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The pawn of a new era is upon us; chains transform the business with new markets, new customers, and a new image

Debra Beatty is short on cash, and her bills are due. Two pawnshops, side by side on Augusta Road on the outskirts of Savannah, Ga., want her business. One is a cramped family-owned shop; the other is Cash America, part of an international pawnshop chain. For Beatty, it's no contest. She and her television are Cash America regulars. This is the sixth time she's pawned it at the clean, brightly lighted Savannah shop. Store manager Tony Fields greets her at the door, lugs the bulky GE set inside, and lends her $150 on the spot. Beatty wouldn't think of going next door. "I wouldn't get as much money," she says.

Pawnshops are going corporate. New markets, new customers, friendlier state laws, and a more wholesome image are transforming an industry once known for bilking the poor and dealing in stolen goods. The steady emergence of chains--already strong in the South and West--is sparking consolidation in a marketplace long dominated by poorly run mom and pop pawnshops. Four major chains are steadily buying out some of the more than 11,000 pawnshops across the nation. They are bringing sophisticated management and public relations techniques to the business and making loans to a growing number of customers like Beatty who can't or won't borrow from banks.

Cash America is the biggest of the new breed, with 402 shops in 15 states and overseas, revenues of $281 million last year, and a listing on the New York Stock Exchange. The others include First Cash Inc., U.S. Pawn, and EZCorp.

Unlike most traditional pawnshops, the chains make their money not from the resale of pawned goods but from the interest they collect on loans. They offer customers more money, too--about 50 percent of an item's value, versus 30 percent for the typical small shop.

The chains can lend more because they do not lend blindly. For example, Cash America's marketing manager Lou Grau tracks his customers' borrowing histories by computer. So he knows what Beatty pawns, how much she borrows, and whether she redeems her goods or abandons them; he's confident she'll pay the 25 percent monthly interest charge to get her TV back--and then pawn it again later. In fact, 7 in 10 people who pawn a ring or a television at Cash America's Savannah shops pay off the loan.

The chains are seeking not only new markets but wealthier customers. Internal Cash America surveys find that its customers' average salaries have climbed from less than $30,000 a year to more than $35,000 in the past few years. Industry analysts believe a surge in bankruptcies and credit card debt is one reason better-heeled people are turning to pawnshops. Forty-eight percent of families held credit card debt in 1995, an 18 percent increase over 1989, according to DRI/McGraw-Hill, a research firm. "Once you're maxed out on your credit card," says Cash America's Mary Jackson, "not a lot of lending institutions will give you the time of day." Cash America projects that by 2005, 50 million people might frequent pawnshops, up from 29 million today.

Like the other pawn chains, Cash America is selective in locating its shops. To reach a more upscale segment of the market, the company is scouting out neighborhoods with 12,000 to 15,000 residents who earn about $33,000 annually and live within 3 miles of a prospective shop. New targets of opportunity include Illinois, Indiana, Ohio, and North Carolina, which have all recently permitted pawnshops to charge more for loans.

The new chains also are more mindful of their public images. For example, Cash America refuses to allow customers to pawn the title of their cars, a common practice in some states where titles are pawned at interest rates of up to 25 percent a month. (In Georgia, a customer who pawned his car title still owed $625 on a $500 loan--despite having made nine payments totaling $1,125, reports Melissa Burkholder of the Consumer Law Center of the South.) Cash America, sensitive to the bad press such stories generate, argues that title-pawn lenders should be regulated like banks that make car loans and not be permitted to use the word "pawn" in their names.

Altering old stereotypes is not easy, however. John Rinder, who trains college graduates to be Cash America store managers, understands that pawnshops still conjure up images of poverty and crime. "You're fighting the stigma," he reminds his charges as they march off, in their white shirts and ties, to greet another customer--with a smile.