Anyone interested in opening a pawn shop as a church-run mission opportunity?

[Roy Richardson]

This column has an intriguing premise - that a church-run pawn shop, with much lower interest rates, can be an opportunity to help folks who operate outside the standard financial system. I will confess that I had never even thought of this idea. In our fair state, the maximum interest rate is usurious:

The maximum rate of interest charged by pawnbrokers shall be the
same as the maximum loan finance charge for supervised loans
under IC 24-4.5-3-508. The maximum rate effective 07/01/04 is: 36% on $.01 to $990 of
the loan amount; 21% any portion of the loan amount from
$990.01 to $3,300; 15% on any portion of the loan amount over
$3,300;or 21%, whichever is greater.
Interest shall not be deducted in advance, neither shall the
pawnbroker induce or permit any borrower to split up or divide any
loan or loans for the purpose of evading any provisions of the
statutes.
If a pawnbroker charges or receives interest in excess of that
provided in the law or makes any charges not authorized by the
law, the pawnbroker shall forfeit principal and interest and return
the pledge upon demand of the pledger and surrender of the pawn
ticket without the principal or interest. If such excessive or
unauthorized charges have been paid by the pledger, the pledger
may recover the same, including the principal if paid, in a civil
action against the pawnbroker.

[Dale Cozby]

http://www.consumersunion.org/finance/nb2.htm

[Roy Richardson]

Dale,

If I can surmise your intent from the link, you are supporting my thesis that a pawn shop run as a missional enterprise, not as a for-profit business, could work in these environments. If we were to charge a significantly lower interest rate than the for-profit pawn shops, people could still make collateralized loans for short-term cash needs without putting themselves into a financial pit.

[Dave McClung]

Dale,

If I can surmise your intent from the link, you are supporting my thesis that a pawn shop run as a missional enterprise, not as a for-profit business, could work in these environments. If we were to charge a significantly lower interest rate than the for-profit pawn shops, people could still make collateralized loans for short-term cash needs without putting themselves into a financial pit.

May I raise a word of caution? Several of the churches where I have been a member have had "helping hand" funds. Those funds have made loans to people in need. The repayment rate has not been good. A church that makes loans has these choices:

1. Take aggressive action to minimize defaults (churches usually aren't good at this).
2. Charge interest rates that are high enough to cover the losses.
3. Subsidize the loan program with funds from other ministries.

Based on my experience, because churches are less effective at enforceing repayment than pawn shops, the rate they would have to charge to cover their losses is even higher than pawn shops charge.

In my opinion, a much better option is for churches to promote teaching people to spend less than they make, then respond to hardship situations with gifts rather than loans.

Bottom line -- Banks don't make good churches and churches don't make good banks.

[Roy Richardson]

Bottom line -- Banks don't make good churches and churches don't make good banks.

Very true. But there is a segment of the population that is using this method of finance. By the church entering their world, albeit at a lower cost to the consumer, it might provide the opportunity to help with this.

Picture this: Church-run pawn shop that offers money management classes e.g. Dave Ramsey or something like that. Now you have access to the people who need it most in a place they are used to frequenting. I understand your caution Dave, and you are absolutely right about churches being lax in enforcement. But, if, and that is a big if, the pawn shop were designed to be self-sustaining after a certain length of time, it would have to be run in such a way to cover its expenses.

It's just a thought spurred by the article.

[Marsha Lynn]

May I raise a word of caution? Several of the churches where I have been a member have had "helping hand" funds. Those funds have made loans to people in need. The repayment rate has not been good. A church that makes loans has these choices:

1. Take aggressive action to minimize defaults (churches usually aren't good at this).
2. Charge interest rates that are high enough to cover the losses.
3. Subsidize the loan program with funds from other ministries.

Based on my experience, because churches are less effective at enforceing repayment than pawn shops, the rate they would have to charge to cover their losses is even higher than pawn shops charge.

In my opinion, a much better option is for churches to promote teaching people to spend less than they make, then respond to hardship situations with gifts rather than loans.

Bottom line -- Banks don't make good churches and churches don't make good banks.

The book When Helping Hurts includes a similar message.

My local church ran into a this type of problem when we bought adjoining land with a house on it and became landlords. Which of us is going to evict the person who doesn't pay their rent? It helped to have a member who owned several rental houses and agreed to be the face of the church for the renters, but was still more hassle than it was worth, partly because of the difficulty of being "mean" to people who desperately needed to know our loving God.

On the other hand, do pawnshops work at getting their money back or do they simply sell the collateral?

[Billy Cox]

On the other hand, do pawnshops work at getting their money back or do they simply sell the collateral?

That was my thought as well. Pawn shops 'collect' unpaid loans by selling the pawned item.

[Billy Cox]

May I raise a word of caution? Several of the churches where I have been a member have had "helping hand" funds. Those funds have made loans to people in need. The repayment rate has not been good. A church that makes loans has these choices:



..

In my opinion, a much better option is for churches to promote teaching people to spend less than they make, then respond to hardship situations with gifts rather than loans.

Bottom line -- Banks don't make good churches and churches don't make good banks.

I agree that congregations should not be in the unsecured loan business.

One dynamic mentioned in the original article was that a collateralized loan would be a means of providing help to those too proud to ask for help and too ashamed to acccept a handout.

I also agree that addressing root causes is the preferable solution ultimately. How to consistently get people in need address root causes, is the $64,000 question.

[Roy Richardson]

I agree that congregations should not be in the unsecured loan business.

One dynamic mentioned in the original article was that a collateralized loan would be a means of providing help to those too proud to ask for help and too ashamed to acccept a handout.

I also agree that addressing root causes is the preferable solution ultimately. How to consistently get people in need address root causes, is the $64,000 question.

Correct. This is a collateralized loan, which is very different than a handout. If the church can do it without the sin of usury, it is way preferable to cash advances, loan sharks, rent to own and other high-cost options in the sub-prime lending business.

In many ways, pawning items preserves dignity if you can do it without charging 36% interest as our state allows.

[Marsha Lynn]

Correct. This is a collateralized loan, which is very different than a handout. If the church can do it without the sin of usury, it is way preferable to cash advances, loan sharks, rent to own and other high-cost options in the sub-prime lending business.

In many ways, pawning items preserves dignity if you can do it without charging 36% interest as our state allows.

Dave's (and other's) caution is still something to consider. A church entering such an enterprise will surely run into some difficult situations that call for more hardheartedness than any church should have to muster. For example, "Please, please, please, give me my grandmother's wedding ring back. My husband took it without telling me. There's no way I can come up with the money you gave him, but I just can't stand the thought of losing it. It's all I have left from her."

I can imagine so many, many variations of that story.

[Gina Stevenson]

Yes, before seeing Marsha's post, I tho't of the: "Oh, pleeeease! I know it is supposed to only be here for X # of months before you can sell it, but pleeeease ... couldn't I just have 2-3 more months to pay it ... pleeeese!?!" And then something else comes up, & extension after extension is requested until ....

So, you continue to be gracious forever (but is not that what we are supposed to do?) ... eventually running out of storage for such things ... or maybe become that "mean church over there who sold my stuff, instead of giving me enough time to pay to get it back!" 'cause as much as you would want to teach them how to be careful w/their $$$, it is finally up to them to learn/heed rather than continue in their old ways.

[Roy Richardson]

Yes, before seeing Marsha's post, I tho't of the: "Oh, pleeeease! I know it is supposed to only be here for X # of months before you can sell it, but pleeeease ... couldn't I just have 2-3 more months to pay it ... pleeeese!?!" And then something else comes up, & extension after extension is requested until ....

So, you continue to be gracious forever (but is not that what we are supposed to do?) ... eventually running out of storage for such things ... or maybe become that "mean church over there who sold my stuff, instead of giving me enough time to pay to get it back!" 'cause as much as you would want to teach them how to be careful w/their $$$, it is finally up to them to learn/heed rather than continue in their old ways.

I deal with having to tell people that I can't:

pay their taxes
fix their car
give them money for their kids
give them money for utility bills
give them money for whatever else

When the item is put up for sale, it doesn't mean it will sell immediately. Many of them stay in the store for a while.

It is an opportunity to pray for God to help them.

[Dave McClung]

That was my thought as well. Pawn shops 'collect' unpaid loans by selling the pawned item.

I don't know the percentage of loans that are paid off vs the ones collected by selling the pawned items, but my guess is that a pawn shop could not make a profit strictly on the sale of the collateral. I know of churches that have started "thrift shops." The ones I know don't make enough to pay their employees even when their stuff is donated.

The silent assumption in the article is that because Pawn Shops charge such high interest, the owners must be making large profits. I doubt that to be true.

If Pawn Shops, on the average, made good profits, you would see corporations buying them up. Most Pawn Shops are operated by the owner's. They provide a reasnable job, but not enough profit to allow the owner's not to work in the shop.

The two skills needed to be successful in the pawn business are 1)knowing how much the collateral will bring when sold, and 2)being able to consistently sell collateral for as much as it was valued. I doubt that many churches have either of those skills

[Rich Schmidt]

The two skills needed to be successful in the pawn business are 1)knowing how much the collateral will bring when sold, and 2)being able to consistently sell collateral for as much as it was valued. I doubt that many churches have either of those skills

You'd definitely need someone with some skill/experience in this area in order to start this sort of "ministry"... but that's not unlike any other ministry (music, youth, etc).

I imagine that, at the very least, such a ministry would need to be subsidized by the church providing free space. Plus, it would probably be able to get by with limited, part-time hours. So it probably wouldn't need as much income as a regular pawn shop in order to remain a viable ministry.

It's definitely an interesting idea. I've had people offer to do work in exchange for financial help, but that's always tricky, because (1) I might not have work that matches their skills and (2) who knows how skilled they actually are. So I usually end up ignoring that aspect and just helping them with a gift, if we're able. It would be interesting to have a "Christian pawn shop ministry" in the community as an alternative. But I'm certainly not going to be the one to start it.

[Roy Richardson]

You'd definitely need someone with some skill/experience in this area in order to start this sort of "ministry"... but that's not unlike any other ministry (music, youth, etc).

I imagine that, at the very least, such a ministry would need to be subsidized by the church providing free space. Plus, it would probably be able to get by with limited, part-time hours. So it probably wouldn't need as much income as a regular pawn shop in order to remain a viable ministry.

It's definitely an interesting idea. I've had people offer to do work in exchange for financial help, but that's always tricky, because (1) I might not have work that matches their skills and (2) who knows how skilled they actually are. So I usually end up ignoring that aspect and just helping them with a gift, if we're able. It would be interesting to have a "Christian pawn shop ministry" in the community as an alternative. But I'm certainly not going to be the one to start it.

We could make it a "zone" project

[Gina Stevenson]

Well, come to think about it, even conventional ministries sometimes get complaints ... so, perhaps a pawn shop wouldn't be so far out of line, so far as people's pleasure/displeasure with it, eh?

[Billy Cox]

I don't know the percentage of loans that are paid off vs the ones collected by selling the pawned items, but my guess is that a pawn shop could not make a profit strictly on the sale of the collateral. I know of churches that have started "thrift shops." The ones I know don't make enough to pay their employees even when their stuff is donated.

The silent assumption in the article is that because Pawn Shops charge such high interest, the owners must be making large profits. I doubt that to be true.

Pawn shops assume a high level of risk when they loan money on a pawned item. The best case scenario is when the loan is repaid with interest.

If Pawn Shops, on the average, made good profits, you would see corporations buying them up. Most Pawn Shops are operated by the owner's. They provide a reasnable job, but not enough profit to allow the owner's not to work in the shop.

Owners likely have to work the store because they have specialized knowledge that is critical to the store's profitability and is not easily transferred to an employee. Due to the wide range of merchandise and market variations, the pawn shop doesn't lend itself well to corporate ownership.

In theory a person could also shop garage sales for 'hidden gems' and make a handsome profit by reselling items on Craigslist or eBay, but nothing says it would be easy or consistently profitable.

By comparison, payday loan and title loan businesses are far easier to replicate.

The two skills needed to be successful in the pawn business are 1)knowing how much the collateral will bring when sold, and 2)being able to consistently sell collateral for as much as it was valued. I doubt that many churches have either of those skills

True. It takes a very special person to correctly value items for profitable resale.

Perhaps the article was assuming that with more favorable interest rates, the pawn shop could realize a higher percentage of its revenue through loan repayment instead of the dicey business of resale.

[Nate Pruitt]

Yes, before seeing Marsha's post, I tho't of the: "Oh, pleeeease! I know it is supposed to only be here for X # of months before you can sell it, but pleeeease ... couldn't I just have 2-3 more months to pay it ... pleeeese!?!" And then something else comes up, & extension after extension is requested until ....

You'd get it on all sides. Just like those saying, "But it's worth more than that! I can't pay my bills with this. I thought you were here to help!" Regular pawnshops would get the first two, but a ministry always seems to have people hoping to guilt more generosity out of them.

Bigger concerns for me would be that a pawnshop in this society carries different functions for different people. Whereas there is little that can be done to "corrupt" meals for the homeless or a clothing closet, pawnshops are a primary location police need to go to in pursuit of stolen goods. It's difficult to think that the church/Christian pawnshop could become well known as the best place to get a few bucks for a drug habit, or that it would inadvertently "fence" stolen goods for those seeking to abuse the system.

[Dennis M. Scott]

A non-profit charging interest (or prices, for that matter) lower than other similar for profit businesses in the area, frequently results in accusations of abuse of non-profit status. If people who happen to be from the church want to establish such a business as a tax paying for profit business, such accusations can't successfully be made. It is helpful when we clearly avoid that thin veil of non-profits. In some communities, raffles and even bingo are not allowed because they unfairly compete with money making gambling endeavors. Personally, I think churches should stick to bean suppers and selling indulgences.

In nearby communities here, a lot of stolen merchandise winds up on the shelves of pawn shops. People from whom things are stolen just put in an insurance claim, and don't go to the bother of checking out the pawn shops, which are even required to take photo id of anyone who pawns something. I guess it would put us in touch with a clientele that needs the gospel.

[Ryan Scott]

I haven't had a ton of experience working with poor people, but I imagine I've had more experience than most 30 year old white pastors.

My conclusion really is that the Church is meant to be a welcoming community and our ministries to the poor should revolve around those people willing to enter into relationship. When I've run a food pantry, I've never had any of the dozens of people who come for food come to a service, but I've been able to help a few who share their needs and problems make positive changes in their lives. When I know someone's story (and not just a sob story, but a real, repeated, verifiable story) and enter into the lives of people, I give them more help. We still put a box together for those people who give you a different name each month and never make eye contact, but they get basic food. When we know someone, we put their favorite things aside for them and know to find some low sodium vegetables for grandma.

I don't believe any congregation should be in the business of performing routine services for strangers. We should be inviting people into relationship and meeting needs for those people who respond to our Christ-like love.

If you know struggling families who are going to pawn something, why not simply offer them a no-interest loan for whatever seems like a realistic re-sale price for the items they intend to pawn? You can simply undercut the pawn shops, but offer the same help. It doesn't have to be a public place of business.

You don't have to require church attendance or acts of piety, simply tell people that you help people you know.

99% of the time, the people who ask for more food or complain that someone got more than them, doesn't actually need the food. They've usually hit up nine other pantries in the past week. The people who need the food say thank you for what they get.

If you take an item in pawn for someone you know and then someone else comes to do the same thing and complains if you won't help. Take them to lunch, have a real conversation. People who are gaming a system don't respond well to relationships.

[Roy Richardson]

There are laws and procedures on stolen merchandise in all states. Stuff has to be held for certain lengths of time to allow for that. But Dennis is right. It would put the church in touch with a clientele who need to hear the Gospel. It would give the church the opportunity to be an agent of hope if we can help them find a path out of the financial darkness they find themselves in. It wouldn't be easy, but it is intriguing to me.

That being said, my little tribe doesn't have the human or financial resources to even think about it right now.

[Dennis M. Scott]

Roy,
I've been involved in urban ministry for most of the last forty years. With other similar minded people, we've kicked around perhaps hundreds of possible ministries. My memory fails me regularly, but I'm pretty sure this is the first time I've heard of a pawn shop. Most of the time pawn shops are seen as part of the enemy. Your creative mind is something I admire: you've decided the concept isn't the enemy, but that seemingly excessive interest rates are. In case you didn't know, that's the out of the box thinking needed. I'd encourage you to take advice from those that have successfully worked "outside", have half a dozen failures for each success, but keep on going. Naysayers are those who know all the reasons things won't work, and a lifetime of nothing to prove it. If you really want to get risky, spend time with like minded people, and laugh about one another's greatest failures. May your number increase.

[Gina Stevenson]

Have never pawned anything, but the one time I did have a bit of experience with such a place, it made me want to wring a chauvinistic acquaintance's little neck! Danny was not yet home from work, he called, did not tell me why he called, then proceeded to pawn a gorgeous (inlaid pearl design on it, as we had seen it at their house) mandolin his aunt had bro't from Italy, for something like $25-35 for a toy(!!) he wanted ~~ remote car/truck/whatever ~~ then told us what he had done/why he had called! Said he did not even want it back, we took the ticket there, the first guy asked for $60 ... the very next day! Tried to quietly dicker with him, as I did not have that much extra with which to do this (we could have given the guy the 25-35!). Then he asked the other guy at the shop, who suddenly wanted $100 more!!

This was a 40-or-so-yr-old man w/a 19-yr-old girlfriend (she may have been more mature, sometimes tho't), who seemed to think he had to ask Danny ... "da man" ... so ended up not affording what we could have, had he had enough sense to just tell me why he had called! Wish I would have asked the "why?" but tho't he just wanted to talk to Danny ....

Have tho't of that gorgeous little mandolin more than once since then ....

[Roy Richardson]

Roy,
I've been involved in urban ministry for most of the last forty years. With other similar minded people, we've kicked around perhaps hundreds of possible ministries. My memory fails me regularly, but I'm pretty sure this is the first time I've heard of a pawn shop. Most of the time pawn shops are seen as part of the enemy. Your creative mind is something I admire: you've decided the concept isn't the enemy, but that seemingly excessive interest rates are. In case you didn't know, that's the out of the box thinking needed. I'd encourage you to take advice from those that have successfully worked "outside", have half a dozen failures for each success, but keep on going. Naysayers are those who know all the reasons things won't work, and a lifetime of nothing to prove it. If you really want to get risky, spend time with like minded people, and laugh about one another's greatest failures. May your number increase.

Thanks. This cock-eyed optimist needed that encouragement.

This link was embedded in the linked column. It tells the story a little more in depth. http://www.worldmag.com/articles/19696

[Gina Stevenson]

Roy,
I've been involved in urban ministry for most of the last forty years. With other similar minded people, we've kicked around perhaps hundreds of possible ministries. My memory fails me regularly, but I'm pretty sure this is the first time I've heard of a pawn shop. Most of the time pawn shops are seen as part of the enemy. Your creative mind is something I admire: you've decided the concept isn't the enemy, but that seemingly excessive interest rates are. In case you didn't know, that's the out of the box thinking needed. I'd encourage you to take advice from those that have successfully worked "outside", have half a dozen failures for each success, but keep on going. Naysayers are those who know all the reasons things won't work, and a lifetime of nothing to prove it. If you really want to get risky, spend time with like minded people, and laugh about one another's greatest failures. May your number increase.

Ouch! (since I gave some feedback on what some customers might say) Made me realize I was once again succumbing to being intimidated back into "the box" for years again ....

~~ one who has "gotten knocked" for such thinking,

told I "Shouldn't think (like) that!!" too many times,
that I let them discourage me too often ~~

[Gina Stevenson]

Ok, admitting to reading the article just now (cannot see the second one at World, Roy, without subscribing), looks to me like it was a very illegitimate pawn shop where I tried to retrieve the mandolin! They were not supposed to try to charge that much more within 24 hrs, if only allowed just so much per month! Too bad we were not online at that time & could have learned all this before going (about that mandolin a few posts back)!

[Marsha Lynn]

Roy,
I've been involved in urban ministry for most of the last forty years. With other similar minded people, we've kicked around perhaps hundreds of possible ministries. My memory fails me regularly, but I'm pretty sure this is the first time I've heard of a pawn shop. Most of the time pawn shops are seen as part of the enemy. Your creative mind is something I admire: you've decided the concept isn't the enemy, but that seemingly excessive interest rates are. In case you didn't know, that's the out of the box thinking needed. I'd encourage you to take advice from those that have successfully worked "outside", have half a dozen failures for each success, but keep on going. Naysayers are those who know all the reasons things won't work, and a lifetime of nothing to prove it. If you really want to get risky, spend time with like minded people, and laugh about one another's greatest failures. May your number increase.

Thank you for this, Dennis. It always bothers me when someone proposes a daring idea and the responses from "realists" start to pile up in numbers. It's nobody's fault that there are so many angles to cover from which the idea looks risky, but it can be discouraging. I appreciate the balance you have provided here.

Marsha

[Kyle Borger]

Correct. This is a collateralized loan, which is very different than a handout. If the church can do it without the sin of usury, it is way preferable to cash advances, loan sharks, rent to own and other high-cost options in the sub-prime lending business.

In many ways, pawning items preserves dignity if you can do it without charging 36% interest as our state allows.

I caution you to be careful with lumping industries into what you label the sin of usury. I worked for a Rent to Own company for over 15 years. The owner is a Nazarene and his father who was the owner before him is a Nazarene. His brother who was my boss at the time is now the pastor I work for and I am a pastor as well. There is a fair amount of tithe money sitting in Nazarene churches from this Rent to Own company. In fact a Nazarene campground has almost all of its appliances because of this company. This Rent to Own company has rarely made a profit. Why? They allow a customer to take an item out for a fraction of what it cost. The company had to purchase it for the full amount up front which demands a large amount of up front cash. Most of these items were returned as the customer only needed them for a short time. The company then had to clean and refurbish the item so that it could be rented again in an attempt to earn more than the item cost. Quite frequently a customer would decide they didn't need to pay any more and there were costs incurred to attempt to retrieve the item. Many times the person just walked away with the merchandise and the police would tell you it is a civil matter even though there are laws on the books in the state that clearly defined the transaction and the result as theft.

Over the course of those years I have had customers hug me and tell me their stories. I have sent flowers when they were in the hospital and I have prayed with them when things were rough. I have helped them with their taxes and I have helped them figure out how to get their finances straight. I have sponsored their kids baseball team or football team and I have tipped them very well when I went to their place of work. We became like family to them because we treated them with dignity and provided them a service that no one else would give them. They had no credit and when they went to the retail store they were told no. But they still needed a fridge because their milk for the baby was going bad. Did their story help? No. But I delivered a fridge that night. Imagine their thankfulness. If they did purchase it, they did pay more than retail but you must understand that they paid for the cost of the item and the cost of the services we provided over the course of the rental. There is tangible value to what they paid.

I'm sorry for getting on my high horse. I know you probably didn't intend to insult the industry. But this family has done a lot for quite a few Nazarene churches and their district. This family also has a Nazarene board member and two ordained Nazarene elders so I would hate for someone to accuse them of mistreating the needy. They have also treated me like a son and supported my ministry. This family sees its company as working to help the less fortunate grow and mature. If someone should buy something retail instead of renting it, they will do everything they can to help them do that. But sometimes it makes more sense to rent something then to get tied up in a loan you can't afford.

Regarding running a pawn shop as a church. Run away! They also have a very hard time making a profit and you will have to be the bad guy. Plus what are you going to do when you take in stolen merchandise? What are you going to do when you find drugs in something you took in? What are you going to do when you give someone money for something that ends up being a fake? What are you going to do when you can't afford to pay your employees? How are you going to afford to provide health insurance which is going to be mandatory? How are you going to afford the liability insurance? What are you going to do when you can't afford the rent? What are you going to do when you have to use ministry money to support the business that was supposed to help the church?

Just don't do it.

[Billy Cox]

Regarding running a pawn shop as a church. Run away! They also have a very hard time making a profit and you will have to be the bad guy. Plus what are you going to do when you take in stolen merchandise? What are you going to do when you find drugs in something you took in? What are you going to do when you give someone money for something that ends up being a fake? What are you going to do when you can't afford to pay your employees? How are you going to afford to provide health insurance which is going to be mandatory? How are you going to afford the liability insurance? What are you going to do when you can't afford the rent? What are you going to do when you have to use ministry money to support the business that was supposed to help the church?

Just don't do it.

These are good cautions, but I think the original article posed it as a mission, not as a revenue source for a church. The business model isn't impossible, but it surely isn't easy either.

Hypothetically speaking, a pawn shop operated using best practices with some financial advantages reserved for non-profit organizations should be able to make ends meet and pay employees. But your point is well taken: 'Can' and 'Should' are very different questions.

[Roy Richardson]

I caution you to be careful with lumping industries into what you label the sin of usury. I worked for a Rent to Own company for over 15 years. The owner is a Nazarene and his father who was the owner before him is a Nazarene. His brother who was my boss at the time is now the pastor I work for and I am a pastor as well. There is a fair amount of tithe money sitting in Nazarene churches from this Rent to Own company. In fact a Nazarene campground has almost all of its appliances because of this company. This Rent to Own company has rarely made a profit. Why? They allow a customer to take an item out for a fraction of what it cost. The company had to purchase it for the full amount up front which demands a large amount of up front cash. Most of these items were returned as the customer only needed them for a short time. The company then had to clean and refurbish the item so that it could be rented again in an attempt to earn more than the item cost. Quite frequently a customer would decide they didn't need to pay any more and there were costs incurred to attempt to retrieve the item. Many times the person just walked away with the merchandise and the police would tell you it is a civil matter even though there are laws on the books in the state that clearly defined the transaction and the result as theft.

Over the course of those years I have had customers hug me and tell me their stories. I have sent flowers when they were in the hospital and I have prayed with them when things were rough. I have helped them with their taxes and I have helped them figure out how to get their finances straight. I have sponsored their kids baseball team or football team and I have tipped them very well when I went to their place of work. We became like family to them because we treated them with dignity and provided them a service that no one else would give them. They had no credit and when they went to the retail store they were told no. But they still needed a fridge because their milk for the baby was going bad. Did their story help? No. But I delivered a fridge that night. Imagine their thankfulness. If they did purchase it, they did pay more than retail but you must understand that they paid for the cost of the item and the cost of the services we provided over the course of the rental. There is tangible value to what they paid.

I'm sorry for getting on my high horse. I know you probably didn't intend to insult the industry. But this family has done a lot for quite a few Nazarene churches and their district. This family also has a Nazarene board member and two ordained Nazarene elders so I would hate for someone to accuse them of mistreating the needy. They have also treated me like a son and supported my ministry. This family sees its company as working to help the less fortunate grow and mature. If someone should buy something retail instead of renting it, they will do everything they can to help them do that. But sometimes it makes more sense to rent something then to get tied up in a loan you can't afford.

Regarding running a pawn shop as a church. Run away! They also have a very hard time making a profit and you will have to be the bad guy. Plus what are you going to do when you take in stolen merchandise? What are you going to do when you find drugs in something you took in? What are you going to do when you give someone money for something that ends up being a fake? What are you going to do when you can't afford to pay your employees? How are you going to afford to provide health insurance which is going to be mandatory? How are you going to afford the liability insurance? What are you going to do when you can't afford the rent? What are you going to do when you have to use ministry money to support the business that was supposed to help the church?

Just don't do it.

I didn't intend to insult the RTO industry by saying that it committed usury, which I'm pretty sure I didn't, but I can see that my sloppy sentence construction could lead to that conclusion. My apologies for that.

There are a lot of sub-prime finance options, and some are usurious. Payday lenders may be the most egregious, and some states have reeled in the interest rates they can charge. Personally, I think 36% is ridiculous on pawned items. I think the church can do it for less than that, which would give them a distinct marketing niche with the other pawn shops.

[Dave McClung]

This column has an intriguing premise - that a church-run pawn shop, with much lower interest rates, can be an opportunity to help folks who operate outside the standard financial system. I will confess that I had never even thought of this idea. In our fair state, the maximum interest rate is usurious:

The maximum rate of interest charged by pawnbrokers shall be the
same as the maximum loan finance charge for supervised loans
under IC 24-4.5-3-508. The maximum rate effective 07/01/04 is: 36% on $.01 to $990 of
the loan amount; 21% any portion of the loan amount from
$990.01 to $3,300; 15% on any portion of the loan amount over
$3,300;or 21%, whichever is greater.
Interest shall not be deducted in advance, neither shall the
pawnbroker induce or permit any borrower to split up or divide any
loan or loans for the purpose of evading any provisions of the
statutes.
If a pawnbroker charges or receives interest in excess of that
provided in the law or makes any charges not authorized by the
law, the pawnbroker shall forfeit principal and interest and return
the pledge upon demand of the pledger and surrender of the pawn
ticket without the principal or interest. If such excessive or
unauthorized charges have been paid by the pledger, the pledger
may recover the same, including the principal if paid, in a civil
action against the pawnbroker.

I think my personal experience is relevant. A Nazarene pastor approached me with a similar idea. His church wanted to run a "Thrift Store" to help the needy. His idea was to buy a building across the street from the church. They would sell donated stuff and use the proceeds to help the needy in the community.

Linda and I made a "matching" offer. We donated half the money to buy the building and they had to raise the other half. Interstingly, a Baptist Church got interested an provided most of the other half.

To make a long story short, the thrift store was not a success. It became an expensive distraction for the church leadership. The problems created were a lot more than the help given.

So far, I have not seen a church operate a business well. In theory, it could be done, but in reality it doesn't happen.

[Jim Poteet]

I think my personal experience is relevant. A Nazarene pastor approached me with a similar idea. His church wanted to run a "Thrift Store" to help the needy. His idea was to buy a building across the street from the church. They would sell donated stuff and use the proceeds to help the needy in the community.

Linda and I made a "matching" offer. We donated half the money to buy the building and they had to raise the other half. Interstingly, a Baptist Church got interested an provided most of the other half.

To make a long story short, the thrift store was not a success. It became an expensive distraction for the church leadership. The problems created were a lot more than the help given.

So far, I have not seen a church operate a business well. In theory, it could be done, but in reality it doesn't happen.

The Reaching Our City (ROC) Thrift Shop in Oklahoma City is extremely successful. It is located at the the corner of N.W. 16th & Rockwell at the Bethany/OKC city limits. Reaching Our City is a ministry of the the Southwest Oklahoma District with great assistance from the Oklahoma District and Bethany First Church. The Thrift Shop makes over $10,000 per month after all expenses. It is a winner!

[Kyle Borger]

I didn't intend to insult the RTO industry by saying that it committed usury, which I'm pretty sure I didn't, but I can see that my sloppy sentence construction could lead to that conclusion. My apologies for that.

There are a lot of sub-prime finance options, and some are usurious. Payday lenders may be the most egregious, and some states have reeled in the interest rates they can charge. Personally, I think 36% is ridiculous on pawned items. I think the church can do it for less than that, which would give them a distinct marketing niche with the other pawn shops.

Take the percentage out of the equation. Look at the dollar amount per transaction. A pawn shop has costs involved in providing money while holding inventory that can't be sold. It has to have additional storage space for that item. It has to track the items in case they are stolen. It has to clean the inventory that isn't claimed to increase the chances of selling it and then it also has to have retail space to display these items for an unknown amount of time. Financial people like to look at percentages and get their feathers ruffled up, but that item that is worth $100 takes just as much work and possibly more storage space than the $1000 watch. Remember you are also paying for the property by the square foot and that cheap item that takes 2 sq ft of storage or display space can end up costing more overhead then the $1000 watch. But if you just look at what you charged in terms of percentage you would look like a crook just because you were trying to claim real world costs. I'm not saying there aren't those out there who do charge an unfair amount. I'm just saying that many times in business there are costs that factor into those percentages that the bean counters have no clue about.

I'm not seeing where a church has an advantage. A for profit not making a profit is no better off then a non-profit not making a profit. Both have the same over head costs unless the church has free and clear retail space that can be used which reduces the over head. I'm just trying to help you understand that many business that seem to charge high rates aren't actually profitable. (Granted often times the owner takes a salary which is included as an expense which causes the business to show a loss for tax purposes, but just the same the line between profit and closing is often very narrow.)

In terms of ministry opportunities..... How can the Christian community provide short term financial access to those in need? I'm not sure I would have the church or community of believers be the designated provider. There can be unintended consequences if the church has to enforce the contract or loan. That shouldn't stop you from finding business men who can find creative ways to provide access to cash. Actually getting everyone in your church to do everything first for God would go a long way, but that isn't what this discussion is about. Perhaps a micro loan program like Dave uses but for your community. You could probably do more if you didn't have to maintain more property to handle the collateral or least not retail property. Perhaps you could arrange a commission system with a 2nd hand store or the local pawn shop to sell the items that you have to keep. I would just try to create a separate entity so that in the event you have a very upset customer it doesn't blow back on the church.

[Rich Schmidt]

The Reaching Our City (ROC) Thrift Shop in Oklahoma City is extremely successful. It is located at the the corner of N.W. 16th & Rockwell at the Bethany/OKC city limits. Reaching Our City is a ministry of the the Southwest Oklahoma District with great assistance from the Oklahoma District and Bethany First Church. The Thrift Shop makes over $10,000 per month after all expenses. It is a winner!

I'm curious what "with great assistance from" means. Financial assistance? Volunteer staff? Rent-free space?

We have several thrift stores in our town, with at least two or three of them connected to churches or denominational groups. All three have been around for a long time, so they seem to be solid, financially. I think only one of them is directly tied to a local congregation, though.

[Jim Poteet]

I'm curious what "with great assistance from" means. Financial assistance? Volunteer staff? Rent-free space?

We have several thrift stores in our town, with at least two or three of them connected to churches or denominational groups. All three have been around for a long time, so they seem to be solid, financially. I think only one of them is directly tied to a local congregation, though.

"Great assistance" means some volunteer staff and many members who take donations to the thrift store. The store pays for its space and is a big hit in the area it serves.

[Roy Richardson]

"Great assistance" means some volunteer staff and many members who take donations to the thrift store. The store pays for its space and is a big hit in the area it serves.

Thanks for clarifying that Jim.

[Roy Richardson]

I'm not married to the pawn shop idea, but I think it is worth a serious investigation

[Gina Stevenson]

Well, as one who mentioned an idea or two re what "could happen," this thread came to mind when running across this the other day:

"A man's (or woman's, I might add) life is interesting primarily when he has failed
(emphasis mine, since some of us had this place "failed" before it even got started),
for it's a sign that he tried to surpass himself."

~~ Georges Clemenceau

[Roy Richardson]

Well, as one who mentioned an idea or two re what "could happen," this thread came to mind when running across this the other day:

"A man's (or woman's, I might add) life is interesting primarily when he has failed
(emphasis mine, since some of us had this place "failed" before it even got started),
for it's a sign that he tried to surpass himself."

~~ Georges Clemenceau

Even Don Quixote has his fans, and he failed often.