores nationwide that employ about 35,000 people and serve about 30 million customers annually. The stores run the gamut from publicly traded pawn companies, such as EZCorp and FirstCash, to small mom-and-pop operations. Many pawn businesses are multigenerational not only in ownership but in customers.

Pawn loans are “like clockwork for a lot of our customers,” Modell said. “There are people who live and breathe with the pawnshop.”

The NPA estimates that pawn loans average $150 for 30 days and that about 85 percent of loans are redeemed. That can vary, depending on the item — people are likelier to retrieve a family heirloom than they are a buzzsaw.

Pawnshops generally serve people without credit or with bad credit, though there are exceptions. They get compared to payday lenders, which are often predatory and suck people into cycles of debt. Are the interest rates pawnshops charge great? No. But on the scale of options for people without a lot of options, they’re not the worst, either.

“Pawn loans are, of course, one of the more expensive forms of credit, but they are often less costly than a payday or car title loan and are far less likely to trap consumers in long cycles of debt,” said Charla Rios, a researcher at the Center for Responsible Lending. “You do have instances where people are bringing in items, and they’re on loan for quite some time.”

She also noted the industry hasn’t really been growing. “Prior to Covid-19, the revenues for pawn loans were kind of flat,” she said.

Financially underserved consumers spent an estimated $189 billion in fees and interest on financial products in America in 2018, $9.2 billion of which went to pawnshops. By comparison, $25.4 billion went to overdraft fees.

“It’s a mixed story,” said John Caskey, an economist at Swarthmore College and the author of Fringe Banking: Check-Cashing Outlets, Pawnshops, and the Poor. “It’s not a complicated transaction where people are being swindled.”

Covid-19 has not been great for pawnshops

Whenever Tabach-Bank, the high-end pawnbroker, runs into people lately, they ask him about what they assume must be a boom in business this year. “People are like, ‘Business must be amazing, you must be crushing.’ But for most pawnbrokers across the nation, it’s been quite the contrary,” he said.

According to Cyndee Harrison, director of marketing and public relations at the National Pawnbrokers Association, members have reported loans falling by as much as 40 percent this year, and some shops have been forced to close down altogether. “When you have a 40 percent decrease in the core area of your business, that’s going to pinch,” she said.

There’s no single answer for what’s going on, but most pawnbrokers and experts have a two-pronged explanation. One is that people are staying home and spending less — they’re not going out to restaurants and bars, they’re skipping vacation, etc. The other is that the CARES Act, the $2.2 trillion stimulus package signed into law in March, got money to a lot of people by way of stimulus checks, expanded unemployment benefits, and Paycheck Protection Program loans to small businesses. Eviction moratoriums and forbearance on mortgages and student loan payments are also factored in.

In other words, people and businesses had more money, and they didn’t need to resort to the pawnshop to pay rent, float their payrolls, or even just go to the bar on Friday night. And it’s not just that they weren’t taking out new loans; they were also able to pay off their existing loans and redeem their stuff.

Kerry Rainey, board president of the NPA and owner of Bayou Pawn and Jewelry in Louisiana, described the situation as “complete madness and a complete change of our business structure.”

“Our pawns went way down, our redemptions went way up,” he said. And with all the extra cash, pawners turned into buying customers. “Now we’re having a hard time restocking the store and getting our inventory back up because of all of the sales that we’ve done.”

It’s an experience shared across the industry, among high-end shops and more typical operations, in blue states and red states.

“The way it’s turned out has been quite different than what we had anticipated, not only for us, but from some of the discussions we’ve had in other pawn stores in Las Vegas,” said Andy Zimmerman, the general manager of Gold and Silver Pawn in Las Vegas, made famous by the television show Pawn Stars.

Zimmerman said in their case, it’s not just about the stimulus and savings; it’s also the decline in casino traffic, especially earlier on in the pandemic. In Las Vegas, it’s not uncommon for gamblers to pawn items for money to bet with.

“When we’re at normal times … especially when big events happen in town and people are well-to-do, they have expensive jewelry, and they’re not very lucky at the tables. Because we have a pretty decent-sized bandwidth to take in expensive items, during those times, the loans would typically pick up,” he said.

Many of the measures from the CARES Act have ended or are about to. The extra $600 in weekly federal unemployment ended in July, PPP loans have been used up, and rent and mortgage payments put off are coming due. Pawnbrokers say that’s started to show up in their business now, too, as customers old and new are again in need of their services.

The publicly traded pawn company FirstCash reported that loans fell by 60 percent in the month of April, and while they began to improve, pawn balances were still down 30 percent at the end of September from the prior year, meaning people are still pawning things less and able to pay off existing loans more. In its third-quarter earnings report, the company indicated it expects the rebound to accelerate.

“We are starting to see people who are in need of short-term cash,” Hyde said. “The big question, of course, is what happens next, and none of us has a crystal ball.”

The negative effects on lower-end financial services aren’t limited to the pawn industry. The payday loan industry has seen a steep decline in business, too.

Pawnshops are an outgrowth of capitalism. If people had more money, they wouldn’t need them.

When asked, most pawnshop owners acknowledged that they were in an awkward position: Many people have been better off financially, at least when government stimulus was flowing, and that’s been bad for business. But shop owners countered that business overall is generally better when the economy is doing better than it is when it’s doing poorly, an assertion that experts backed up.

While the impression of pawnshops is that they are only there for people in moments of desperation, that’s not always the case. People will also pawn an item to buy a concert ticket or get that last bit of money they need for a vacation. And in good times, they tend to feel more optimistic they can pay it off.

“A pawnshop tends to do best when the economy is good and rolling and people feel safe and secure with pawning their extra item — a laptop, jewelry, television, a watch — something like that so they can just get the temporary loan because they know they’ve got their next payroll check coming,” Barnett said. A one-time government loan doesn’t provide the same kind of future assurances.

For many people, the pawnshop is just a part of their financial lives, and some of their possessions are just a part of their budget. They build up relationships with brokers and will come in to get a loan time and time again.

Lewin, the Illinois pawnbroker, told me about a widow in her 70s who has been coming to him every month for years, getting a $200 or $300 loan on a nice piece of jewelry to tide her over before her next Social Security check comes in. When she comes to pick up her jewelry, they clean it for her, give her a cup of coffee, and catch up.

Yes, pawnshops charge high interest rates that more traditional financial institutions don’t. But they are also a lifeline for people who often don’t have access to more traditional financial institutions or just need to figure out a way to get by.

Wendy Woloson, a historian at Rutgers University and the author of In Hock: Pawning in America From Independence Through the Great Depression, noted that throughout history pawnshops have been vilified in an effort to downplay the broader flaws their existence exposes. “The exploitative practices that capitalism relies on would not have worked if it were not for the pawnbroker to help people get by week-to-week,” she said.

If people had more money in their pockets, if the capitalist system worked better, then they wouldn’t need pawnbrokers as much in the first place. 2020 has been a case study showing just that. But while more help is not on the way from the federal government, it’s still going to be there from the pawnshop.

“There would be a lot of people in a world of hurt if pawnshops didn’t exist,” Farr said.

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Bad Credit

Third of Brits feel depressed following mortgage rejection

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Of those who have experienced rejection when applying for a new mortgage, a third claim they were left feeling depressed according to a survey by new specialist mortgage broker platform Haysto.

More than half (53%) felt marginalised, unfairly treated and with a sense of injustice as a result, whilst 21% said the process had left a long-term negative effect on their mental health.

Haysto has recently launched to make mortgages possible for those who may have previously been told they won’t be able to get one.

They specialise in bad credit, self-employed and complex mortgages.

Haysto’s research also showed that over a third of Brits (35%) feel they couldn’t get a good mortgage deal for themselves, wouldn’t want to go through the stress of applying or are unlikely to apply at all for fear of being rejected.

Furthermore, 90% incorrectly assumed taking a COVID-19 mortgage payment holiday could negatively affect their credit score, despite the Financial Conduct Authority (FCA) and lenders ensuring that credit reports won’t be affected.

More than 50% of mortgages for people who are self-employed or have bad credit aren’t available directly from lenders and are only accessible through specialist brokers.

Haysto is working to raise awareness among those in complex situations that they could still qualify for a mortgage, even if they have been previously rejected, and that the process needn’t be as daunting and negative as they may assume.

Over half of Haysto’s customers have been rejected for a mortgage elsewhere.

The company is also working to tackle the psychological impact of applying for and being rejected for a mortgage.

Because of this, they’ve pledged that for every mortgage they help complete for someone, they’ll donate a percentage of their profits to the mental health charity Mind, so they can continue to support people struggling with financial worries.

Paul Coss, co-founder of Haysto, said: “It’s disappointing that the entire mortgage process remains shrouded in misconceptions and confusion as this is having a significant and often unnecessary impact on mental health.

“Self-employment and poor credit histories are on the rise in the UK so a growing number of people applying for mortgages simply don’t fit the traditional eligibility mould.

“Many are rejected by traditional lenders and online platforms that can’t see past their situation, while others are put off from applying at all.

“Haysto doesn’t rely on automation.

“We believe strongly in: no more computer says “No”.

“Our platform provides the market’s most personalised mortgage experience by matching customers to specialist mortgage brokers based on their unique situation.

“We want to help everyone access their dream home.

“Even if they have been rejected before, there are specialist lenders and brokers specifically for self-employed and bad credit mortgages who can help.”




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