Pawn shops and payday lenders shocked by how upside down COVID-19 pandemic is affecting them

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John Sanford has been a pawnbroker for 20 years and says he’s never seen anything like it.

Pawn shops and payday lenders have long been harbingers of tough economic times due to health and financial crises.

But Sanford says that was not the case in the upside down world of 2020 where the COVID-19 pandemic led to a recession.

“I rushed to the bank before it happened and prepared all kinds of cash. I thought it would be a godsend. But no. Absolutely not,” said Sanford, co-owner of Rocky Mountain Pawn. in Calgary. monitors the decreasing number of items on its shelves.

“It was amazing how much stuff we had after 2015 when the oil entered the reservoir. We had a lot of stuff. And now we have nothing.”

Pawn shops lend people money and usually give them 30 days to come back, pay off the loan, and get their items back. Sanford says about eight in ten customers usually return.

Sanford sees an average of 15 to 30 pawns a day, but one day last week he had only had one by mid-afternoon.

“According to people we spoke to and who came by, the economy is full of free money. There are people who brag about what they get from CERB, ”he says.

Bare shelves

The federal government’s Canada Emergency Benefit provides people unemployed due to the pandemic $ 500 per week for up to 16 weeks.

On the bright side, in the Sanford era, items that had been in stock for years were sold. Gold rings, chains, Rolex watches, televisions, video game consoles and stereos flew off shelves as the health crisis began. Guitars were also popular.

But with supplies gone and no one pledging items, Sanford predicts a calculation is imminent.

“As for the pawns, this will be the worst month since 1982 to lend money. In thirty days, we won’t even be making enough money to pay our rent.”

The co-owner of Halifax Buy and Sell says business has been slow as well.

“It’s really strange,” says Robert Blotnicky. “Literally, everyone who comes through the store is looking to spend their CERB check money and trying to buy things to meet their needs.”

People have also rushed to pay to recover their pledged items, he said. “At this point our pawn shelves are very bare.”

Payday loans

The payday loan industry is also struggling, says Alan Evetts, director of the Canadian Consumer Finance Association and owner of MyCanadaPayday.com in Vancouver.

In the first six weeks of the pandemic, numbers across the industry were consistently down about 84% from before the crisis, he says.

“Things have changed dramatically. Demand has been completely decimated by COVID, ”he says.

“I think there are a few factors that motivate it. Expenses are drastically reduced when people are at home. And life is cheaper when you don’t leave your home.”

Evetts also blames the high unemployment rate for the drop, as loans depend on clients having an upcoming salary to pay them back.

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