BILL ANALYSIS Ó
AB 1751
Page 1
ASSEMBLY THIRD READING
AB
1751 (Low)
As Amended May 31, 2016
2/3 vote. Urgency
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|Committee |Votes|Ayes |Noes |
| | | | |
| | | | |
| | | | |
|----------------+-----+----------------------+--------------------|
|Business & |15-0 |Salas, Brough, Bloom, | |
|Professions | |Campos, Chávez, | |
| | |Dahle, Dodd, Eggman, | |
| | |Gatto, Gomez, Holden, | |
| | |Jones, Mullin, Ting, | |
| | |Wood | |
| | | | |
|----------------+-----+----------------------+--------------------|
|Appropriations |19-1 |Gonzalez, Bigelow, |Roger Hernández |
| | |Bloom, Bonilla, | |
| | |Bonta, Calderon, | |
| | |Chang, Daly, Eggman, | |
| | |Gallagher, Eduardo | |
| | |Garcia, Holden, | |
| | |Jones, Obernolte, | |
| | |Quirk, Santiago, | |
| | |Wagner, Weber, Wood | |
| | | | |
| | | | |
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AB 1751
Page 2
SUMMARY: Revise and recasts the Department of Justice's (DOJ)
requirements for the implementation, construction, and
maintenance of the single, statewide and uniform electronic
reporting system, defined as the California Automated Pawn and
Secondhand Dealer System (CAPSS), revises the reporting
requirements for pawnbrokers and secondhand dealers and makes
numerous other technical and clarifying changes, as specified.
Specifically, this bill:
1)Defines CAPSS to mean "the California Pawnbroker and
Secondhand Dealer System which is a single, statewide, uniform
electronic reporting system that receives secondhand dealer
reports and is operated by the DOJ consistent with Resolution
Chapter 16 of the Statutes of 2010. The maintenance and
operation of CAPSS is funded by the Secondhand Dealer and
Pawnbroker Fund."
2)Replaces "single, statewide and uniform electronic reporting
system" with "CAPSS".
3)Revises the reporting requirements to require every secondhand
dealer or coin dealer, as specified, to report daily or no
later than the next business day, excluding weekends and
holidays, as specified.
4)Revises the property description requirements, as specified.
5)Authorizes a secondhand dealer to utilize an article field
descriptor, the format which must be provided by the DOJ, if
using the article field descriptor would, in whole or in part,
accurately populate the property description with a plain text
description generally accepted in the secondhand industry.
6)Specifies that the lack of an article field descriptor by a
secondhand dealer is not relevant to any determination as to
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whether the secondhand dealer has received evidence of
authority to sell or pledge the property, as specified.
7)Specifies that a report submitted by a pawnbroker or
secondhand dealer is deemed to have been accepted by the DOJ
if a good faith effort has been made to supply all of the
required information.
8)Specifies that an error or omission on the report be noted,
the pawnbroker or secondhand dealer be notified of the error
by the DOJ, and the reporting pawnbroker or secondhand dealer
has three business days from the notice by the DOJ to amend or
correct the report before being subject to any enforcement
violation.
9)Revises the reporting requirements for secondhand dealers
conducting any business at a gun show, as specified.
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)Specifies that funds collected by DOJ for processing
secondhand dealer applications and initial licenses,
processing renewal licenses, and implementing, operating, and
maintaining CAPSS cannot be used by the DOJ for encoding or
to train personnel to encode the descriptions in 3) above.
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12)States that unless specifically identified in Business and
Professions Code (BPC) Section 21628, the DOJ, chiefs of
police, and sheriffs cannot require 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.
13)States that if there is a future change to the reporting
requirement of CAPSS that substantively alters the reporting
standards, as specified, those changes must be implemented and
operated in compliance with the Administrative Procedures Act
and in implementing and operating a future change to CAPSS,
the DOJ chiefs of police and sheriffs must comply with current
reporting and holding requirements as specified.
14)Prohibits the DOJ from taking any action with respect to the
implementation, operation, or maintenance of CAPSS by adoption
of an emergency regulation.
15)Requires on or before July 1, 2017, the DOJ to convene a
meeting with the Department of Technology to discuss issues
pertaining to any proposed changes or upgrades to CAPSS, as
specified.
16)Requires a secondhand dealer or coin dealer to electronically
transmit to CAPSS, no later than the next business day, on the
date of the transaction, excluding weekends or holidays 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.
17)Deletes the provisions related to reporting on paper forms,
as specified.
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18)Deletes current requirements pertaining to the development
and implementation of the CAPSS, as specified.
19)States that this bill is an urgency statute necessary for the
immediate preservation of the public peace, health or safety
within the meaning of California Constitution Article IV, 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,
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.
20)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
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classify and encode for law enforcement databases.
21)Makes numerous technical and clarifying amendments to
secondhand dealer reporting requirements.
FISCAL EFFECT: According to the Assembly Appropriations
Committee, minor and absorbable costs to DOJ.
COMMENTS:
Purpose. This bill revises the DOJ's current requirements for
the implementation and construction of CAPSS 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 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 [CAPSS] 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,
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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.
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.
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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,
which the DOJ was mandated to develop and implement. CAPSS was
intended to eliminate the need for paper reports in favor of a
uniform electronic database. With the advent of CAPSS, 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. CAPSS 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. CAPSS 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.
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CAPSS. According to information provided on the DOJ's Web site,
CAPSS 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 CAPSS, 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.
CAPSS currently 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.
Issues with CAPSS and the Current Reporting Requirements. Prior
to the implementation of CAPSS, 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.
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CAPSS 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 CAPSS 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
"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
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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 CAPSS as raised by
the CPA, this bill makes numerous revisions to existing law
including: 1) revising plain text property description
requirements; 2) require the information collected about the
seller or pledger be only what is required under existing law;
3) revising reporting requirements; and, 4) require that any
future changes to CAPSS follow the Administrative Procedures Act
and not through emergency regulations, as specified, among
others.
This bill will also require the DOJ to convene a meeting with
the Department of Transportation pertaining to any proposed
changes or upgrades to CAPSS. 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 plain text property
descriptions generally accepted in the pawn and secondhand
dealer industries.
This bill contains an urgency clause to expedite the requirement
for the DOJ to update CAPSS and allow for transaction reports to
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be accepted with plain text property descriptions.
Analysis Prepared by:
Elissa Silva / B. & P. / (916) 319-3301 FN:
0003346