BILL ANALYSIS Ó ------------------------------------------------------------ |SENATE RULES COMMITTEE | SB 217| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 445-6614 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ 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. CONTINUED SB 217 Page 2 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 CONTINUED SB 217 Page 3 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 **** END **** CONTINUED