BILL ANALYSIS Ó
SENATE COMMITTEE ON
BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT
Senator Jerry Hill, Chair
2015 - 2016 Regular
Bill No: AB 1751 Hearing Date: June 27,
2016
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|Author: |Low |
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|Version: |June 20, 2016 |
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|Urgency: |Yes |Fiscal: |Yes |
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|Consultant|Mark Mendoza |
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Subject: Secondhand goods
SUMMARY: Revises 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 and clarifies the
reporting requirements for pawnbrokers and secondhand dealers;
makes numerous other technical and clarifying changes, as
specified.
Existing law:
1) Provides for the Secondhand Goods Law that regulates the sale
or other disposition of secondhand goods. (Business and
Professions Code (BPC) § 21500 et seq.)
2) Declares that it is the intent of the Legislature to curtail
the dissemination of stolen property and to facilitate the
recovery of stolen property by means of a uniform, statewide,
state-administered program of regulation of persons whose
principal business is the buying, selling, trading,
auctioning, or taking in pawn of tangible personal property.
(BPC § 21625)
3) Defines a "secondhand dealer" to mean and include any person,
co-partnership, firm or corporation whose business includes
buying, selling, trading, taking in pawn, accepting for sale
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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. (BPC § 21626(a))
4) Defines "tangible personal property" as 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 § 21627(a))
5) Defines "tangible personal property", among other things, as
all tangible personal property, new or used, received in
pledge as a security for a loan by a pawnbroker. (BPC §
21627(b)(1))
6) 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 § 21627(c)).
7) 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 § 21627(e))
8) 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)
9) Requires the form, among other things, to include specified
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information such as a complete and reasonably accurate
description of serialized property, a complete and reasonably
accurate description of non-serialized 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 § 21628(A))
10)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 §
21628(d)(1))
11)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.
(BPC § 21628(d)(5))
This bill:
1) 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.
2) Provides that, by specifying the manner or reporting, all
secondhand dealers and pawnbrokers are relieved of the
inherent costs and burdens imposed under existing law that
requires these businesses to report their daily acquisitions
of secondhand tangible personal property.
3) Provides 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.
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4) 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."
5) Replaces "single, statewide and uniform electronic reporting
system" with "CAPSS".
6) 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, after receipt or purchase of
secondhand tangible personal property, to CAPSS, all
secondhand 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
7) Revises the property description requirement to be a complete
and reasonably accurate description of the property,
including, but not limited to, the following: serial number,
personalized inscriptions, and other identifying marks or
symbols, owner-applied numbers, the size color, material,
and, if known by the secondhand dealer, the manufacturer's
pattern name. Requires the property description include the
brand and model name or number of the item if known to, or
reasonably ascertainable by, the secondhand dealer. Provides
that the property description be a plain text description of
the item generally accepted by the secondhand industry.
8) Authorizes a secondhand dealer to optionally utilize an
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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.
9) Specifies that the lack of an article field descriptor by a
secondhand dealer is not relevant to any determination as to
whether the secondhand dealer has received evidence of
authority to sell or pledge the property, as specified.
10)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.
11)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.
12)Requires a secondhand dealer to report any business conducted
at a gun show to the CAPSS system, as specified.
13)Deletes the requirement that the DOJ, in consultation with
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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.
14)Prohibits the DOJ, chiefs of police, and sheriffs from
collecting any additional information concerning the seller,
the pledger, or the property received by the secondhand
dealer in the report required by statute.
15)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.
16)Prohibits the DOJ from taking any action with respect to the
implementation, operation, or maintenance of CAPSS by
adoption of an emergency regulation.
17)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.
18)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.
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19)Deletes the provisions related to reporting on paper forms,
as specified.
20)Deletes current requirements pertaining to the development
and implementation of the CAPSS, as specified.
21)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 CAPPS 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.
22)Makes numerous technical and clarifying amendments to
secondhand dealer reporting requirements.
FISCAL EFFECT: This bill has been keyed "fiscal" by Legislative
Counsel. According to the Assembly Appropriations Committee
analysis dated on May 11, 2016, this bill would impose
significant costs to the DOJ for IT programming for backend
mapping to CAPSS and ongoing costs to monitor and maintain the
IT system.
COMMENTS:
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1. Purpose. The California Pawnbrokers Association (CPA) is the
Sponsor of this bill. 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 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 the CAPSS system does
not expand beyond current law the information that is
required to be collected or reported by secondhand dealers
and pawnbrokers."
According to information provided by the CPA, there are
thousands of different items 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 ten to a high of 600, with the
average around 50.
2.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 § 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
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specific license to conduct such business with the local
licensing agency (chief of police or sheriff) that is
required to accept an application from any individual seeking
a license within their jurisdiction.
Following the receipt of the requisite fees and results of the
fingerprint-based criminal history background check, the DOJ
Secondhand Dealer and Pawnbroker Unit provides the local
licensing agency with the background check results and a
license number. Upon receipt of any subsequent arrest and
disposition information regarding a licensed secondhand
dealer or pawnbroker, the Secondhand Dealer and Pawnbroker
Unit will notify the respective local licensing agency.
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.
3.Reporting Requirements for Secondhand Dealers. To help
curtail the dissemination of stolen property, BPC § 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
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completed, a copy was provided to local law enforcement, and
a copy was 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. As of
now, however, many secondhand dealers continue to use the
"JUS 123" form because of the CAPSS systems inability to
accept only plain text descriptions.
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. The
result was the CAPPS system. The CAPSS system was intended
to eliminate the need for paper reports in favor of a uniform
electronic database. Secondhand dealers and pawnbrokers are
now required to enter information that was currently captured
on the DOJ's "JUS 123" form into the CAPSS through a web
interface. 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 and made available free of charge to
authorized law enforcement agencies. 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, as well as resource
intensive for local law enforcement.
4.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 § 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
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requirements. The sponsors of this bill report concerns with
the usability of the system since categories typically used
by federal law enforcement may not be applicable to the items
being reported.
The current CAPSS system allows secondhand dealers to report
in 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
that deal in high volume transaction.
5.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
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businesses. Property descriptions utilized by these
industries are 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 (e.g. photograph and license
plate number). BPC § 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 §
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 § 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 BPC § 21628. For example, CPA reports that secondhand
dealers have been asked to report photographs of the person
selling an item and their car's license plate. 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) allows
secondhand dealers to use plain text property descriptions
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when reporting daily; 2) requires the information collected
about the seller or pledger be only what is required under
existing law; 3) requires that DOJ's implementation of the
CAPSS system follow the Administrative Procedures Act and not
through emergency regulations; 4) authorizes secondhand
dealers to optionally use an article field when describing an
item.
If this bill were to pass, this measure 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.
6.Prior Related Legislation. AB 1182 (Santiago, Chapter 749,
Statutes of 2015) narrowed the definition of tangible
personal property and required DOJ to annually update the
list of items that represent a significant class of stolen
goods beginning January 1, 2016 and post it on its Web site.
AB 632 (Eggman, Chapter 169, Statutes of 2015) authorized
specified unique identifying numbers to be used as the serial
number reported for handheld electronic devices, as
specified.
ACR 101 (Jones-Sawyer, Resolution Chapter 154, Statues of
2014) requested DOJ to convene meetings with representatives
from law enforcement, prosecutors, the secondhand dealer and
pawnbroker industry, and interested members of the public to
discuss potential changes in law regarding internet
pawnbrokers.
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SB 782 (Hill, Chapter 318, Statutes of 2013) clarified 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) required the DOJ
to develop and implement a statewide, uniform electronic
reporting system. Required the DOJ to charge a licensure fee
and a renewal fee of no more than $300 to cover the costs of
the reporting system. It also authorized the police chief,
sheriff, or police commission to charge a fee not to exceed
the actual costs incurred to process the renewal application
of the license and to collect and transmit the feed charged
by the DOJ.
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.
( Status: This bill failed passage in the Assembly Public
Safety Committee.)
AB 704 (Ma) of 2011 would have required secondhand dealers to
provide specified information to any peace officer upon
demand and allowed for the storage of the item for up to 90
days, and would have required an impounding agency to satisfy
specified requirements regarding impounded. ( Status: This
bill was held in the Assembly Judiciary Committee.)
7. Arguments in Support. Supporters underscore that "this bill
will help ensure that we are able to provide our electronic
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JUS123 form data directly to law enforcement via the DOJ's
database as mandated and agreed upon with AB 391. As you are
aware, despite our efforts, the system currently in place is
inadequate for law enforcement and unusable for pawnbrokers
in many respects. AB 1751 addresses these points directly
and will allow for an operable system to be put in place for
the benefit of all."
SUPPORT AND OPPOSITION:
Support:
Capital City Loan & Jewelry, II
Empire Jewelry and Loan
Granter Jewelry and Loan Company LLC
Jewelry-N-Loan
Precious Metal Investments
Royal Loan
San Francisco Gold Buyer
The Pawnshop Inc.
Opposition:
California Peace Officers' Association
California Police Chiefs Association
California State Sheriffs' Association
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