BILL ANALYSIS Ó
AB 1751
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Date of Hearing: April 12, 2016
ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS
Rudy Salas, Chair
AB 1751
(Low) - As Amended March 28, 2016
NOTE: This bill contains an urgency clause.
SUBJECT: Secondhand goods.
SUMMARY: Eliminates the requirements for the Department of
Justice (DOJ) to develop descriptive categories for the single,
statewide, and uniform electronic reporting system for purposes
of reporting requirements of tangible personal property for
secondhand dealers, and instead requires the DOJ to accept the
plain text property descriptions commonly recognized and
utilized by the pawn and secondhand dealer industries; requires
the DOJ to encode those plain text property descriptions and
prohibits the DOJ from using initial licensing fees for that
purpose, as specified; requires the single, statewide, and
uniform electronic reporting system to be implemented and
operated in compliance with the Administrative Procedure Act and
prohibits the DOJ from taking any action with respect to the
implementation, operation, or maintenance of the electronic
reporting system by adoption of an emergency regulation;
specifies that a secondhand dealer is not required to provide
additional information about a seller or pledger, other than
what is required in existing law; and, makes other technical and
clarifying amendments.
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EXISTING LAW:
1)Defines a "secondhand dealer" to mean and include 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, but does not include a
coin dealer or participants at guns shows or events, as
specified. (Business and Professions Code (BPC) Section
21626(a))
2)Defines "tangible personal property" all secondhand tangible
personal property which bears a serial number or personalized
initials or inscription, or which at the time it is acquired
by the secondhand dealer, bears evidence of having had a
serial number or personalized initials or inscription. (BPC
Section 21627(a))
3)Defines "tangible personal property" to also mean all tangible
personal property that the Attorney General (AG) statistically
determines through the most recent DOJ "Crime in California"
report to constitute a significant class of stolen goods and
requires the DOJ to supply a list of such personal property to
all local law enforcement agencies, post it on the AG's Web
site, and update it annually beginning January 1, 2016. (BPC
Section 21627(c)).
4)Defines a "significant class of stolen goods" to mean those
items determined through the DOJ's annual "Crime in
California" report to constitute more than 10% of property
reported stolen in the calendar year preceding the annual
posting of the list of significant classes of stolen goods.
(BPC Section 21627(e))
5)Requires every secondhand dealer or coin dealer, as specified,
to report daily, or on the first working day after receipt or
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purchase of secondhand tangible personal property, on forms or
through an electronic reporting system approved by the DOJ,
all secondhand tangible personal property, excluding 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; provides that the
report contain specified information including a complete and
reasonably accurate description of serialized property, as
specified, a complete and reasonably accurate description of
nonserialized property, a certification by the intended seller
or pledger that he or she is the owner of the property or has
the authority to sell or pledge, a certification of the
intended seller that to his or her knowledge and belief
information is true and complete, and a legible fingerprint
taken from the seller or pledger, as prescribed by the DOJ.
(BPC Section 21628(A)(1-7))
6)Requires every secondhand dealer or coin dealer as specified,
to report daily, or on the first working day after receipt or
purchase of secondhand tangible personal property, on forms or
through an electronic reporting system approved by the DOJ,
all secondhand tangible personal property, except for
firearms, which he or she has taken in trade or pawn, accepted
for sale on consignment, or accepted for auctioning to the
chief of police or the sheriff as specified. (BPC 21628)
7)Requires the DOJ, in consultation with appropriate law
enforcement agencies, to develop clear and comprehensive
descriptive categories denoting tangible personal property, as
specified, subject to reporting requirements. (BPC Section
21628(d)(1))
8)Defines an "item" to mean any single article; however, with
respect to a commonly accepted grouping of articles that are
purchased as a set, including, but not limited to, a pair of
earrings, or place settings of china, silverware, or other
table ware, "item" refers to the commonly accepted grouping.
THIS BILL:
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9) Authorizes a secondhand dealer or coin dealer, as specified,
to submit daily transaction reports to the chief of police or
to the sheriff on paper forms until the electronic reporting
system operated by the DOJ is operational in the jurisdiction
where the secondhand dealer is located, and specifies that the
report may only include specified information.
10)Deletes the requirement that the DOJ, in consultation with
the appropriate law enforcement agencies, develop clear and
comprehensive descriptive categories denoting tangible
personal property and instead requires the DOJ to accept the
plain text property descriptions generally accepted in the
pawn and secondhand industries provided by secondhand dealers,
as has been the longstanding practice of chiefs of police and
sheriffs when they receive paper reports from secondhand
dealers.
11)Requires the DOJ to have the continuing duty to encode the
plain text property descriptions received by pawnbrokers and
secondhand dealers for law enforcement databases in order for
those descriptions to be useful for law enforcement purposes.
12)Specifies that funds collected by DOJ for processing
secondhand dealer applications and initial licenses,
processing renewal licenses, and implementing, operating, and
maintaining the single statewide, uniform electronic
reporting system cannot be used by the DOJ for encoding or to
train personnel to encode the descriptions in 3 above.
13)Specifies that until the uniform electronic reporting system
is implemented, chiefs of police and sheriffs that continue to
receive paper forms must also recognize and accept the plain
text property descriptions generally recognized in the pawn
and secondhand industries.
14)States that unless specifically identified in BPC Section
21628, the DOJ, chiefs of police, and sheriffs cannot require
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a secondhand dealer to include any additional information
concerning the seller, the pledger, or the property received
by the secondhand dealer in the report, as specified.
15)States that the single, statewide and uniform electronic
reporting system, required as specified, must be implemented
and operated in compliance with the Administrative Procedures
Act and in implementing and operating the single, statewide
and uniform electronic reporting system, the DOJ chiefs of
police and sheriffs must comply with current reporting and
holding requirements as specified.
16)Prohibits the DOJ from taking any action with respect to the
implementation, operation, or maintenance of the electronic
reporting system by adoption of an emergency regulation.
17)Requires a secondhand dealer to electronically transmit to
the DOJ's single, statewide, uniform electronic reporting
system on the date of the transaction or, if not possible due
to an electrical, telecommunications, or other malfunction, as
soon as reasonable thereafter, the report of acquisition of
tangible personal property.
18)States that this bill is an urgency statute necessary for the
immediate preservation of the public peace, health or safety
within the meaning of Article IV of the Constitution, and the
facts constituting the necessity include:
a) In order to make the single, statewide, uniform
electronic reporting system a cost savings for secondhand
dealers and pawnbrokers, the plain text property
descriptions historically utilized by these industries must
be accepted by the DOJ, just as these plain text
descriptions have historically been accepted by chiefs of
police and sheriffs; and,
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b) Further, to protect the integrity of law enforcement
databases, it is necessary to specify that only trained law
enforcement personnel are to input classification codes of
property reported by these businesses, not the businesses
themselves.
19)States that it is the intent of the Legislature to clarify
that pawnbrokers and other secondhand dealers are to report
their acquisition of tangible personal property in
descriptive, plain text language commonly used in the pawn and
secondhand industries; by specifying the manner or reporting,
it relives all secondhand dealers and pawnbrokers of the
inherent costs and burdens imposed under existing law that
requires these businesses to report their daily acquisitions
of secondhand tangible personal property; further states the
intent that the DOJ continue to accept the plain text
descriptive language historically used in the pawn and
secondhand industries; and, only properly trained law
enforcement personnel of the DOJ or local law enforcement
classify and encode for law enforcement databases.
FISCAL EFFECT: Unknown. This bill is keyed fiscal by the
Legislative Counsel.
COMMENTS:
Purpose. This bill revises the DOJ's current requirements for
the implementation and construction of the single, statewide
and uniform electronic reporting database which was funded as
a result of AB 391 (Pan), Chapter, 172, Statutes of 2012.
This bill is sponsored by the California Pawnbrokers
Association (CPA). According to the author, "the need for
this legislation arises because in implementing the
[California Automated Pawn and Secondhand Dealer System
(CAPSS)] system, the DOJ is requiring that second hand dealers
to input optional information beyond what is statutorily
authorized by the Legislature. [This bill] will continue the
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requirement of existing law by specifying that the plain text
property descriptions commonly recognized and utilized by the
pawn and secondhand dealer industries shall be the sole method
of describing property acquired by these businesses. [This
bill] also makes it clear that the CAPSS system does not
expand beyond current law the information that is required to
be collected or reported by secondhand dealers and
pawnbrokers."
Licensing Requirements for Secondhand Dealers. The regulation
of secondhand dealers and pawnbrokers occurred as a result of
AB 2967 (Young) Chapter 499, Statutes of 1980. The intent of
regulation was to provide law enforcement agencies with a
means to curtail the selling of stolen property and to
facilitate its recovery by means of a uniform statewide, state
administered secondhand dealer licensing and reporting
program. Secondhand dealers include persons whose business
includes buying, selling, trading, taking in pawn, accepting
for sale on consignment, accepting for auctioning or
auctioning secondhand tangible personal property.
Pursuant to BPC Section 21641, local entities such as police
chiefs, the sheriff, or where appropriate the police
commission, have the responsibility to incorporate the
Secondhand Dealer and Pawnbroker licensing process into their
local programs. It is the responsibility of the local
licensing agency to administer, maintain, and enforce state
law regarding the secondhand dealer and pawnbroker licenses.
Persons, entities, or corporations wishing to conduct business
as a secondhand dealer or pawnbroker, must first apply for a
specific license to conduct the business with the local
licensing agency (chief of police or sheriff) who then
receives background check results and a license number issued
by the DOJ's Secondhand Dealer and Pawnbroker Unit. 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 with
each renewal.
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Once secondhand dealers and pawnbrokers have received the
appropriate license from the local agency, in addition to any
other locally required business licenses or permits needed to
operate, they are eligible to transact business with 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.
Pawnbroker Industry in California. According to information
provided by the CPA, there are thousands of different "articles"
that are pawned or bought daily in California by approximately
600 California pawnbrokers. Further, the daily transactions for
pawnbrokers vary from shop to shop with a low of 10 to a high of
600, with the average around 50.
Reporting Requirements for Secondhand Dealers. To help curtail
the dissemination of stolen property, BPC Section 21628
specifies that 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.
Until January 1, 2016, that property report was completed on
the "JUS 123" standardized paper form which was completed for
each item purchased, taken in trade, taken in pawn or accepted
for sale on consignment. The form required very specific
information including, but not limited to, 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 was provided to local law enforcement, and a
copy retained by the dealer. This was to help ensure that
items received by a secondhand dealer or pawnbroker were not
stolen, and provided a mechanism for law enforcement to
review, retrieve or hold as part of an investigation.
AB 391 (Pan), Chapter 172, Statutes of 2012, required secondhand
dealers and coin dealers to help fund a new reporting system,
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which the DOJ was mandated to develop and implement. The
result was the California Pawn and SecondhandDealer
System(CAPSS). The CAPSS system was intended to eliminate the
need for paper reports in favor of a uniform electronic
database. With the advent of the CAPSS system, licensed
secondhand dealers and pawnbrokers are able to submit the
requisite tangible personal property transaction information
to the DOJ online instead of on paper, saving time and
providing a functional system for law enforcement purposes.
The CAPSS system is funded through licensing fees from the
secondhand dealers. As a result of implementing the funding
mechanism, licensing fees for secondhand dealers rose from $12
to $300 biannually. The single uniform database was intended
to alleviate the need for the submission of multiple paper
reports which were described as costly and time consuming, and
resource intensive for local law enforcement.
The CAPPS System. According to information provided on the
DOJ's website, the initial CAPSS system was implemented in
December 2014. Since that time, the DOJ reports that its
contractor has been working diligently on phase-in
improvements.
Pursuant to BPC Section 21628(d)(1), in establishing the CAPSS
system, the DOJ was required to consult with appropriate law
enforcement agencies to develop clear and comprehensive
descriptive categories denoting tangible personal property,
where the categories are to be incorporated by secondhand
dealers and coin dealers for purposes of reporting requirements.
The sponsors of this bill, report concerns with the usability
of the system.
The current CAPSS system allows secondhand dealers to report two
ways: 1) through an item-by-item manual transaction on the DOJ's
website, via a secure log-in; and 2) through a "bulk upload"
which permits a secondhand dealer to report multiple records of
seller or pledger records as opposed to a single item by item.
The bulk upload feature is necessary for those shops which deal
in high volume transaction.
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Issues with the CAPSS System and the Current Reporting
Requirements. Prior to the implementation of the CAPSS
system, secondhand dealers would utilize paper "JUS 123"
forms, which required the use of plain text (handwritten)
descriptions to describe the property acquired. Secondhand
dealers would fill out the documents using terminology more
common to the pawn and secondhand industry, as there was not
specific descriptive language requirements or categories that
secondhand dealers were required to use. These paper forms
were submitted daily or on the next business day to local law
enforcement who would in turn enter the data into a database
system. Law enforcement would then transfer the property as
described on the "JUS 123" into the appropriate law
enforcement data base system.
The CAPSS system was intended to alleviate the burden of filling
out paper "JUS 123" forms where, the report of daily
acquisitions of secondhand tangible personal property was
limited to a single transaction. However, the revised
reporting process implemented through the DOJ's CAPSS system
has become an issue for the CPA. According to the CPA, "the
DOJ is placing the obligation on secondhand dealers and their
employees to categorize the property these businesses acquire
utilizing law enforcement classifications rather than the
historic plain text descriptions commonly utilized by and
recognized in the secondhand and pawn industries.
This requirement by the DOJ now obligates the businesses to
transmit their property descriptions in the language of law
enforcement rather than language recognized in their
businesses. Property descriptions utilized by these industries
are generally significantly more descriptive because dealing
in the trade requires describing items for their customer to
review and approve."
In addition, the CPA raised concerns about the request to
disclose more information about a seller or pledger than what is
required under current law. BPC Section 21628 specifies that
information that is to be reported by secondhand dealers on the
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"JUS 123," which includes, a report written in English that is
legible, contain specified information about the seller or
pledger of the property, a complete and reasonable description
of the property including serial numbers or other identifiers, a
certification from the seller or pledger that he or she is he
owner and can sell or pledge the property, a certification that
the seller or pledger's knowledge of the item is correct, and a
legible fingerprint. Pursuant to BPC Section 21628(b)(1), only
upon successful completion of the reporting requirements
described above, can the secondhand dealer have the adequate
authority to take possession of the property.
BPC Section 21628(a)(2) specifies the identification that a
secondhand dealer can accept from a seller or pledger which
includes: 1) a passport of the United States; 2) a driver's
license issued by any state or Canada; 3) any state
identification card; 4) a passport from any other country in
addition to another item of identification bearing an address;
and, 5) a Matricula Consular card. The CPA notes that
additional information beyond the identification regarding the
seller or pledger has been requested to be reported, which the
CPA contends is not explicitly authorized under 21628. This
bill seeks to clarify that the DOJ, sheriffs and chiefs of
police cannot require secondhand dealers to include any
additional information about the seller or pledger, or the
property received other than what is specified, under current
law.
In order to address the multiple issues with the CAPSS system as
raised by the CPA, this bill does four things: 1) allow
secondhand dealers to use plain text property descriptions
when reporting daily; 2) require the information collected
about the seller or pledger be only what is required under
existing law; 3) authorize the continuation of the paper "JUS
123" with the acceptance of plain text property descriptions;
and, 4) require that DOJ's implementation of the CAPSS system
follow the Administrative Procedures Act and not through
emergency regulations.
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This bill will allow for the continued use of the "JUS 123"
until the CAPSS system is fully implemented (if this bill were
to pass, the DOJ would need to revise the current database in
order to accept electronic reports with the plain text property
description), and would allow secondhand dealers to report as
soon as possible in the event of a technological malfunction of
the system and not be out of compliance for not reporting as
specified in existing law. In addition, this bill deletes the
requirement for the DOJ to consult with local law enforcement to
create clear and comprehensive descriptive categories, and
instead recognize and accept the plain text property
This bill contains an urgency clause to expedite the requirement
for the DOJ to update its current CAPSS system and allow for
transaction reports to be accepted with plain text property
descriptions.
Current Related Legislation. AB 2236 (Santiago and Bonta) of
the current legislative session, defines "tangible personal
property" to exclude these specified types of property that
have a value of $950 or less. Note: This bill is pending in
the Assembly Committee on Business and Professions.
Prior Related Legislation: AB 1182 (Santiago), Chapter 749,
Statutes of 2015 narrowed the definition of tangible personal
property, as specified, and requires the DOJ to annually
update the list of items which represent a significant class
of stolen goods, beginning January 1, 2016, and post it on its
Web site, and makes other technical and clarifying amendments.
AB 632 (Eggman), Chapter 169, Statutes of 2015, would authorize
specified unique identifying numbers to be used as the serial
number reported for handheld electronic devices, as specified.
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SB 782 (Hill), Chapter 318, Statutes of 2013, clarifies the
interests of licensed pawnbrokers and secondhand dealers
relating to the seizure and disposition of property during a
criminal investigation or case.
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.
AB 1796 (Galgiani), of 2012 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.
Note: This bill failed passage in the Assembly Public Safety
Committee.
AB 704 (Ma) of 2011 would have required that a person conducting
business as a secondhand dealer provide specified information to
any peace officer upon demand and allow for the storage of the
item for up to 90 days, 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. Note: This bill was held in the Assembly
Judiciary Committee.
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.
ARGUMENTS IN SUPPORT:
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The California Pawnbrokers Association writes in support, "The
California Pawnbrokers Association is proud to sponsor and
support [this bill]. This important urgency measure when
enacted may keep hundreds of small businesses operating in
California.
ARGUMENTS IN OPPOSITION:
The California State Sheriffs' Association writes in opposition,
"The proponents of this bill now argue that this reporting
requirement is difficult or will require additional training and
technology. The DOJ has made significant overtures to assist
the affected industry with the new reporting methodology.
Additionally, abandoning the requirement that person who is in
possession of the item (the pawnbroker) describe the item in
favor of requiring DOJ to interpret a free-form, plain text
description without the benefit of seeing or holding the item
will lead to a database that contains less-than-accurate
information and will severely limit the utility of this
important crime-fighting tool."
POLICY ISSUE(S) FOR CONSIDERATION:
1) This bill will likely result in the DOJ modifying or
revising the current CAPSS system and will also require, in
the process, that the implementation and operation of the
system be done in compliance with the Administrative
Procedures Act, and not through emergency regulations. The
timeframe necessary to complete a system update and
navigate through the regulation process will take an
unknown amount of time. Although, the current database
will may be operational, many secondhand dealers will need
to return to the "JUS 123" to report.
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2) To facilitate an exchange of information regarding the
DOJ's single, statewide, and uniform electronic reporting
system, the author should amend the bill as follows:
On or before July 1, 2017, the Department of Justice shall
convene a meeting with the Department of Technology to discuss
issues pertaining to any proposed changes or upgrades to the
single, statewide, and uniform electronic reporting system and
the Department of Technology may provide technological
assistance for ongoing improvements, updates or changes to the
single, statewide, and uniform electronic reporting system, as
requested.
REGISTERED SUPPORT:
California Pawnbrokers Association (sponsor)
REGISTERED OPPOSITION:
California State Sheriffs' Association
California Police Chiefs Association
Analysis Prepared by:Elissa Silva / B. & P. / (916) 319-3301
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