BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                     AB 236


                                                                    Page  1





          Date of Hearing:   April 21, 2015


                   ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS


                                Susan Bonilla, Chair


          AB 236  
          Lackey - As Amended April 15, 2015


          SUBJECT:  Weighmasters:  exemptions:  pawnbrokers and secondhand  
          dealers.


          SUMMARY:  Adds pawnbrokers and secondhand dealers to the list of  
          persons who are not weighmasters and makes other technical  
          changes.   


          EXISTING LAW:


          1)Defines a "secondhand dealer" to mean "any person,  
            co-partnership, 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," and specifies that a  
            "secondhand dealer" does not include a coin dealer or  
            participant at gun shows or events, as specified.  (Business  
            and Professions Code (BPC) Section 21626 (a))

          2)Specifies that "secondhand dealers" are not persons who  
            perform the services of an auctioneer for a fee or salary, or  
            persons whose business is limited to the reconditioning and  
            selling of major household appliances, as long as specified  
            conditions are met.  (BPC Section 21626.5)








                                                                     AB 236


                                                                    Page  2










          3)Defines a "weighmaster" to mean any person who, for hire or  
            otherwise, weighs, measures, or counts any commodity and  
            issues a statement or memorandum of the weight, measure or  
            count which is used as the basis for either the purchase or  
            sale of that commodity or charge for service.  (BPC Section  
            12700)

          4)Specifies that the following persons are not weighmasters:   
            (BPC Section 12701) 



             a)   Retailers weighing, measuring or counting commodities  
               for sale by them in retail stores directly to consumers;

             b)   Producers of agriculture commodities or livestock, as  
               specified, when no charge is made for the weighing, or when  
               no signed or initiated statement or memorandum is issued of  
               the weight upon which a purchase or sale of the commodity  
               is based; 



             c)   Common carriers issuing bills of lading, as specified;



             d)   Milk samplers and weighers, as specified;



             e)   Persons who measure the amount of oil, gas, or other  
               fuels for purposes of royalty computation and payment, or  
               other operations of fuel and oil companies and their retail  








                                                                     AB 236


                                                                    Page  3





               outlets;



             f)   Newspaper publishers weighing or counting newspapers for  
               sale to dealers or distributors;



             g)   Textile maintenance establishments, as specified;



             h)   County sanitation districts; as specified;



             i)   Facilities that handle medical waste, as specified;



             j)   Persons who purchase scrap metal or salvage materials  
               pursuant to a nonprofit recycling program, as specified;



             aa)  Licensed pest control operators; 



             bb)  Retailers or recycling centers established solely for  
               the redemption of empty beverage containers; as defined in  
               the Public Resources Code, as specified; and,





             cc)  Any log scaler who performs log scaling functions, as  








                                                                     AB 236


                                                                    Page  4





               specified.  


          5)Requires an applicant for a weighmaster's license, who is a  
            recycler or junk dealer, as specified, or performing services  
            on behalf of a recycler or junk dealer, to pay additional  
            licensing fees to the California Department of Food and  
            Agriculture (CDFA), as specified.  (BPC Section 12704)


          THIS BILL:


          1) Specifies that a pawnbroker or secondhand dealer, who is  
            weighing property that is acquired and reports the acquisition  
            of the property as specified, is not a weighmaster. 



          2)Clarifies that the weighmaster's requirements for junk dealers  
            and recyclers do not apply to pawnbrokers.

          3)States the intent of the Legislature is to clarify that  
            licensed pawnbrokers and secondhand dealers are not  
            weighmasters and declares that the clarification is necessary  
            based on the CDFA's administrative interpretation of SB 485  
            (Calderon), Chapter 518, Statutes of 2013 placing pawnbrokers  
            and secondhand dealers within the meaning of weighmasters.



          FISCAL EFFECT:  Unknown.  This bill is keyed fiscal by the  
          Legislative Counsel.  


          COMMENTS:


          1)Purpose.  This bill is sponsored by the  California  








                                                                     AB 236


                                                                    Page  5





            Pawnbroker's Association  .  According to the author, "[this  
            bill] simply clarifies that the fee created by SB 485  
            (Calderon), Chapter 518 Statutes of 2013, does not apply to  
            pawnbrokers.  SB 485 was passed in 2013 as a measure to help  
            increase compliance with metal theft laws.  Scrap metal  
            recyclers agreed to assess a new $500 fee on their weighmaster  
            permit in order to improve enforcement.  In 2014 several  
            pawnbrokers in the Los Angeles area were told that they must  
            become weighmasters and pay the fee despite SB 485's intent  
            being clear that it only applied to scrap metal dealers. [This  
            bill] explicitly exempts pawnbrokers from being considered a  
            weighmaster.  This is appropriate because pawnbrokers do not  
            deal with commodities exclusively priced by weight. Instead  
            the value of products they purchase is based on a variety of  
            factors.  [This bill] prevents pawnbrokers around California  
            from unnecessarily being charged a $500 fee to fund improved  
            compliance with metal theft laws-something that could violate  
            Prop 26's provisions because pawnbrokers have nothing to do  
            with metal theft."


          2)Background.  According to the sponsor, those individuals  
            involved in pawnbroking or secondhand dealing typically do not  
            conduct transactions which require the use of a scale; yet,  
            the author and sponsor state that recently pawnbrokers have  
            been required by the CDFA to obtain a weighmaster's license.   
            The sponsor contends that pawnbrokers loan money on an item  
            based on several criteria and not solely on the factor of the  
            weight alone.  Further, to clarify that if a pawnbroker were  
            using a scale for the valuation of commodities and needed an  
            additional weighmasters license, he or she would not be  
            required to pay the additional fee which is currently required  
            for junk dealers and recyclers under BPC Section 12704(b), as  
            a result of SB 485 (Calderon), Chapter 518, Statutes of 2013.













                                                                     AB 236


                                                                    Page  6





            BPC Section 21625 specifies the intent of the Legislature in  
            establishing the provisions for secondhand dealers was to help  
            curtail the dissemination of stolen property and help  
            facilitate the recovery of stolen property through a  
            statewide, uniform reporting system.  Every secondhand dealer,  
            including pawnbrokers, are required to report daily or on the  
            first working day after the purchase of property to the  
            Department of Justice (DOJ).  The reporting helps law  
            enforcement track and monitor items of high crimes as  
            determined by the DOJ in an effort to prevent stolen property  
            from being sold between secondhand dealers or taken in pawn.  





            The regulation of weighmasters is found in a separate section  
            of the BPC.  Weighmasters weigh, measure, or count any  
            commodity and issue a statement or memorandum of the weight,  
            measure or count which is used as the basis for either the  
            purchase or sale of that commodity or charge for service.   
            Weighmasters, include those individuals who are junk dealers  
            and recyclers who typically buy recycled "junk" including all  
            ferrous and nonferrous scrap materials.    





            Unlike pawnbrokers and secondhand dealers, junk dealers  
            typically base the value of their items on the weight of the  
            commodity and are therefore subject to the provisions  
            requiring a weighmaster's license.  Under current law,  
            pawnbrokers are specifically exempt from the laws regulating  
            junk dealers and recyclers however; they are not exempt from  
            the weighmasters law.  This bill seeks to clarify that  
            pawnbrokers and secondhand dealers, while conducting  
            transactions with a scale and holding and reporting property  
            as required, are not required to obtain a weighmaster's  








                                                                     AB 236


                                                                    Page  7





            license when performing those duties for which they are  
            licensed.





            Pawnbrokers and Secondhand Dealers.  A secondhand dealer  
            includes a person, business or corporation whose main purpose  
            is to buy, sell, trade, take in pawn, 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.  According to the National  
            Pawnbrokers Association, the core of a pawn store's business  
            is making collateral loans by securing something of value.   
            The pawn store may have other business elements such as retail  
            sales. However, pawnbrokers focus on lending money.  Customers  
            bring in an item of value, and the pawnbroker offers a loan  
            based on a percentage of the item's estimated value.  The  
            pawnbroker then keeps the item until the customer repays the  
            loan with interest and any additional fees that may apply.   
            Pawn stores are regulated on a federal, state, and local  
            level.  On average, customers receive only a portion of the  
            item's retail value. The average loan amount nationally is  
            $150. The sponsors of this bill contend that pawnbrokers  
            typically value the item based on several factors and not  
            weight alone.



            Pawn Broker and Secondhand Dealer Transactions.  Traditional  
            pawn and secondhand dealer transactions typically take place  
            through face-to-face encounters where applicable state and  
            local laws can apply, such as California's 30-day hold  
            requirement.  In 2012, AB 391 (Pan) Chapter, Statutes of 2012,  
            was enacted and established a new requirement that secondhand  
            dealers and pawnbrokers electronically report to the DOJ all  








                                                                     AB 236


                                                                    Page  8





            secondhand tangible property which has been purchased, taken  
            in trade, taken in pawn, accepted for sale on consignment or  
            accepted for auctioning, the new electronic database is in the  
            process of development. 



            Weighmasters.  Enforcement of California's weights and  
            measures laws and regulations is the responsibility of the  
            Division of Measurement Standards (DMS) under the CDFA.   
            Weights and measures officials have the authority to issue  
            citations for misdemeanor and infraction violations involving  
            weights and measures laws.  The CDFA is authorized to inspect  
            all weighmasters, including those of junk dealers and  
            recyclers, to ensure compliance with recordkeeping and  
            reporting requirements with relation to the issuance of  
            weighmaster certificates.  According to the CDFA, most  
            pawnbrokers are not required to obtain a weighmaster's  
            certificate unless they are conducting business services which  
            require a weighmaster's license.  The sponsor notes that the  
            majority of pawnbroking businesses do not overlap with the  
            requirements that would trigger a weighmaster's license.  


            In 2013, SB 485 (Calderon) Chapter 518, Statutes of 2013,  
            increased the amount of information that must be provided by a  
            junk dealer or recycler on an application for a new  
            weighmaster's license or renewal in order to provide both the  
            CDFA and the county sealers with better information to  
            determine if a junk dealer or recycler business is operating a  
            legitimate business.  



            The current license fee a weighmaster is required to pay to  
            the CDFA for each license year, depending on location, is: $75  
            for a weighmaster operating at a fixed location; $30 for each  
            additional fixed location; and $200 if the weighmaster is  
            operating at other than a fixed location.  SB 485 enhanced  








                                                                     AB 236


                                                                    Page  9





            that fee by requiring a junk dealer or recycler to pay an  
            additional $500 fee for each fixed location or other location  
            where it operates to cover costs associated with the  
            investigative work performed by the DMS to review the  
            additional material submitted on the application for a  
            weighmaster's license or renewal.  
            The author and sponsor explain that the pawnbrokers and  
            secondhand dealers are being required to pay the additional  
            $500 fee which was established for junk dealers.  BPC Section  
            21603 explicitly states that pawnbrokers are not junk dealers.  
             In the event that a pawnbroker is providing a separate  
            service that would require a weighmaster's license. This bill  
            would exempt pawnbrokers, who may also need to obtain a  
            weighmaster's licenses, from the additional $500 fee which was  
            specifically required for junk dealers and recyclers. 





            Prior Related Legislation.  ACR 101 (Jones-Sawyer), Chapter  
            154, Statutes of 2014, requested the DOJ convene stakeholder  
            meetings in 2014 with representatives from law enforcement,  
            prosecutors, the secondhand dealer and pawnbroker industry,  
            and interested members of the public to identify changes in  
            current law which would allow secondhand dealers and  
            pawnbrokers to conduct Internet-based business.  
            
            SB 485 (Calderon), Chapter 518, Statutes of 2013, required a  
            junk dealer or recycler to submit additional information  
            regarding its junk dealer business to the CDFA when applying  
            for a weighmaster's license or a renewal license; required the  
            CDFA to complete an investigation of the information on the  
            application or renewal within a specified period of time and  
            revoke the license if the information submitted in the  
            application or renewal is materially inaccurate; increases the  
            fees that junk dealers or recyclers pay for each fixed  
            location; and sunsets these provisions on January 1, 2019.  









                                                                     AB 236


                                                                    Page  10







            SB 757 (Berryhill) of 2013, would have made conforming changes  
            to authorize a junk dealer or recycler buying newspaper or  
            California Redemption Value (CRV) containers, as specified, to  
            accept as valid seller identification a passport from any  
            country or a Matricula Consular issued by Mexico.  It also  
            specified that the term "secondhand dealer" did not include a  
            junk dealer.  NOTE: This bill was amended to address an  
            unrelated issue: Groundwater management.  

            AB 909 (Gray) of 2013, would have required the Board of State  
            and Community Corrections to establish the Metal Theft Task  
            Force Program to provide, evaluate and monitor grants  
            disbursed to enhance the capacity of local law enforcement and  
            prosecutors to deter, investigate, and prosecute metal theft  
            and related metal theft crimes.  NOTE: This bill was vetoed by  
            Governor Brown.  

            AB 841 (Torres) of 2013, would have required junk dealers and  
            recyclers to provide payment to sellers of nonferrous material  
            by mailed check only, as specified.  NOTE: This bill was  
            vetoed by Governor Brown.  In the Governor's veto message he  
            stated that "he signed four bills last year to prevent more  
            theft" ?.What's really missing today is robust enforcement of  
            our laws."
             
             AB 316 (Carter), Chapter 317, Statutes of 2011, provided that  
            every person who steals, takes, or carries away copper  
            materials which are of a value exceeding $950 is guilty of  
            grand theft, punishable by a fine not exceeding $2,500,  
            imprisonment in a county jail not exceeding one year, or by  
            both that fine and imprisonment, or by imprisonment in a  
            county jail or the state prison not exceeding 16 months, or 2  
            or 3 years and a fine not to exceed $10,000, as specified.



            AB 1778 (Ma), Chapter 733, Statutes of 2009, required  








                                                                     AB 236


                                                                    Page  11





            recyclers to obtain identifying information of individuals who  
            bring in more than $50 worth of CRV recyclables and  
            newspapers.  AB 1778 also required that payments of $50 or  
            more be made by check.

            SB 447 (Maldonado), Chapter 732, Statutes of 2008, required  
            scrap metal dealers and recyclers to report what materials are  
            being scraped at their facilities and by whom on a daily  
            basis.

            AB 844 (Berryhill), Chapter 731, Statutes of 2008, required  
            recyclers to hold payment for three days, check a photo ID,  
            and take a thumbprint of anyone selling scrap metals.  Also  
            required any person convicted of metal theft to pay  
            restitution for the materials stolen and for any collateral  
            damage caused during the theft.

            SB 691 (Calderon), Chapter 730, Statutes of 2008, required  
            junk dealers and recyclers to take thumbprints of individuals  
            selling copper, copper alloys, aluminum, and stainless steel.   
            Also, required sellers to show a government identification  
            (ID) and proof of their current address.  Recyclers who  
            violated the law faced suspension or revocation of their  
            business license and increased fines and jail time.
            


          ARGUMENTS IN SUPPORT:


          The  California Pawnbroker's Association  writes in support,  
          "Pawnbrokers are not commodity dealers, recyclers, or junk  
          dealers; we loan money on a multitude of factors other than  
          metal weight and we already report to DOJ all reportable  
          transactions and pay a large biannual fee to do so.  With  
          understandable zeal, the [CDFA] has attempted to interpret  
          2013's SB 485 (Calderon) as classifying pawnbrokers as recyclers  
          or junk dealers for purposes of imposing the fee authorized in  
          that legislation."








                                                                     AB 236


                                                                    Page  12







          ARGUMENTS IN OPPOSITION:


          None on file.


          POLICY ISSUES FOR CONSIDERATION: 


          It is currently unclear how many pawnbrokers or secondhand  
          dealers may be conducting transactions that would also require  
          them to obtain a weighmaster's license.  While this bill seeks  
          to clarify that pawnbrokers, who conduct transactions of a  
          pawn-broking nature, should not be required to obtain a  
          weighmaster's license, it may be necessary for pawnbrokers who  
          also provide services such as buying or selling scrap metals and  
          salvage materials based on weights or measures, to obtain a  
          weighmaster's license for their additional business  
          transactions.  


          REGISTERED SUPPORT:





          California Pawnbroker's Association (sponsor)


          West Coast Chapter of the Institute of Scrap Recycling  
          Industries, Inc. 




          REGISTERED OPPOSITION:








                                                                     AB 236


                                                                    Page  13







          None of file.  




          Analysis Prepared by:Elissa Silva / B. & P. / (916) 319-3301