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