Lending to Consumers for 109 Years,
but No Profits

Back in 1893, a group of wealthy and influential New Yorkers joined forces to create a lending facility for low-income consumers. Among them were individuals whose names we still recognize: J. Pierpont Morgan, Cornelius Vanderbilt, August Belmont (builder of subways in New York, but best remembered today by the Belmont Raceway), and Seth Low, former mayor of New York and Brooklyn. These and other distinguished individuals contributed $100,000 (a lot of money in those days) to found a nonprofit pawnshop. Today, the Provident Loan Society still exists. In the latest issue of Today's Pawnbroker, Charlene Komar Storey (editor) provides an excellent history of the Provident Loan Society.

While the New York statute permitted pawnshops to charge 3 percent per month (an annual rate of 36 percent.) Provident charged just enough to cover its operating costs: 2.167 percent per month, or 26 percent APR. Items pledged are held for an extended grace period. Provident holds two-day auctions at the Doyle New York Auction House of items that have not been redeemed. By the mid-1930s, Provident had 22 facilities throughout New York, the Bronx and Brooklyn. Ms. Storey reports that "the average loan in 1894 was $16. In 1918, it had jumped to $52. But half the loans were for $29 or less. During the Great Depression, demand became so great that the Society limited loans to $50."