Senate Bill No. 300

Introduced by Senator Mendoza

February 23, 2015

An act to amend Sections 21201, 21201.5, and 21208 of, and to add Section 21201.6 to, the Financial Code, relating to pawnbrokers.

LEGISLATIVE COUNSEL’S DIGEST

SB 300, as introduced, Mendoza. Pawnbrokers: regulations.

Existing law regulates pawnbrokers and requires a written contract for every loan by a pawnbroker for which goods are received in pledge as security, as specified, and requires a copy of that contract to be furnished to the borrower.

This bill would permit the requirement for a written contract to be met electronically, provided that the contract and transaction comply with the provisions of the Uniform Electronic Transactions Act and meet certain disclosure requirements.

Existing law requires a pawnbroker, within one month after the loan period expires, to notify the borrower at his or her last known address of the termination of the loan period, by a means for which verification of mailing or delivery of the notification can be provided by the pawnbroker, and provides for extending the right of redemption for a period of 10 days from the date that notice is mailed.

This bill would instead require the pawnbroker to provide that notification to the pledgor at his or her last known mailing or electronic address, by a means for which verification of mailing or, at the sole option of the pledgor, electronic transmission of the notification can be provided by the pawnbroker, as specified.

Existing law permits a pledgor and a pawnbroker to agree to a new loan to become effective at the end of the loan period and requires the new loan to be processed as a new loan subject to loan origination, storage, and other fees as specified.

This bill would permit a replacement loan to be issued at the request of the pledgor with consent of the pawnbroker before the expiration of the redemption period, to become effective on the date it is issued, subject to specified procedures.

Existing law requires a pawnbroker to comply with the reporting requirements imposed on secondhand dealers, including the requirement to obtain and report the customer’s fingerprint.

This bill would require a pawnbroker who has issued a loan electronically, instead of obtaining and reporting the customer’s fingerprint, to electronically deposit the loan proceeds into a deposit account held in the name of the pledgor, as specified.

Because a knowing violation of these provisions would be a crime, this bill would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: yes.

The people of the State of California do enact as follows:

SECTION 1.  

It is the intent of the Legislature to permit the
citizens of California the ability to transact pawn or collateral loans
in an efficient and expeditious manner wherever they may be
located. It is further the intent of the Legislature to permit such
loans to be made in conformity with the Uniform Electronic
Transactions Act, as set forth in Title 2.5 (commencing with
Section 1633.1) of Part 2 of Division 3 of the Civil Code.

SEC. 2.  

Section 21201 of the Financial Code is amended to
read:

21201.  

begin insert (a) end insert begin insert   end insert Every loan made by a pawnbroker for which goods
are received in pledge as security shall be evidenced by a written
contract, a copy of which shall be furnished to the begin delete borrower. end delete
begin insert pledgor. end insert The loan contract shall provide a four-month loan period,
shall set forth the loan period and the date on which the loan is
due and payable, and shall clearly inform the begin delete borrower end delete begin insert pledgor end insert of
his or her right to redeem the pledge during the loan period.

begin delete

Every

end delete

begin insert (b) end insert begin insert   end insert begin insert Every end insert loan contract shall contain the following notice, in at
least 8-point boldface type and circumscribed by a box,
immediately above the space for the begin delete borrower’s end delete begin insert pledgor’s end insert
signature:

“You may redeem the property you have pledged at any time
until the close of business on ____ [fill in date begin insert no fewer than end insert four
months from date loan begins]. To redeem, you must pay the
amount of the loan and the applicable charges which have accrued
through the date on which you redeem.”

begin delete

Every

end delete

begin insert (c) end insert begin insert   end insert begin insert Every end insert pawnbroker shall retain in his or her possession every
article pledged to him or her for a period of four months. During
such period the begin delete borrower end delete begin insert pledgor end insert may redeem the articles upon
payment of the amount of the loan and the applicable charges. If
the begin delete borrower end delete begin insert pledgor end insert and the pawnbroker agree in writing that the
pawned property may be stored off premises, following the request
for redemption of the loan, the pawnbroker shall return the pledged
property to the consumer the next calendar day when both the
pawnbroker’s store and the storage facility are open, not to exceed
two business days.

begin delete

If

end delete

begin insert (d) end insert begin insert   end insert begin insert If end insert any pledged article is not redeemed during the four-month
loan period as provided herein, and the begin delete borrower end delete begin insert pledgor end insert and
pawnbroker do not mutually agree in writing to extend the loan
period, the pawnbroker shall notify the begin delete borrower end delete begin insert pledgor end insert within
one month after expiration of the loan period. If the pawnbroker
fails to notify the begin delete borrower end delete begin insert pledgor end insert within one month after the
expiration of the loan period, the pawnbroker shall not charge
interest from the day after the expiration of the one-month period.
The pawnbroker shall notify the begin delete borrower end delete begin insert pledgor end insert at his or her
last known begin insert mailing or electronic end insert address of the termination of the
loan period, by a means for which verification of mailing begin delete or
delivery end delete begin insert or, at the sole option of the pledgor, electronic
transmission end insert of the notification can be provided by the pawnbroker,
and extending the right of redemption, during posted business
hours, for a period of 10 days from date of mailing begin insert or electronic
transmission end insert of that notice. The 10-day notice shall begin delete include a
statement that: end delete begin insert state, in substantially the same format as the
following: end insert “If the tenth day falls on a day when the pawnshop is
closed, the time period is extended to the next day that the
pawnshop is open.”

begin delete

However,

end delete

begin insert (e) end insert begin insert   end insert begin insert However, end insert the posted schedule of charges required pursuant
to Section 21200.5 shall contain a notice informing the begin delete borrower end delete
begin insert pledgor end insert that if he or she desires, the pawnbroker shall send the
notice of termination of the loan period by registered or certified
mail with return receipt requested, upon prepayment of the mailing
costs. begin delete If end delete

begin insert (f) end insert begin insert   end insert begin insert If end insert any pledged article is not redeemed within the 10-day
notice period, the pawnbroker shall become vested with all right,
title, and interest of the pledgor, or his or her assigns, to the pledged
article, to hold and dispose of as his or her own property. Any
other provision of law relating to the foreclosure and sale of
pledges shall not be applicable to any pledge the title to which is
transferred in accordance with this section. begin delete The end delete

begin insert (g) end insert begin insert   end insert begin insert The end insert pawnbroker shall not sell any article of pledged property
until he or she has become vested with the title to that property
pursuant to this section. The sale of pledged property is a
misdemeanor pursuant to Section 21209.

SEC. 3.  

Section 21201.5 of the Financial Code is amended to
read:

21201.5.  

begin delete A end delete begin insert (a) end insert begin insert   end insert begin insert During the contractual loan period and any
extension thereof, a end insert pledgor may request, and a pawnbroker may
consent to, a begin delete new end delete begin insert replacement end insert loan to take effect upon begin delete or at any
time after end delete the expiration of the loan period stated in the begin delete original end delete
begin insert active end insert loan contract delivered to the pledgor under Section 21201
begin insert or this section end insert . begin delete The pledgor shall pay in cash or another form
acceptable to the pawnbroker all of the charges and interest due
under the original loan, and the remaining unpaid balance of the
actual amount borrowed under the original loan shall be debited
to the new loan on which the same article or articles are pledged.
The loan to which the debit is applied shall be processed as a new
loan and shall be deemed to be a new loan subject to loan
origination fees, storage fees, and other fees permitted by this
chapter, when applicable. The new loan contract required by
Section 21201 shall disclose the amount of the original loan that
is debited to the new loan. end delete

begin insert

(b) A replacement loan may also issue upon the request of the
pledgor and the consent of the pawnbroker prior to the expiration
of the grace period provided by Section 21201. This replacement
loan shall become effective on the date it is issued.

end insert begin insert

(c) All of the following shall apply to a replacement loan issued
pursuant to this section:

end insert begin insert

(1) The loan shall be processed as, and deemed to be, a new
loan subject to all other fees and charges permitted by this chapter.

end insert begin insert

(2) The pledgor’s consent to the terms of any replacement loan
shall be deemed given when he or she executes the written
replacement loan in person or electronically in conformity with
the provisions of Section 21201.6, and pays in cash or another
form acceptable to the pawnbroker all of the charges and interest
due under the prior loan or if all of the following conditions are
met:

end insert begin insert

(A) The pledgor pays off all outstanding charges from the prior
loan then due, including interest, and any loan writing, storage,
notification, or other fee authorized in this chapter in cash or
another form acceptable to the pawnbroker. The pledgor’s payment
may be delivered to the pawnbroker by any method, including, but
not limited to, United States mail, private mail, a personal
representative, or electronic transfer, provided that manner of
payment is acceptable to the pawnbroker. If insufficient payment
is tendered by the pledgor or is tendered in a form unacceptable
to the pawnbroker, the pawnbroker shall, if commercially
reasonable, return the payment in the same manner that the
payment was delivered by the pledgor or by another commercially
reasonable manner within five business days and shall include a
statement advising the pledgor the reason the payment was
rejected. The pawnbroker is under no obligation to enter into a
replacement loan if the amount is insufficient or the form of
payment or method of tender is unacceptable to the pawnbroker.

end insert begin insert

(B) If the replacement loan is executed other than pursuant to
Section 21201.6, the principal amount of the replacement loan is
equal to or less than the principal amount of the prior loan.

end insert begin insert

(C) The terms of the replacement loan are consistent with this
chapter on the date the replacement loan is issued.

end insert begin insert

(D) The replacement loan is evidenced by a written agreement
or electronic record and a paper or electronic copy is mailed or
otherwise transmitted to the pledgor within five business days
following receipt of payment by the pawnbroker by a means for
which verification of mailing or transmittal can be provided by
the pawnbroker.

end insert begin insert

(3) The unpaid balance of the prior loan shall be debited to the
replacement loan on which the same article or articles have been
pledged. The replacement loan shall disclose the amount of the
prior loan that is debited and shall otherwise be consistent with
Section 21201.

end insert

SEC. 4.  

Section 21201.6 is added to the Financial Code, to
read:

21201.6.  

The requirement for a written contract signed by the
pledgor as set forth in Sections 21201 and 21201.5 may be met
electronically if all of the following conditions are satisfied:

(a) The contract and transaction comply with the provisions of
the Uniform Electronic Transactions Act, as set forth in Title 2.5
(commencing with Section 1633.1) of Part 2 of Division 3 of the
Civil Code, as may be applicable at the time that the loan is entered
into between the pawnbroker and the pledgor.

(b) Any written disclosures specified in this chapter to be set
forth in a specified minimum font size are conspicuously presented
to the pledgor prior to his or her execution of the electronic
contract.

(c) The pawnbroker makes one of the following disclosures:

(1) If the principal loan amount is below two thousand five
hundred dollars ($2,500), the pawnbroker discloses the maximum
compensation due a pawnbroker as set forth in Section 21200.7
prior to the pledgor’s execution of the electronic agreement.

(2) If the principal loan amount is two thousand five hundred
dollars ($2,500) or more, the pawnbroker discloses the provisions
of Sections 21051 and 22054 prior to the pledgor’s execution of
the electronic agreement.

SEC. 5.  

Section 21208 of the Financial Code is amended to
read:

21208.  

begin delete A end delete begin insert (a) end insert begin insert   end insert begin insert Except as provided in subdivision (b), a end insert
pawnbroker shall comply with the reporting requirements imposed
on secondhand dealers under Article 4 (commencing with Section
21625) of Chapter 9 of Division 8 of the Business and Professions
Code.

begin insert

(b) A pawnbroker who has issued a loan electronically pursuant
to Section 21201.6 shall, in lieu of obtaining and reporting the
customer’s fingerprint as set forth in subdivision (g) of Section
21628 of the Business and Professions Code, electronically deposit
the loan proceeds into a deposit account held in the name of the
pledgor at a bank, savings and loan, or credit union located in the
United States.

end insert

SEC. 6.  

No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of
the Government Code, or changes the definition of a crime within
the meaning of Section 6 of Article XIII B of the California
Constitution.