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Pawnshops feeling the slowdown

A women slips into the Ta Chien Pawnshop on Chiling Road, yesterday in Taipei. PHOTO: CHEN CHENG-CHANG, TAIPEI TIMES

How bad is the economy? Even pawnshops have not emerged unscathed from last year's recession.

"Business is getting slower and slower. That's because even badly cash-strapped, customers don't have many pawn-worthy valuables left," a pawnshop owner surnamed Chen told the Taipei Times yesterday.

According to statistics from the Taipei Pawnshop Association, last year over 30 out of the city's 276 pawnshops were forced to shut down due to slow business.

After one month of preparation, Chen says he is set to launch a new breed of pawnshops in Taipei County -- 7-Eleven style, with broad aisles and brightly lit. He said that the shops would be spacious and feature customer-friendly counters and huge outdoor neon-light signboards to attract clients.

"To compete with banks, we'll emphasize quality service," he said, adding that he would start operating the franchise the moment the government gives him the license.

At another Taipei pawnshop, sitting behind an iron-barred counter, traditional pawnshop owner Lee Ren-chung (李仍中) said his business is also on the decline.

"The best business I've ever had was probably some 10 years ago [when the economy was good]. Whereas, with the stock market at a low point, customers can't afford to pay back loans," Lee said.

As he spoke, a client surnamed Chen came in to extend his three-month NT$7,000-loan contract on a gold necklace for another two months.

However, when it comes to small-denomination loans, Lee said he believes people still prefer to seek help from pawnshops because "it's convenient and cash is usually in hand within minutes, as long as the collateral value is agreed upon."

According to Lee, his client's gold necklace has an estimated market value of NT$10,000 and the loan costs the client 9.5 percent of the loan sum (NT$665) per month for "interest and storage charges."

If Chen fails to pay back the loan, the item will be forfeited to the pawnshop, which will re-sell it to potential buyers at a discount price.

Pawnshops will consider anything of value, but gold, diamond watches and jewelry remain the most popular collateral, Lee said.

The ability to accurately appraise the collateral's value is key to minimizing risk, he said.

"We once lost big time when some people put fake diamond watches up as collateral and disappeared with the loans," Lee said.

Always ready to throw his sales pitch, Lee said that pawnshops could be a good place to find bargains on used gold and jewelry. "The discount can sometimes be up to 50 percent off," he said.

As tough times trigger further belt-tightening, some people are desperate to sell anything they can for cash.

"Tea leaves, mobile phones, binoculars and professional cameras are things I've heard my colleagues say they have received as collateral," said the owner of Ching Cheng Pawnshop (金成當鋪) in Taipei, who refused to be identified.

The middle-aged shop owner said that his shop specializes in the pawning of automobiles, offering clients 60 to 70 percent of their vehicles' actual worth.

"The auto pawn business is unstable. Sometimes, we may not get a single deal in a month, while, at other times, we may get more than we can handle. On average, the forfeiture rate is as high as 30 percent," the owner said in his sparse office -- free of iron bars -- with a half dozen cars parked in back.

When an owner can't pay up, the pawner simply cuts a deal with second-hand car dealers and sends the forfeited cars to them for re-sale.

Pawnshop dealers agreed that, when it comes to price, everything is negotiable and loans can be granted to any citizen over the age of 20 with an ID card.

Foreigners are required to show either a passport or an alien resident certificate.

A minimum 4-percent monthly interest rate and a storage fee are charged on all deals.

Three-month contracts are standard and are extendable indefinitely.

If the owner of the pawned item fails to pay back loans within five days after the three-month contract expires, the item is forfeited and becomes the legal property of the pawnshop.
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