On Thanksgiving Day, a new 50,000-square foot pawn shop will open in Sioux Falls, South Dakota, with an indoor shooting range, a concert stage, a deli, and branded merchandise (think: t-shirts, hot sauce, motorcycles, and more) as far as the eye can see.
Owner Chuck Brennan is calling it the "Disneyland of pawn shops."
Visitors walking through Badlands Pawn, Gold & Jewelry can peer at an on-site foundry melting down gold and silver, a display case with $1 million in gold bricks, a live rock radio studio, a 410 Sprint racecar, a saloon with video lottery games, and 300 guitars "flying through the air" on a custom guitar rig. In addition to the typical pawn shop wares, says Brennan, Badlands will also be home to a TV game show that will air on local Fox affiliates, and visitors can test out and buy everything from handguns to fully automatic assault rifles in the shop's 14-lane shooting gallery and gun shop. Musical acts booked for the concert hall include Joan Jett, KISS, Europe, Rick Springfield, and The Offspring.
Plus, anyone of legal age can pop into an on-site parlor for a free tattoo—of the Badlands logo, of course.
Part of an effort to enliven the city's downtown, the construction of Badlands comes as pawn shops across the country are trying to go mainstream. With record growth in the years following the recession—as unemployment and metal prices rose alongside the popularity of shows like "Hardcore Pawn" and "Pawn Stars"—the pawn shop industry has been working hard to shed its bad reputation.
But just as Badlands is more than a pawn shop, Brennan is more than just a pawn shop owner. He's the Las Vegas-based multimillionaire founder of Dollar Loan Center, a payday lender with more than 80 locations in California, Nevada, Utah, and his home state of South Dakota.
As it turns out, pawn shops and payday lenders have something important in common in South Dakota: They are unregulated by the government and can charge borrowers any interest rate they'd like.
Consequently, South Dakota has among the highest concentration of payday lenders per capita and the highest payday loan rates in the country (an average of 574% annually). On average, payday borrowers who borrow $300 in South Dakota will owe back more than $900 after only 5 months.
Critics of Brennan and the industries he represents say a lack of regulation traps borrowers in cycles of debt. While pawn shop loans tend to be paid off relatively quickly—in part because borrowers are eager to get back items with sentimental value—four out of five payday loans in the U.S. are rolled over or renewed within 14 days. That means rates billed as "short-term" can be deceptive: The median payday customer is in debt for nearly 200 days a year.
Leaders of a group called South Dakotans for Responsible Lending say they have collected more than 20,000 signatures in favor of a ballot measure to cap interest rates of payday lenders at 36% annually, qualifying the proposed law for the November 2016 state ballot. (That 36% cap mirrors federal rules limiting interest on loans to military servicemembers).
"I believe those rates should be set by the market," he says. "A cap could put us out of business. A lot of people can't use banks, and they need these services."
One of Brennan's biggest detractors is Steve Hildebrand, a native South Dakotan and former Obama campaign staffer who is co-chair of the responsible lending group. He describes payday lenders, pawn shops, and the growing video lottery business as all part of South Dakota's "poverty industry," which profits from those who are poor and desperate.
"If you are, say, a senior on fixed income who can't afford your prescription drugs, the absolute last thing you should be doing is bringing your possessions to a pawn shop," says Hildebrand. "If you are losing your money playing video lottery, the last thing you should be doing is going down the street to take out a payday loan."
Better, says Hildebrand, would be for residents to turn to any other means of assistance, whether from family or county human services. He points out, too, that South Dakota's unemployment rate is exceptionally low, and that many employers are "desperate for workers."
"Ask your family for help or consider getting a second job," he says. "Anything is better than borrowing, especially at these rates."
Loans at the Badlands pawn shop will cost a monthly interest rate amounting to roughly 200% annually, says Brennan. That's more than 10 times the average APR for a credit card, though Brennan says he has worked to match competitor pawn shops' rates.
"We're the best of the worst," says Brennan.
Of course, if you take out a loan at Badlands and can't pay it back, that watch or ring or any other possession you put up as collateral will go on sale—joining the rest of the $10 million in inventory with which the shop is opening.