‘They don’t understand how pawn shops work,’ bill may force closure, Spring Valley owner says

Valley Coin and Pawn in Spring Valley may go out of business if proposed Illinois legislation is passed, its owner Chris Drewel said.

Other pawn shop owners across the state are echoing his sentiment that a bill, if passed, would include pawn shops in the Predatory Lending Prevention Act and limit how much interest and fees pawn shops can charge on loans. The bill is being considered during the General Assembly’s lame duck session that concludes Tuesday.

“They want to cap us at a flat 3% (monthly rate), which effectively means I won’t be able to do loans and will have to go out of business,” Drewel told Shaw Media.

State Sen. Jacqueline Collins, D-Chicago, who sponsored the bill, said during a Statehouse news conference the goal of the legislation is to protect consumers.

“The PLPA put a stop to many forms of predatory lending in Illinois, but pawnshops convinced a judge to give them a loophole to allow them to continue issuing loans with abusive and excessive three-figure interest rates,” Collins said.

The PLPA was signed in March of 2021 and prevents lenders from enacting unfair loan terms on borrowers, such as high interest rates. Drewel said pawn shops should not be included in the PLPA because they are non-recourse lenders, meaning the loan is secured by collateral in which the borrower is not liable.

Laws allow pawn shops to charge interest rates and fees as high as 240% per year or more, according to the Woodstock Institute, a consumer advocacy group. The proposed bills present a 36% cap on all yearly interest and fees.

At Valley Coin and Pawn, interest and fees on loans don’t reach close to 240%, and Drewel said the customers he’s served have never complained about unreasonable rates. He said, however, the proposed 36% annual cap is too low and makes his business inoperable.

Collins wrote in an op-ed for the Chicago Sun Times about the concern for the future of the pawn industry if the shops are subject to a 36% rate cap.

“The pawn industry, which is thousands of years old, exists in all 50 states, including in states with rate caps at or below 36%. In fact, pawnbrokers successfully operated in Illinois under a 36% rate cap from 1901 to 1991,” Collins wrote in the Sun-Times. “And what about the future of consumers whose money is being taken by the pawnbrokers? Given a choice between money in consumers’ pockets and profits for pawnbrokers, I side with consumers.”

At Valley Coin and Pawn, a borrower can acquire cash loan in exchange for putting up collateral, for example a television, in exchange for $100. The borrower then receives a ticket through a computerized system that lists the loan information.

The item is tagged, possessed by the shop, stored, insured and protected. The borrower can regain the item within 30 days for the loan amount plus a 20% finance charge. Or, the borrower can keep the $100 loan at no consequence.

If the borrower wishes to extend the 30-day payback window, the pawn shop charges 33 cents per day the loan period is extended. Drewel said the vast majority of borrowers return for their items and pay off their loans within a month or two.

Because each loan is ensured in the collateral, Drewel said pawn shops should not be considered predatory lenders and not be included in the proposed bill. Part of the problem, Drewel said, is a negative stigma surrounding pawn shops that comes from people not understanding how they operate.

“They (legislators) don’t understand how pawn shops work, how long they’ve been around and how they help people.” Drewel said.

He also said pawn shops offer a place to shop for jewelry, coins, guitars and other unique items at prices lower than buying an item new.

Customer Tad Becker has visited Drewel’s pawn shop on multiple occasions over the past few months. He said he likes to come in and see what’s new in stock.

“I would be very sad if this place closed. Pawn shops feel like an old time store, and they’re different,” Becker said. “It’s one of the only things that still feel unique and local.”

Mike McNeal has been a regular customer at Valley Coin and Pawn for the past eight to nine months. He visits weekly to look at the coin selection and the variety of other items the pawn shop has in stock. He said the legislation is unfair and wrong.

“It’s just not right, it’s not right at all,” McNeal said. “I go to different pawn shops, I like them, I admire them, they’re run by good people.”

A petition is available for customers to sign on the counter at Valley Coin and Pawn. Drewel said he’s gathered more than 200 signatures and has mailed the petitions out to representatives.

Collins and other representatives are considering the legislation — Senate Bill 4241 and House Bill 5840 — in a lame duck session. The session will conclude Tuesday, Jan. 10, where it’s unclear whether a decision will be made in the timeframe, according to reports from Capitol News Illinois.

Collins did not return messages for comment with Shaw Media.

Those interested can contact their representatives regarding the proposed legislation. Contact Sen. Sue Rezin’s office at 815-220-8720 or Rep. Lance Yednock’s office at 815-324-5055.