History of Collateral Pledging

Ancient world

In the west, pawn broking existed in the ancient Greek and Roman Empires. Most contemporary Western law on the subject is derived from the Roman jurisprudence. As the empire spread its culture, pawn broking went with it.

Likewise, in the East, the business model existed in China 3000 years ago no different than today, through the ages strictly regulated by Imperial or other authorities.

Middle Ages

In spite of early Roman Catholic Church prohibitions against charging interest on loans, there is some evidence that the Franciscans were permitted to begin the practice as an aid to the poor.

In England the pawnshop came in with William the Conqueror, with an Italian name, Lombard. In 1338 Edward III pawned his jewels to the Lombards to raise money for his war with France. King Henry V did much the same in 1415.

The Lombards were not a popular class and Henry VII Tudor harried them a good deal. In the very first year of James I Stuart an Act against Brokers was passed and remained on the statute-book until Queen Victoria had been on the throne thirty-five years. It was aimed at the many counterfeit brokers in London. This type of broker was evidently regarded as a fence.

Modern time

The Chinese conditions are decidedly favorable to a borrower. He may, as a rule, take three years to redeem his property, and he cannot be charged a higher rate than 3% per annum.

Symbol of pawn brokers.

The pawnbroker's symbol is three spheres suspended from a bar. The three sphere symbol is attributed to the Medici Family of Florence, Italy, owing to its symbolic meaning of Lombard. This refers to the Italian province of Lombardy, where pawn shop banking originated under the name of Lombard banking. The three golden spheres were originally the symbol which medieval Lombard merchants hung in front of their houses, and not the arms of the Medici family. It has been conjectured that the golden spheres were originally three flat yellow effigies of bezants, or gold coins, laid heraldically upon a sable field, but that they were converted into spheres to better attract attention.

Most European towns called the pawn shop the "Lombard". The House of Lombard was a banking family in medieval London, England. According to legend, a Medici employed by Charles the Great slew a giant using three bags of rocks. The three ball symbol became the family crest. Since the Medicis were so successful in the financial, banking, and money lending industries, other families also adopted the symbol. Throughout the middle Ages, coats of arms bore three balls, orbs, plates, discs, coins and more as symbols of monetary success. Pawnbrokers (and their detractors) joke that the three balls mean "Two to one, you won't get your stuff back".

Saint Nicholas is the patron saint of pawnbrokers. The symbol has also been attributed to the story of Nicholas and the three bags of gold.

Modern pawn broker storefront.

In the United Kingdom typical high street pawn interest rates vary between 5% to 12% gross per month and the average annual equivalent rate is 85%. In South Africa this rate varies from 10% to 40%.