Thursday, 15 August 2013

Sign of the times as pawnbrokers and payday lenders compete for custom

Payday Loan
Walk down most high streets and you will come across a shop front featuring either a pictograph image of a curved arm with three globes hanging from it or an overhead sign comprised of three gold balls. This is the traditional sign for a pawnbroker. The pawn industry is not a new one, in fact it started in Ancient China around 3,000 years ago and became such a part of everyday life in Britain that it features as a child’s nursery rhyme. Pop Goes the Weasel refers to “pop” which is a slang term for pawning and a “weasel” being a tool used by shoemakers. Therefore; “That’s the way the money goes, Pop goes the weasel.”

There used to be quite a stigma about having to take an item, such as your father’s silver watch or the family’s most valuable possession, down to the pawnbrokers in order to get some money to keep the family going until the next wage packet arrived. Nowadays, the pawnshop in the UK has seen a bit of a resurgence with a much more upmarket image, not at all reminiscent of something that Charles Dickens may have seen on during his walks around Victorian London.

 Pawnbroker industry announce new game plan

Which? consumer reported a few years ago that the number of pawnbrokers in the UK trebled since the start of the millennium. The customer demographic also changed once the credit crunch started to bite with an increase in, what was perceived as, the “middle class” clientele. So it was of interest to note that yesterday the largest UK pawnbroker chain are now denouncing the “new kids on the block,” payday loan firm, Wonga. Pawnbroker H&T are said to be so disgusted with the 30-35% interest rate typically applied to a Wonga loan that they have decided to scrap their own payday loan scheme altogether.

 Payday loans are a real political football

This comes at a time when Newcastle United has revealed its new sponsor to be none other than Wonga.com. This season both fans and players can sport the new football shirts with the sponsors namely clearly emblazoned across the front. Pop into the club shop and you can pick up a shirt to fit all sizes starting from age two months upwards. This is the third team that Wonga have sponsored and it has caused a lot of discussion among the fans of the Toon Army. The Citizen Advice Bureau and local council officials in Newcastle have also joined in the discussion as well. Pay day loans, they feel, are designed to support people on a temporary basis until they get their finances sorted out – they should be seen as a “one off” loan.

 However, by getting in with a large football team where the fans wear the team strip out and about, are we getting to a point where this type of financial lending is beginning to be seen as “the norm”? 

Is this now giving a high interest pay day lender a respectability and a method of dealing with personal finances that could be taken to be an accepted way of debt management?

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