BILL ANALYSIS Ó
SB 762
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Date of Hearing: August 13, 2013
Counsel: Gabriel Caswell
ASSEMBLY COMMITTEE ON PUBLIC SAFETY
Tom Ammiano, Chair
SB 762 (Hill) - As Amended: June 4, 2013
As Proposed to be Amended in Committee
SUMMARY : Clarifies the interests of licensed pawnbrokers and
secondhand dealers relating to the seizure and disposition of
property during a criminal investigation or criminal case.
Specifically, this bill :
1)Revises the 90 day hold provisions law enforcement may place
on property in possession of a pawn broker to, among other
things, authorize a peace officer to also place a hold on
property that the officer has probable cause to believe is
lost or embezzled. The bill would limit these provisions to
licensed pawnbrokers and secondhand dealers and would revise
notification procedures regarding lost, stolen, or embezzled
property.
2)Permits the law enforcement agency to extend the hold beyond
90 days, as specified, until the conclusion of the criminal
proceedings.
3)Authorizes a peace officer to take physical possession of
property as evidence if the property is placed on hold.
4)Provides that if a search warrant is issued for the search of
the business of a licensed pawnbroker or secondhand dealer to
secure lost, stolen, or embezzled property, the hold would
continue as long as the property is subject to the
jurisdiction of the court.
5)Requires that a person claiming ownership of the property to
file a written statement, signed under penalty of perjury,
stating the factual basis upon which they claim ownership or
an interest in the property.
6)Requires that law enforcement must return property that it has
taken physical possession of at the conclusion of the criminal
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proceedings.
EXISTING LAW :
1)Provides that it is unlawful for any person to engage in the
business of secondhand dealer, as defined, without being
licensed. (Business and Professions Code Section 21640.)
2)Defines a "secondhand dealer" as any person, copartnership,
firm, or corporation whose business includes buying, selling,
trading, taking in pawn, accepting for sale on consignment,
accepting for auctioning, or auctioning secondhand tangible
personal property. A "secondhand dealer" does not include a
"coin dealer" or participants at a gun show as defined.
[Business and Professions Code Section 21626(a).]
3)Defines a "coin dealer" as any person, firm, partnership, or
corporation whose principal business is the buying, selling,
and trading of coins, monetized bullion, or commercial grade
ingots of gold, or silver, or other precious metals.
[Business and Professions Code Section 21626(b).]
4)Excludes from the meaning of "secondhand dealers" the
following:
a) Any person who performs the services of an auctioneer
for a fee or salary;
b) Any person whose business is limited to the
reconditioning and selling of major household appliances,
provided all the following conditions are met:
i) The person does not trade, take in pawn, accept for
drop-off, accept as a trade-in, accept for sale on
consignment, accept for auction, auction, or buy, except
in bulk, the appliances;
ii) The person does not perform repair services for
owners of appliances unless the appliance was purchased
from the person; and
iii) The person has never been convicted of the crime of
attempting to receive or receiving stolen property or any
other theft-related crime. (Business and Professions
Code Section 21626.5.)
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5)Requires every secondhand dealer or coin dealer to report
daily, or on the first working day after receipt or purchase
of the property, on forms either approved or provided at
actual cost by the Department of Justice, all tangible
personal property, except for firearms, which he or she has
purchased, taken in trade, taken in pawn, accepted for sale on
consignment, or accepted for auctioning, to the chief of
police or to the sheriff. The report shall include certain
specified information. (Business and Professions Code Section
21628.)
6)Requires every pawnbroker to report daily or on the first
working day after receipt or purchase, all descriptions of all
property received in pledge or purchased as tangible personal
property, as defined, in whatever quantity received, including
property purchased as tangible personal property at wholesale,
tangible personal property taken in for sale or possessed on
consignment for sale, and tangible personal property taken in
trade. The report shall be submitted to the police chief
executive or the sheriff depending on where the transaction
took place. All reports shall be on forms approved or
provided at actual cost by the Department of Justice (DOJ).
The police chief executive or sheriff who receives a report on
a form filed pursuant to the provisions of this section shall
daily submit a legible copy of the transactions to the DOJ.
(Financial Code Section 21208.)
7)States that a violation of the existing laws related to
secondhand dealers and tangible personal property, including
the failure to obtain a license as required, under
circumstances where a person knows or should have known that a
violation was being committed is a misdemeanor punishable as
follows:
a) For the first offense, a fine of up to $1,500 or
imprisonment in the county jail up to two months, or both;
b) For the second offense, a fine of up to $5,000 or
imprisonment in the county jail up to four months, or both;
and,
c) For the third offense, a fine of up to $25,000 or
imprisonment in the county jail up to six months, or both.
(Business and Professions Code Section 21645.)
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8)Requires a license to be subject to forfeiture by the
licensing authority and the licensee's activities as a
secondhand dealer to be subject to being enjoined for breach
of any of the following conditions:
a) The business shall be carried on only at the location
designated on the license. The license shall designate all
locations where property belonging to the business is
stored. Property of the business may be stored at locations
not designated on the license only with the written consent
of the local licensing authority;
b) The license or a copy thereof, certified by the
licensing authority, shall be displayed on the premises in
plain view of the public;
c) The licensee shall not engage in any act which the
licensee knows to be in violation of this article; or
d) The licensee shall not be convicted of an attempt to
receive stolen property or any other offense involving
stolen property. [Business and Professions Code Section
21642(b).]
FISCAL EFFECT : Unknown
COMMENTS :
1)Author's Statement : According to the author, "This bill
attempts to curb the illegal trade in gold, silver, gems, and
other items that are subject to the pawn and secondhand dealer
licenses requirements in the B&P and Financial Codes. 'Cash
for Gold', 'weekend hotel gold buyers', 'the Tupperware model
of having all your friends bring their broken or unwanted gold
jewelry to your home and you will be handed cash for it on the
spot' All of these require a valid secondhand dealers
license. Yet, generally, none of them are licensed. Why is
this so important? Licensed secondhand dealers are required to
report to local law enforcement daily all transactions of this
type. DOJ must also be notified daily. Perhaps more
importantly these items must be held for 30 days for the
purpose of inspection by law enforcement. Law enforcement
knows exactly where to go to inspect because the items must be
available at the permanent address of the licensee. None of
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the gold buying models mentioned above can or do comply.
"Additionally the bill describes to manner in which police may
put an unlimited number of 90 'holds' on merchandize suspected
of being 'lost, stolen, or embezzled' and it should be noted
that the police may physically take possession of such items,
but the status of the item is still a hold, this preserves the
property interest of the lender who has perfected a lien on
the property. In this way, after the item has no more
evidentiary value, the property interest is maintained. If
there is some other law enforcement or prosecutorial reason to
take an item from a pawnbroker that has followed all of the
legal requirements, a warrant can be obtained and upon the
conclusion of the criminal action, the pawnbroker will be have
due process when a disputed claim of ownership arises.
"For those operating outside of the law, as unlicensed
traders, the items taken by law enforcement may be seized and
disposed as described in the bill."
2)Knowledge Requirement in Existing Law : Existing law states
that a person who engages in the sale of secondhand goods
without a license is guilty of a misdemeanor if he or she knew
or should have known that a violation was being committed.
Existing law also provides penalties for a violation of this
requirement, which includes jail time and a fine up to $25,000
for a third offense. (Business and Professions Code Section
21645.) This bill deletes the requirement that the person had
knowledge that he or she needed a license in order to sell
secondhand goods.
In order to convict a person under the current law for failing
to have a secondhand dealer license, the prosecuting agency
must show that a person knew of should have known that he or
she needed a license. This only requires that a defendant had
actual knowledge or, in the alternative, that a reasonable
person in the same or similar circumstance as the defendant
would have known that he or she was engaging in activity that
would require a secondhand dealer license. There has been no
showing that prosecutors have difficulty establishing this
requirement.
3)Regulation of Secondhand Dealers and Pawnbrokers : A
secondhand dealer includes a person, business or corporation
whose main purpose is to buy, sell, trade, take in pawn,
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accept for sale on consignment, or accept for auction,
secondhand tangible personal property. Current law
specifically exempts certain individuals from the definition
of a secondhand dealer, including coin dealers, certain
auctioneers and certain appliance repair persons.
City and county licensing agencies have been delegated the
responsibility to implement the State Secondhand Dealer and
State Pawnbroker licensing process through local programs. As
part of this implementation, a local licensing agency (usually
a sheriff or chief of police) is required to accept an
application from any person desiring to be licensed as a
secondhand dealer or pawnbroker within their jurisdiction.
Prior to the granting of a license, the local agencies are
required to submit the secondhand dealer or pawnbroker
"application package" to DOJ for processing. DOJ completes
the background check and issues the appropriate license number
to the local authority requesting the license. An initial
application for local licensure consists of fingerprints, a
licensing fee and evidence of a surety bond. Secondhand
dealers and pawnbrokers are required to renew their licenses
biannually and submit a new application packet each renewal.
Once secondhand dealers and pawnbrokers have received the
appropriate license from the local agency, in addition to any
other business licenses or permits needed to operate, they are
eligible to sell a wide variety of tangible personal property.
Under current law, if someone is operating as a secondhand
dealer without a license they are subject to punishment for
unlawful conduct. If a person knows or should have known they
were committing a violation, they can be penalized by a fine
of up to $1,500 or imprisonment in the county jail for two
months or both for the first offense, a fine of up to $5,000
and imprisonment in the county jail or both for the second
offence, and a fine of up to $25,000 and imprisonment in
county jail up to six months or both for the third offense.
4)Unlicensed Activity : There have been some examples provided
by the author's office noting a recent increase in businesses
that operate without a secondhand dealer's or pawnbroker's
license where sellers may quickly obtain cash for property,
often gold or other precious metals.
According to an August 10, 2010 article from The Daily News of
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Los Angeles, "Law enforcement and local governments are
scrambling to shut down a shadow industry that has sprung from
the booming cash-for-gold business nationwide: Thieves are
snatching jewelry, then converting it into a quick payday at
the shops." Unlicensed entities that promise "cash-for-gold"
are not reporting the items they receive to the appropriate
law enforcement entity, nor are they holding them for the
appropriate time, which may potentially destroy or eliminate
any chance for law enforcement to recover stolen or illegal
items.
In a September 22, 2012 news story in the San Bernardino County
Sun, it was reported that leaders in the City of Rialto have
placed a moratorium on new cash-for-gold shops due to an
increase of thefts. According to the article, officials say
that robbers sell the stolen goods at such cash-for-gold
stores which are more lax than pawn shops in verifying the
merchandise brought in. "Currently, pawn shops are required
to hold the items for 30 days before selling them, which gives
investigators time to find out if they are stolen."
5)Reporting Requirements for Secondhand Goods : When secondhand
dealers or pawnbrokers take in items, whether buying outright
or loaning money and holding for collateral, they are required
to report daily or on the first working day after they have
taken possession of an item on a "JUS 123" standardized form
which must be completed for each item purchased, taken in
trade, taken in pawn or accepted for sale on consignment. The
forms require very specific information including name and
identification of the seller, a description of the property,
(such as serial numbers or other identifying marks),
certification of ownership, certification that the seller's
knowledge of the item is correct, and a fingerprint. Once
completed, a copy is provided to local law enforcement, and a
copy is retained by the dealer. This is to help ensure that
items received by a secondhand dealer or pawnbroker are not
stolen.
Further, to protect the licensees and consumers who may have
been victims of crime of theft, any item received by a
secondhand dealer or pawnbroker is required to be held for 30
days. This allows sufficient time for the appropriate law
enforcement entities to review the items received and
determine if they have been reported stolen or are a part of
some other criminal probe.
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Currently, secondhand dealers and pawnbrokers must report on
the standardized "JUS 123" form by hand. AB 391 (Pan) Chapter
172, Statutes of 2012 required secondhand dealers and coin
dealers to help fund a new electronic reporting system which
was developed by DOJ. Secondhand dealers and pawnbrokers will
utilize an electronic database in which they will enter the
information required in an electronic format, in lieu of
submitting the "JUS-123" and that information will be
available for all law enforcement agencies in a searchable
format. Once the system is up and running, the information
may be easier for law enforcement to search and retrieve lost
or stolen property. Currently, the uniform electronic
reporting system is still in the contracting/production phase,
and its implementation date is not certain.
6)Argument in Support : The California Pawnbrokers Association
writes in support, "The problem of illegal and unlicensed gold
buyers is affecting every community in California. This
activity takes advantage of the public, and is an impediment
to the rightful return of stolen property, and makes effective
law enforcement and prosecution of many tangible personal
property crimes nearly impossible. This bill will provide the
means for more vigorous prosecution of these crimes that are
afflicted upon the California citizenry."
7)Argument in Opposition: The California District Attorneys
Association (CDAA) writes in opposition, "CDAA is concerned
with the language in the bill that governs the issuance of
search warrants. Specifically, the amendments to Business and
Professions Code Section 21647 eliminate the authority of a
peace officer to make an immediate, plain view seizure of
stolen property as recognized in Christians v. Chester (1990)
218 Cal.App.3d 273. Before an officer could make a seizure,
the bill would require that he or she has to give the
pawnbroker written notification as part of placing the item on
hold.
"Additionally, we are generally concerned about attempted
statutory search warrant restrictions that are sought to
protect business interests. Law enforcement has a duty
to investigate and prosecute crime. The application for,
and the issuance of, search warrants are topics that are
the subject of much statute and volumes of case law.
Jurisprudence surrounding the lawful issuance of search
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warrants is a balance between the right to be free from
unlawful searches and the necessity of law enforcement to
enforce the law and protect the public. The fiscal
interests of one particular industry should not trump
this carefully struck balance and respectfully, we feel
this measure unduly restricts the ability of law
enforcement to do its job."
8)Prior Legislation :
1) AB 391 (Pan) Chapter 172, Statutes of 2012, requires
secondhand dealers and coin dealers to report certain
information using the electronic reporting system developed
by DOJ on and after the date that the system is
implemented.
2) AB 1796 (Galgiani) of the 2011-12 Legislative Session,
would have included in the definition of criminal
profiteering activity the unlicensed sale of tangible
personal property or other secondhand goods, including gold
and other precious metals, without a license. This bill
failed passage in the Assembly Public Safety Committee.
3) AB 704 (Ma) of 2011-12 Legislative Session, would have
required that a person conducting business as a secondhand
dealer to provide specified information to any peace
officer upon demand allow for the storage of the item for
up to 90 days, and required an impounding agency to satisfy
specified requirements regarding impounded property and
further would have authorized a nonprofit association
composed of 50 or more licensed secondhand dealers to bring
an action to enjoin a person from conducting business as a
secondhand dealer without being licensed. This bill was
held in the Assembly Judiciary Committee.
4) SB 1520 (Schiff), Chapter 994, Statutes of 2000, makes
the reporting system for pawned and secondhand property
more effective for law enforcement purposes through
development of specified reporting categories and reporting
in electronic form.
REGISTERED SUPPORT / OPPOSITION :
Support
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California Coin and Bullion Merchants Association
California Pawnbrokers Association
California Police Chiefs Association
Opposition
California District Attorneys Association
Los Angeles District Attorney's Office
One Private Individual
Analysis Prepared by : Gabriel Caswell / PUB. S. / (916)
319-3744