October 25, 2026 | Industry Intelligence | Jer Ayles

PAWN LOANS ARE BOOMING. CONSUMER FINANCING IS STRUGGLING. WHAT DOES THAT TELL US ABOUT THE AMERICAN BORROWER?

FirstCash just reported two very different businesses moving in opposite directions. Payday, title, and installment lenders ought to pay attention.

FirstCash just reported something every payday, title, and installment lender ought to spend five minutes thinking about.

Its pawn business is booming. Its consumer-financing business is shrinking.

Same company. Same quarter. Two very different results.

Look at these numbers.

Source: FirstCash Holdings, Inc., third-quarter operating results, October 22, 2026. Transaction volume refers to AFF's lease and loan originations. Changes are year over year.

That's worth examining.

FirstCash operates more than 3,300 pawn stores across the United States, Latin America, and the United Kingdom. It also owns American First Finance (AFF), which provides retail point-of-sale loans and lease-to-own financing.

The pawn business is growing.

AFF's financing volume is falling.

Why?

And more importantly, what does that tell us about the customers walking into our loan stores?

THE CUSTOMER NEEDS $500. BUT WHY?

I've spent more than 20 years in this business.

I've seen customers borrow money for practically every reason imaginable.

Rent. Utilities. Car repairs. Groceries. Medical bills. Christmas. And occasionally something they probably shouldn't have purchased in the first place.

But here's a distinction operators sometimes overlook.

A customer pawning jewelry may need $400 to get through Friday.

A customer financing a $2,000 sofa is making a purchasing decision.

Both need access to financing.

But those are different financial decisions.

When household budgets tighten, the customer may postpone the sofa.

The electric bill? Not so easily.

Could that help explain FirstCash's results?

Possibly.

But we shouldn't get carried away.

FirstCash specifically attributes AFF's weaker transaction volume to soft furniture sales, merchant-partner problems, and its own decision to emphasize merchant quality.

And its pawn results include international operations, acquisitions, and a growing store network.

One company's earnings report does not prove that America's subprime borrowers are running out of money.

What it does provide is a reason to examine what's happening in our own businesses.

HERE'S WHERE LENDERS CAN GET INTO TROUBLE

Imagine you operate 40 payday and title loan stores.

Last month, your stores received 6,000 applications.

This month, they received 6,600.

Applications are up 10%.

Management is delighted.

The marketing department wants more money.

Store managers are talking about record demand.

Everybody's happy.

Until somebody looks at the funded loans.

And the defaults.

And the acquisition costs.

And the actual profit.

Let's run the numbers.

Hypothetical example for illustration. These are not FirstCash results.

Applications increased 10%.

Funded loans declined 8.3%.

Now suppose first-payment defaults also increase.

And the company spent another $15,000 acquiring those additional applications.

What exactly are we celebrating?

This is why I get nervous when operators tell me business is great because the phones are ringing.

The phone ringing isn't revenue.

An approved application isn't revenue.

Even a funded loan isn't profit.

Profit comes after you account for the revenue actually earned, credit losses, acquisition expense, funding costs, servicing, collections, and overhead.

That's the business we're in.

THE FIRSTCASH NUMBERS CONTAIN ANOTHER LESSON

American First Finance reported a decline in its combined average monthly net charge-off rate, from 5.8% to 5.6%.

That's an improvement in its reported loss measure.

Yet transaction volume declined 15%, and net revenue fell 20%.

The point?

You can improve losses and still have a revenue problem.

You can increase applications and still have a funding problem.

You can increase funded loans and still have a profitability problem.

This is why every lender needs to understand the relationship between production, credit performance, and NOI.

Not just one of them.

All three.

FIVE QUESTIONS I'D ASK EVERY STOREFRONT LENDER THIS MONDAY

1. Are applications increasing because more qualified borrowers want our loans—or because more financially stressed consumers are searching for money?

   Look at new versus repeat borrowers. Examine income, existing obligations, and application quality.

2. Are approval rates changing?

   An increase in applications accompanied by a falling approval rate may indicate a change in applicant mix, underwriting policy, marketing quality, or some combination. Find out which.

3. Are we funding more loans or merely processing more applications?

   Measure applications, approvals, funded loans, and conversion at the store and employee level.

4. Are first-payment defaults moving in the same direction as originations?

   Compare comparable borrower groups and loan vintages. Don't confuse a recent increase in volume with an improvement in loan quality.

5. Is additional volume improving contribution to NOI?

   After acquisition costs, expected losses, funding costs, and servicing expenses, are the additional loans actually worth making?

If you can't answer these questions, you don't yet know whether increased demand is good news.

THE OPPORTUNITY FOR PAYDAY AND TITLE LENDERS

I'm not suggesting that payday and title lenders should imitate pawnshops.

The products are different.

Pawn loans are generally non-recourse loans secured by pledged personal property.

Payday loans depend on repayment from the borrower's financial resources.

Title loans introduce another set of risks involving repayment, vehicle collateral, lien documentation, and recovery costs.

Different products. Different rules. Different economics.

But there is a lesson worth stealing from FirstCash.

If your applications are rising, that's a signal.

If approvals are rising, that's another signal.

If first-payment defaults are rising, pay attention.

And if NOI isn't improving, stop congratulating yourself on the volume.

Your customers don't all borrow for the same reason.

They don't all have the same capacity to repay.

And they certainly don't all produce the same economic result.

MY TAKE

FirstCash's pawn results are impressive.

Its AFF results are a reminder that consumer-finance demand isn't one big, uniform market.

Some customers need immediate liquidity.

Some want to finance purchases.

Some have stable repayment capacity.

Others are already stretched.

A good lender understands those differences.

A poor lender counts applications.

Here's the question I'd put to every lending owner reading this:

Not how many applications you received.

Not how many loans you funded.

How much additional profit did you produce?

If the answer is no, that's where I'd start.

Because the fastest way to turn strong consumer demand into a disappointing year is to confuse loan volume with profitable lending.

More people needing money doesn't necessarily mean more people can repay it.

And that's a distinction serious lending operators cannot afford to ignore.