Palatine Considers Allowing ‘Pawn’ Loans For Jewelry and Watches at Local Business

Palatine will decide later this month whether a local business can make "pawn loans" after a lengthy discussion at Monday's meeting.

Kelly Swisher, owner of Palatine Jewelry and Watch Shoppe, located at 293 N. Northwest Highway, appealed to the council to add collateral loans, otherwise known as "pawn loans," limited specifically to jewelry and watches.

The business currently sells jewelry and watches, and handles repairs for both as well.  A pawnbroker’s license would be required to allow the added service at the location, which has been in business since April 2010.  

“I have a very hard time bringing pawning to the village of Palatine; it preys on people who are desperate for money at the time,” said Aaron Del Mar, District 1 councilman.  “It is subjective on what you value items at and that number could be anywhere.”

Swisher agreed that values are subjective, but said pawn loans already are occurring at businesses in the village without council approval.

Swisher said in the nine years he has owned a pawn shop in Arlington Heights, he has found that people are grateful because family heirlooms don’t have to be sold to get someone through a difficult financial time.  

“If I loan an individual $500 they need for the item, if in 30 days they pay the service fee and the $500 loan back, they are thankful for an additional option not to have [to] sell something they may want to ultimately keep,” Swisher said.

The service fees would be proposed at slightly below 20 percent for loans of $300 or less, but that rate would decrease as loan amounts increased, Swisher said. All loans would be made in cash.

“I don’t think this should be done in Palatine, but maybe I have a different, more conservative view than other people,” Del Mar said.

Del Mar then recused himself from voting on the matter because he owns Exquisite Jewelers located at 1590 N. Rand Rd.  He stated he did not want to produce any conflict of interest in the matter since he also owns a jewelry store in Palatine.

The process for a collateral loan was then explained by Swisher.

“We determine what we are willing to loan on the item, take information such as state identification or a driver’s license and a digital photo would also be taken and catalogued,” Swisher said.

Two receipts are then provided, one for customer and the other for the business.  Swisher said The Truth in Lending Act and the Equal Credit Opportunity Act requires explanations of the process to be included on the receipts.   

Once a collateral loan is made, the business would hold the item for 30 days. At the end of that time period, the individual has the option of paying the loan off, plus the service fee of 19.62 percent or less depending on the loan amount. 

Swisher said if an individual was unable to pay the loan back, they could simply pay the service fee and start the process over again for another 30 days until they were able to repay the loan.

“If individuals don’t come in to retrieve their item, state law mandates that the loan is automatically renewed for another 30 days.   

“At 61 days, if there is no further contact from the individual, the item becomes the property of the business, and it can be sold,” Swisher said.

Swisher said another part of the process is to report sales information to the police department at the end of each business day.

District 6 Councilman Brad Helms asked what type of individuals patronized Swisher’s pawn shop in Arlington Heights.

“About 70 percent of customers are middle-aged women; they take care of the bills and sometimes they need help to cover unexpected costs,” Swisher said.

Swisher also said he has seen a spike in senior citizens coming in to afford high veterinary bills. He added that small business owners also have utilized his collateral loans if they have been cut off from the banking systems and need to cover business costs.

When asked about the percentage of pawned items that are redeemed, Swisher said roughly 70 percent of individuals come back to reclaim pawned items.

The average for the 228 licensed pawn shops in Illinois is slightly more than 65 percent.

When concerns over safety were brought up, Swisher said the business is fully alarmed, and that all customers have to be buzzed in to the business. He added that there is a DVR system that records footage from the front to the back of the shop.

Concerns also were raised about the age of individuals that Swisher would do business with.

“A major concern of mine is for kids to bring in mom’s diamond ring (to be pawned),” said Jim Clegg, District 3 councilman.

“The village ordinance, which was written in 1961, says that I can’t pawn to anyone under the age of 21, but state law allows pawn shops to do business with anyone 18 years of age or older,” said Swisher. “Eighteen year olds are covered by federal law and I cannot discriminate by age.”

“Home rule authority allows Palatine to be more restrictive (than federal law), that would be an issue that would need to be looked at by the village attorney,” said Reid Ottesen, village manager.

Village staff will now be investigating restrictions relating to whether 18 or 21 years of age would be the threshold to be able to pawn items.

The village council will reconsider the request for special use for a unique use at the Jewelry and Watch Shoppe at its March 21 meeting.