Danny Green, manager of Thunder Pawn

Danny Green is mad and isn’t afraid to let the government know just what he thinks. “People want us. We’re not going away. Tell the government,” said Green.

The manager of Thunder Pawn in Franklin, Green is referring to U.S. Senate Bill 500, of which he says would virtually wipe out the pawn business. The name of the bill is “Protecting Consumers from Unreasonable Credit Rates Act of 2009.” Green said the bill will force pawnbrokers to limit interest rates on the short-term loans they provide to 36 percent, an amount that won’t sustain the business. He is gathering signatures on a petition to be sent to the government, letting them know of the support pawnshops have in the community.

“It’ll put us out of business and the employees will be out of a job. It will hurt the community. We help people in ways that no one else will. You can’t walk in a bank and tell them you need $5, or $10 or $50. They’d laugh at you. But if you have anything of value I can help you out. It might be a mother needing to buy a pack of diapers or a man who wants a beer,” Green said.

The problem with the bill, he said, is that loans would be considered at an annual interest rate, when the overwhelming majority of the loans he issues are short-term. Amanda Adorno, who also works at Thunder Pawn, said, “It will basically cause us to make a profit of only $2 for every $100 we loan. That’s not even enough to cover the rent.”

If Senate Bill 500 passes, pawn shops such as this one on Highlands Road will likely go out of business.

The bill was created to stop predatory lending practices, especially in the payday loan industry. It sets the maximum yearly interest rate on consumer loans at 36 percent, including all fees.

Normally, 36 percent is a fairly high interest rate cap. However, when dealing with short-term, high-risk consumer loans, 36 percent is actually unsustainably low.

Green offered this example from SaveMyPawnshop.com:

A pawnshop extends a $100 loan to a customer. At the 36 percent rate cap, the maximum daily interest charge for that loan is $0.10 (($100 x 36 percent) / 365). The customer returns to the pawnshop 20 days later to repay the loan. The maximum the pawnshop can charge the customer for the loan is $2 (20 x $0.10).

It costs pawnshops a lot more than $2 to service this short-term loan. Pawnshops have to pay for employees, supplies, storage space, retail space and more. The employee’s salary alone for the 30 minutes spent servicing the loan will cost more than $2, said Adorno.

Most needy Americans don’t have access to many types of loans others take for granted, Green said, like credit card loans and bank loans.

Payday loans, tax advance loans and title loans will also be wiped out by the bill, he said.

If this bill passes, friends or family will basically be the only place low-income, high-risk borrowers will be able to go when they need cash. “People will turn to theft and robbery,” Green said. “It will take your average good guy and turn him into a criminal to support his family.”

According to SaveMyPawnshop, fees and interest charged by the government in various cases is well above 36 percent:

The IRS Failure-to-File Penalty is five percent per month (or partial month):

Example: Jane Doe owes the IRS $100 in taxes this year. She forgets to file her tax return until April 25, 10 days after it was due. She now owes the IRS the original $100 in taxes plus $5 is penalty fees ($100 x 5 percent), for a total of $105. If we do the math, we see that Jane is paying fees at a rate of 0.5 percent per day (5 percent / 10 days = 0.5 percent per day). If you multiply that out over 365 days, the penalty Jane pays is equal to an annual interest rate of 182.5 percent. There are many more examples of excessive government fees that are equivalent to well more than the 36 percent annual interest rate cap proposed for businesses. If businesses are expected to survive under a 36 percent rate cap, the government should also be able to operate under this cap, said the Web site.

Each state has different laws on pawnshops, but the bill would place the same rate on all if it passes. At Friendly’s Pawn in nearby Mountain City, Ga., owner Angie Garrison said she charges 25 percent for the first three months of the loan, and then cuts it to 12.5 percent. She would have to charge 304 percent annually to maintain her profit margin under the bill, she said.

Green said everybody needs to keep spending in this troubled economy. “Pawnshops keep money circulating. The woman who got the money for diapers from us will go somewhere else in town to spend it,” he said.

Thunder Pawn has already received more than 1,000 signatures protesting the bill. “Franklin has been so supportive, and to a lot of the 3,500 or so people who live here, we are the backbone of their survival,” Green said.

For more information, call or visit Thunder Pawn at 253 Highlands Road, phone (828) 349-3215, or visit www.SaveMyPawnshop.com.