Pawnshops allowed to take guns for loan

By Bridgett Hernandez

Starting in July, qualified pawnshops in Indiana have been able to accept a new form of collateral for loans: handguns.

Previously, pawnshops that were licensed to do so could pawn other types of firearms and even buy or sell handguns. However, using a handgun to secure a loan was against the law. Indiana lawmakers repealed the prohibition earlier this year.

According to Sen. James Tome, R-Wadesville, who authored S.B. 13, it’s not clear why the prohibition was initially instated in 1935. In February, he told the Senate Judiciary Committee that Indiana was one of 10 states that didn’t allow a person to make a loan secured by a handgun. Doing so would have been considered a Class B misdemeanor.

New customer demographic

The repeal has opened up a new line of business for pawnshops in Indiana that are licensed to deal in firearms. Lev’s Pawn Shop District Manager Victor Amato said it’s too soon to measure the economic impact of the repeal, but, “It has allowed pawnshops in Indiana the ability to cater to, service and help an entirely new demographic of customers.”

The demographic includes historical collectors, military reenactors, sportspersons, target shooters, law enforcement officers, military personnel, homeowners and others who couldn’t use a handgun to secure a loan.

“There’s no reason that anybody shouldn’t be able to have the right to take any object that they legally own and borrow against it,” Amato said.

Many people, he said, “just have too much month left at the end of the month” and pawning their valuables is something quick and easy that they can do if they’re in a tight spot. At one location alone, he gets five or six calls a day from people looking to sell or get a loan on a gun. Out of the people who were coming in to pawn their firearms, about half were trying to pawn a handgun. Before the repeal, pawnbrokers would have to turn this business away unless the customer wanted to sell it instead of pawn it.

When the original owner returns to pay back the loan and collect the firearm, the pawnshop runs a criminal background check as if the owner is purchasing it for the first time.

Firearms are almost always picked back up by their owners, Amato said. One reason is the monetary value. With proper upkeep, guns don’t depreciate as quickly as cars or laptops, he said.

Another reason is that they hold sentimental value, according to Greg Engstrom, president of the Indiana Pawnbrokers Association.

“The situation that we run into is people liken their gun to their hunting dog and their Harley. They’re three things that they’re not going to give up,” he told the Senate Judiciary Committee in February.

Helping law enforcement

Contrary to their portrayal in popular culture, Amato said “pawnshops are actually one of the most highly regulated businesses in America” when it comes to the rules and regulations that govern what he can say to a customer when he writes a loan, how a loan is written and how it is overseen.

Pawnshops also work closely with law enforcement to track down stolen goods. Every piece of merchandise that pawnshops take in, no matter how insignificant, has an exacting detail report that is generally sent out to police within 24 hours, he said.

“This details everything about the item: make, age, model, edition, color, serial number, any identifying marks, anything that it might have come with and everything you would ever want to know about who it came with including their picture, their thumb print, all their ID information, everything,” he said.

Keeping accurate records helps the authorities track down stolen merchandise, put the bad guys where they belong and help the rightful owner get their merchandise back, Amato said. Pawnshops take a loss when stolen goods are recovered, so its in their best interest to turn away merchandise that they suspect to be stolen, Amato said.

“We’re like any other business. We’re here to make money. Having stolen merchandise and the problems associated with it are just bad for business,” he said.

That’s why more than 99 percent of pawnshop transactions are legitimate, he said.

Tracking down stolen goods

That one percent of stolen merchandise is where Joseph Lyon, detective and pawn detail coordinator for the Fort Wayne Police Department, comes into the picture. He works closely with area pawnshops, second-hand stores and gold buyers in an effort to locate and recover stolen property. He has recovered nearly a million dollars worth of stolen goods since he took his post in 2011.

Lyon uses an online service called Leads Online. About 4,000 agencies in the country use the service and nearly 21,000 scrapyards, pawnshops and second-hand shops report to them. Every day, the service gathers information from all of the transactions and makes it available to law enforcement so that they can see if it matches any reports of stolen goods.

The system is also plugged into the FBI’s National Crime Information Center, so it is continuously running data through to see if it gets any hits on serial numbers.

“Using this service, I’ve recovered property from as far away as Seattle, and I’ve also recovered property from other agencies that ended up here. I’ve sent an iPad back to Miami, I’ve sent handguns back to Texas. The way property migrates across the nation never ceases to amaze me,” Lyon said.

Since he’s been working the pawn detail, about a dozen firearms that were stolen or involved in a crime have surfaced on the database.

While pawnshops are required to run a criminal background check on a customer when he or she picks up a firearm, they aren’t required to run one on the front end of the transaction. If a pawnbroker knows or suspects that a customer isn’t supposed to have a firearm, it’s left to their discretion whether to turn the customer away or accept the firearm knowing that they could never give it back.

“If something seems a little fishy to them, they’ll either turn the customer away and then contact me or they’ll take the item in and immediately contact me. I get a lot of good information from my shops. We have a very good working relationship,” Lyon said.

“If somebody who is not legally able to own a handgun is selling a handgun, they’ve committed a crime, and I’ve got proof.”

Although licensed pawnshops are now allowed to accept handguns as collateral, there’s a reluctance among many to do so, he said. That’s because dealing in handguns involves investment in security, the risk of liability, paperwork and other red tape.

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