Macon Reporter

The pawn shop industry says it is on the verge of being wiped out of existence by two bills limiting the earning potential of the stores. 

HB5840 and SB4241 both would require pawn stores to limit transaction fees for pawned items. The owner of Decatur Jewelry & Pawn is asking "every single one of you that depend on Decatur Jewelry & Pawn's services" to send them a private message to allow them to get customers in touch with their respective state senator and House representative and "ask them to oppose these bills and to tell them why."

“The time has come to inform my long-time, loyal customers,” Decatur Jewelry & Pawn said in a Facebook post. “The Illinois Legislature has introduced two separate bills in the House and The Senate to basically shut down pawnshops throughout Illinois. The bills will be voted on during the LAME DUCK Session in Springfield in January. Basically, they want to limit a pawnshop's interest to 3% per transaction.” 

If these laws will be enacted into law, "your access to quick, secure, private cash will be eliminated throughout the state of Illinois," Decatur Jewelry & Pawn said, while urging clients to "Please step up and speak up and let your voices be heard." 

A sample computation was also shared on the post to show how the bills would financially impact the pawn shop business.

“Decatur Jewelry & Pawn's average pawn loan amount to my customers is $150.00. With this amount, my fee will be $4.50 per transaction," Decatur Jewelry & Pawn said. "Let's do the math. At $15.00 per hour, minimum wage in Illinois, a pawn transaction will cost me $5.00 in payroll wages, only to earn $4.50 on the transaction. The math says I will lose .50 cents on LABOR alone. Now, add in my insurance, utilities, mortgage, office supplies, computers and software to run the company, it's clear, this bill will be financially detrimental to the Illinois Pawn industry.” 

More than 560,000 pawn transactions took place in Illinois in 2020. 

The Illinois Pawnbrokers Association has put out a press release elevating the issue. Kelly Swisher, president of the Illinois Pawnbrokers Association, said that their “[I]ndustry is comprised of over 200 local business owners, many of whom have been a part of their communities for decades. And they’re hearing from customers who are worried about what they’ll do if their pawnshop goes away.” Wisher added that “These measures would shut down pawnshops and shut out Illinois consumers.” 

The industry says pawn shops are an essential lifeline for unexpected expenses for many people and "Imagining a world without pawnshops is easy unless you’re one of the Illinoisans who count on pawn transactions as a financial safety net for their families.”

Illinois businesses and residents are highly regulated when compared to peers across the country. Illinois ranks the third-most regulated state with 278,475 regulations, according to Illinois Policy. This is compared to an average of 133,000 regulations per state. 

This highly regulated environment has real consequences for small businesses. Director of Fiscal and Economic Research Bryce Hill and research intern Jim Royal noted that “Illinois’ high level of regulation is concerning for the state, which has relied on small businesses for nearly 70% of job creation since 2011. Regulation creates barriers to market entry that discourage entrepreneurs from establishing new firms. Compliance costs are one such barrier: a 2017 survey of small business owners nationwide found the average business owner paid $83,019 in regulatory compliance costs in their first year of operation."  The acquisition of a license to operate is also another cost of regulation. Applicants in the state "are often required to complete hundreds of hours of coursework before receiving an occupational license, but the stringency of these requirements varies wildly across fields. For instance, hair braiders must complete 300 hours of training before being licensed. That’s nearly three times the 120 hours required to become a real estate broker."

The Mercatus Center said overregulation in Illinois is a danger. The research institution noted from 1997 to 2015 the number of people living in poverty rose with the number of regulations adopted by the state. According to Mercatus Center “One reason a greater regulatory burden may increase poverty and inequality is that regulation can reduce entrepreneurship.” 

The paper, "The Regressive Effects of Regulations in Illinois" noted that “Researchers matched data from the Mercatus Center at George Mason University on industry-level federal regulation (from the RegData dataset) with Census Bureau data on the number of small and large firms and the number of employees per industry.” 

An approximate 10 percent increase was seen "in the number of regulatory restrictions pertaining to a particular industry is associated with a 0.42 percent reduction in the total number of small firms (that is, with fewer than 500 employees) within that industry and a corresponding 0.55 percent reduction in small firm employment." Additionally, the study also revealed that the "consecutive years of rising regulatory burden on an industry have a compounding effect, whereby the negative effects of regulation are amplified if preceded by above-average regulation growth.”