New pawnshops in Raleigh will be restricted to certain areas after a recent ruling by the North Carolina Court of Appeals in favor of a city zoning ordinance restricting pawnshop locations.
The ordinance, TC 17-08, restricts pawnshops to business, thoroughfare, and industrial districts. These zones include downtown, major roads that lead into the city and manufacturing areas.
Before the ordinance took effect Feb. 17, 2009, pawnshops could locate in three additional districts: buffer commercial, neighborhood business and shopping center. The latter two may contain or may be in close proximity to homes, which prompted questions from some residents and councilors about the impact pawnshops have on the character of their communities.
Dave Beck, owner of Plaza West Jewelry and Loan at Western Boulevard and Jones Franklin Road, takes offense at the negative portrayals of his profession.
“I’m a goldsmith by trade,” he said, pointing to his two workstations for examining jewelry. “I have a 900-square-foot jewelry store. I successfully compete against the biggest retailers of jewelry in the city.”
Beck was one of several plaintiffs who sued the city for the pawnshop ordinance.
“I have a huge investment in this neighborhood,” he said.
The losing plaintiffs in the appeal can petition the state Supreme Court for a discretionary of the case. Because the court of appeals ruling was unanimous, the plaintiffs cannot appeal directly to the Supreme Court.
Under the ordinance, no new pawnshops can set up shop outside of the four permissible districts. Pawnshops like Beck’s, which have stood for 17 years in a now-prohibited shopping center, are allowed to remain indefinitely. But if a fire or storm should damage his property in excess of 50 percent of its value, Beck would have to apply for a permit to rebuild. The city would likely refuse to grant such a permit to repair an illegal use of land.
Similarly, as with the sale of any business, any buyer of Beck’s pawnshop would have to receive a new license to operate from the city council. If the buyer wants to continuing running a pawnshop, the council still could approve a new license even for such a nonconforming use.
But councilors can always vote against granting a license, and TC 17-08 might cause them to more closely scrutinize a pawnshop outside of a proper zone. If the council votes not to approve a new pawnshop license, Beck would be forced to sell off his goods and find a buyer who would open a permitted business type in the same space.
“I really feel a great injustice has been done,” Beck said.
Magnets for Crime?
“When I came into the council in 2003, [pawnshops were] a major concern among my constituents,” said Councilman Thomas Crowder, whose district includes the Plaza West Shopping Center where Beck’s store is located. “In District D there was an overwhelming majority of pawnshops in the district.”
Measures have long been in place to prevent pawnshops from being easy places to fence stolen goods.
Since 1989, all North Carolina pawnshops have been required by state law to provide information on every transaction to the local authorities. Pawnshop employees and owners must keep meticulous records not only of the make, model, serial number, and condition of the merchandise that changes hands, but also of the physical appearance of anyone selling or collateralizing goods.
Beck said that he has always complied with the law by uploading information to the Wake County Sheriff’s office at the end of every business day. He has even lobbied along with the North Carolina Criminal Justice Information Network, a state agency, to create a statewide database of this information. It is currently only available to the county and its municipalities.
“The Raleigh Police Department has given us a clean bill of health,” Beck said. “Our records show that less than one-tenth of one percent of our transactions involve illegal property. We are the only people visible, and we’re visible because of the reporting.”
Beck cited online venues as thieves’ preferred means of divesting stolen merchandise.
Capt. Patrick Niemann, commander of the Southwest Police District where Plaza West is located, wasn’t so sure.
“Is stolen property appearing at pawnshops a regularly recurring problem? Yes,” he said. “The vast majority of pawnshops are extremely cooperative in retrieving stolen property.”
Crowder also remains unconvinced by reporting requirements.
“Just like any business, respectable business owners follow the letter of the law, but some don’t,” he said.
Mary-Ann Baldwin, one of three council members to vote against the ordinance in 2009, calls the measure “overkill.”
“If certain pawnshops were violating laws and not operating the way they should, that’s the issue we should deal with,” she said. “It didn’t make sense to me to spend taxpayer dollars on an issue that affects very few people, when there wasn’t a huge outcry by the public.”
Chip Williams, owner of a video store in the Plaza West Shopping Center, went further.
“I think one member of the city council doesn’t like pawn shops and has a vendetta against them,” he said, referring to Crowder.
Service or Menace?
Other charges against pawnshops: They prey on low-income communities, lower property values and discourage other types of businesses from locating nearby.
“Pawnshops attract check-cashing businesses that exploit low-wealth citizens,” Crowder said. “Extremely high interest rates are another concern.”
Under North Carolina law, pawnshops can charge no more than 2 percent per month interest on loans.
[pullquote]“If certain pawnshops were violating laws and not operating the way they should, that’s the issue we should deal with,” she said. “It didn’t make sense to me to spend taxpayer dollars on an issue that affects very few people, when there wasn’t a huge outcry by the public.”[/pullquote]
Pawnshops loan much smaller amounts of money than banks. Unlike bank loans, loans at pawnshops are collateral, non-recourse loans, which means that the lender cannot try to collect on the loan if the debtor defaults. After a 90-day waiting period, the pawnshop simply takes possession of the collateral merchandise and sells it.
According to some studies, about 17 million Americans have no bank account.
“We are the bank for that portion of the population,” Beck said.
“Let’s face it; not all of us can go to the bank to get money when needed,” Baldwin said. “People use pawnshops to generate cash when they need money to pay bills. Not everyone lives a charmed life. If you really rely on pawnshops in hard times, I don’t feel that I should be the judge.”
Mary-Belle Pate, chair of the Southwest Citizens Advisory Council at the time of deliberations on the ordinance, sees the issue another way. In her area of the city, she cites two pawnshops that, due to their dilapidated character, bring down the quality of the neighborhood and discourage more affluent people from buying homes or renting property in the area.
“It’s just not fair,” she said. “You may be low-income and struggling for your existence, but you don’t need to be treated like trash, to look out your window at a pawnshop.”