More than 3,000 years ago, pawn shops first emerged in Ancient China as a method of granting short-term credit to peasants. Some pawnbrokers operated independently, but over time most of these businesses were run through pawn shops. Pawnbroking thrived in ancient Greece and Rome, giving merchants a way to get small shops off the ground. During the Middle Ages, some restrictions were placed on charging interest by the Catholic Church, halting the growth of pawn shops. These rules were relaxed in the 14th and 15th centuries in Europe as short-term credit became an important way of financing business endeavors and granting temporary aid to the poor. Prominent families such as the Lombards of England and the Medicis of Italy became known as money-lending families. England’s King Edward III famously pawned his jewels to the Lombards in 1388 to help finance war against France, and Queen Isabella of Spain is said to have put up her jewelry as collateral to fund Christopher Columbus’ expeditions to the New World.
The word “pawn” stems from the Latin word “patinum” meaning cloth or clothing. For the working class, clothes were often the most valuable items they owned. Though the majority of pawn shops have always been privately operated, some public pawn shops were set up as charitable funds in Europe in the 18th century, offering low interest loans to the poor to help curb debt. The practice of pawning clothes on Monday and retrieving them on Friday–“payday”–was a common way for poor people to make it through the week during the 19th century. Since people in need of quick cash were more apt to be on the fringes of society during this era, protections were put in place to try to prevent the pawning of stolen items. The Pawnbrokers Act of 1872 in England established regulations protecting pawnbrokers who inadvertently sold stolen items. This act also stipulated the amount of interest that could be charged on pawned items, and set out overall guidelines for the industry, establishing a pattern of regulation that continues today.