BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                      



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          |SENATE RULES COMMITTEE            |                   SB 217|
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                                 THIRD READING


          Bill No:  SB 217   
          Author:   Vargas (D)
          Amended:  As introduced
          Vote:     21

           
           SENATE BANKING & FINANCIAL INST. COMMITTEE :  7-0, 4/6/11
          AYES:  Vargas, Blakeslee, Evans, Kehoe, Liu, Padilla, 
            Walters

           SENATE JUDICIARY COMMITTEE  :  5-0, 5/10/11
          AYES:  Evans, Harman, Blakeslee, Corbett, Leno


           SUBJECT  :    Pawnbrokers:  compensation

           SOURCE  :     California Pawnbrokers Association


           DIGEST  :    This bill authorizes pawnbrokers to charge 
          borrowers the greater of $3 per month or 2.5 percent per 
          month on the unpaid principal balance of loans greater than 
          90 days old, and below $2,500.

           ANALYSIS  :    Existing law prohibits a pawnbroker from 
          charging or receiving compensation at a rate exceeding 2.5 
          percent per month on that portion of the unpaid principal 
          balance of any loan up to, including, but not in excess of 
          $225.  For other loan amounts, existing law prohibits a 
          pawnbroker from charging or receiving compensation at a 
          rate exceeding specified amounts based upon the unpaid 
          principal balance of the loan.

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           Prior and Related Legislation   
           
          AB 424 (Eng), 2011-12 Session, makes technical changes 
          intended to help pawnbrokers accurately calculate interest 
          payments on loans of greater than 90 days.  The bill is 
          pending in the Assembly Banking and Finance Committee.

          SB 212 (De Leon), 2011-12 Session, clarifies the 
          circumstances under which replacement loans can be taken 
          out by borrowers who are unable to undertake these 
          transactions in person.  This two-year bill is pending in 
          the Senate Banking and Financial Institutions Committee.

          AB 580 (Calderon), Chapter 340, Statutes of 2008, enacted 
          the minimum interest charge and loan set-up fee changes in 
          the AB 264, which is described below. 
                            
          AB 264 (Mendoza), 2007-08 Session, would have replaced the 
          current stair-step interest rates applied to pawn loans of 
          over 90 days with a single monthly interest rate of 2.5 
          percent, increased the minimum interest charge per month 
          from $1 to $3; and changed the cap on loan set-up fees to 
          the greater of $5 or two percent, capped at $10 (up from $3 
          on loans of $50 and below and $5 on loans above $50).  The 
          bill was held in the Senate Judiciary Committee.

          AB 1297 (Papan), Chapter 505, Statutes of 2001, increased 
          the maximum loan setup fee on loans of up to $50 from $2 to 
          $3; increased allowable handling and storage fees from $3, 
          $9, and $18, to $5, $10, and $20, depending on the size of 
          the object; and increased the maximum allowable fee for 
          costs relating to sending a loan expiration notice from $2 
          to $3.

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  No   
          Local:  No

           SUPPORT  :   (Verified  5/11/11)

          California Pawnbrokers Association (source)
          American Federation of State, County and Municipal 
          Employees



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           ARGUMENTS IN SUPPORT :    The California Pawnbrokers 
          Association is sponsoring this bill, to help ensure the 
          continued existence of pawnbrokers in California.  
          According to the trade association, the number of 
          pawnbrokers operating in California has declined over time, 
          as pawnbroker operating costs have increased, while the 
          charges they are allowed to impose have remained flat.  
          Among the operating costs cited by the Pawnbrokers 
          Association:  workers' compensation costs that are among 
          the highest in the state, the cost of training employees to 
          accurately value collateral, the need to upgrade security 
          to ensure the safety of pawned items, antiquated and 
          burdensome reporting requirements, and the costs of 
          licenses and permits.  

          The California Pawnbrokers Association is concerned that, 
          without an increase in its compensation structure, the 
          number of pawnbrokers in the state will continue to 
          decline, which will result in many potential pawn customers 
          utilizing other, more costly forms of short-term credit.


          JJA:kc  5/12/11   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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