Amended in Senate March 26, 2015

Senate BillNo. 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 amended, 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.begin insert The bill would also require that the contract be for a minimum of 4 months.end insert

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 specifiedbegin delete procedures.end deletebegin insert requirements, including, but not limited to, that the pledgor pay off all outstanding charges from the prior loan then due before a replacement loan may be issued.end insert

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:

P2    1

SECTION 1.  

It is the intent of the Legislature to permit the
2citizens of California the ability to transact pawn or collateral loans
3in an efficient and expeditious manner wherever they may be
4located. It is further the intent of the Legislature to permit such
5loans to be made in conformity with the Uniform Electronic
6Transactions Act, as set forth in Title 2.5 (commencing with
7Section 1633.1) of Part 2 of Division 3 of the Civil Code.

8

SEC. 2.  

Section 21201 of the Financial Code is amended to
9read:

10

21201.  

(a) Every loan made by a pawnbroker for which goods
11are received in pledge as security shall be evidenced by a written
P3    1contract, a copy of which shall be furnished to the pledgor. The
2loan contract shall provide abegin delete four-month loan period,end deletebegin insert loan period
3that is a minimum of four months,end insert
shall set forth the loan period
4and the date on which the loan is due and payable, and shall clearly
5inform the pledgor of his or her right to redeem the pledge during
6the loan period.

7(b) Every loan contract shall contain the following notice, in at
8least 8-point boldface type and circumscribed by a box,
9immediately above the space for the pledgor’s signature:

10“You may redeem the property you have pledged at any time
11 until the close of business on ____ [fill in date no fewer than four
12months from date loan begins]. To redeem, you must pay the
13amount of the loan and the applicable charges which have accrued
14through the date on which you redeem.”

15(c) Every pawnbroker shall retain in his or her possession every
16article pledged to him or her for a period of four months. During
17such period the pledgor may redeem the articles upon payment of
18the amount of the loan and the applicable charges. If the pledgor
19and the pawnbroker agree in writing that the pawned property may
20be stored off premises, following the request for redemption of
21the loan, the pawnbroker shall return the pledged property to the
22begin delete consumerend deletebegin insert pledgorend insert the next calendar day when both the
23pawnbroker’s store and the storage facility are open, not to exceed
24two business days.

25(d) If any pledged article is not redeemed during the four-month
26loan period as provided herein, and the pledgor and pawnbroker
27do not mutually agree in writing to extend the loan period, the
28pawnbroker shall notify the pledgor within one month after
29expiration of the loan period. If the pawnbroker fails to notify the
30pledgor within one month after the expiration of the loan period,
31the pawnbroker shall not charge interest from the day after the
32expiration of the one-month period. The pawnbroker shall notify
33the pledgor at his or her last known mailing or electronic address
34of the termination of the loan period, by a means for which
35verification of mailing or, at the sole option of the pledgor,
36electronic transmission of the notification can be provided by the
37pawnbroker, and extending the right of redemption, during posted
38business hours, for a period of 10 days from date of mailing or
39electronic transmission of that notice. The 10-day notice shall state,
40in substantially the same format as the following: “If the tenth day
P4    1falls on a day when the pawnshop is closed, the time period is
2extended to the next day that the pawnshop is open.”

3(e) However, the posted schedule of charges required pursuant
4to Section 21200.5 shall contain a notice informing the pledgor
5that if he or she desires, the pawnbroker shall send the notice of
6termination of the loan period by registered or certified mail with
7return receipt requested, upon prepayment of the mailing costs.

8(f) If any pledged article is not redeemed within the 10-day
9notice period, the pawnbroker shall become vested with all right,
10title, and interest of the pledgor, or his or her assigns, to the pledged
11article, to hold and dispose of as his or her own property. Any
12other provision of law relating to the foreclosure and sale of
13pledges shall not be applicable to any pledge the title to which is
14transferred in accordance with this section.

15(g) The pawnbroker shall not sell any article of pledged property
16until he or she has become vested with the title to that property
17pursuant to this section. The sale of pledged property is a
18misdemeanor pursuant to Section 21209.

19

SEC. 3.  

Section 21201.5 of the Financial Code is amended to
20read:

21

21201.5.  

(a) During the contractual loan period and any
22extension thereof,begin insert but prior to the start of the 10-day grace period
23provided in subdivision (d) of Section 21201,end insert
a pledgor may
24request, and a pawnbroker may consent to, a replacement loan to
25take effect upon the expiration of the loan period stated in the
26active loan contract delivered to the pledgor under Section 21201
27or this section.

28(b) begin deleteA end deletebegin insertAlternatively, a pledgor may request, and a pawnbroker
29may consent to, a end insert
replacement loanbegin delete may also issue upon the request
30of the pledgor and the consent of the pawnbroker prior to the
31expiration of the grace period provided by Section 21201. Thisend delete

32begin insert during the 10-day grace period provided in subdivision (d) of
33Section 21201. Any suchend insert
replacement loan shall become effective
34on the date it is issued.

35(c) All of the following shall apply to a replacement loan issued
36pursuant to this section:

37(1) The loan shall be processed as, and deemed to be, a new
38loan subject to all other fees and charges permitted by this chapter.

begin delete

39(2) The pledgor’s consent to the terms of any replacement loan
40shall be deemed given when he or she executes the written
P5    1replacement loan in person or electronically in conformity with
2the provisions of Section 21201.6, and pays in cash or another
3form acceptable to the pawnbroker all of the charges and interest
4due under the prior loan or if all of the following conditions are
5met:

6(A) The pledgor pays off all outstanding charges from the prior
7loan then due, including interest, and any loan writing, storage,
8notification, or other fee authorized in this chapter in cash or
9another form acceptable to the pawnbroker. The pledgor’s payment
10may be delivered to the pawnbroker by any method, including,
11but not limited to, United States mail, private mail, a personal
12representative, or electronic transfer, provided that manner of
13payment is acceptable to the pawnbroker. If insufficient payment
14is tendered by the pledgor or is tendered in a form unacceptable
15to the pawnbroker, the pawnbroker shall, if commercially
16reasonable, return the payment in the same manner that the
17payment was delivered by the pledgor or by another commercially
18reasonable manner within five business days and shall include a
19statement advising the pledgor the reason the payment was rejected.
20The pawnbroker is under no obligation to enter into a replacement
21loan if the amount is insufficient or the form of payment or method
22of tender is unacceptable to the pawnbroker.

23(B) If the replacement loan is executed other than pursuant to
24Section 21201.6, the principal amount of the replacement loan is
25equal to or less than the principal amount of the prior loan.

26(C) The terms of the replacement loan are consistent with this
27chapter on the date the replacement loan is issued.

28(D) The replacement loan is evidenced by a written agreement
29or electronic record and a paper or electronic copy is mailed or
30otherwise transmitted to the pledgor within five business days
31following receipt of payment by the pawnbroker by a means for
32which verification of mailing or transmittal can be provided by
33the pawnbroker.

34(3) The unpaid balance of the prior loan shall be debited to the
35replacement loan on which the same article or articles have been
36pledged. The replacement loan shall disclose the amount of the
37prior loan that is debited and shall otherwise be consistent with
38Section 21201.

end delete
begin insert

39(2) Before a replacement loan may be issued, the pledgor shall
40pay off all outstanding charges from the prior loan then due,
P6    1including interest or any loan writing, storage, notification, or
2other fee authorized in this chapter, in cash or another form
3acceptable to the pawnbroker. The pledgor’s payment may be
4delivered to the pawnbroker by any method, including, but not
5limited to, United States mail, private mail, a personal
6representative, or electronic transfer, provided that the manner
7of payment is acceptable to the pawnbroker. If insufficient payment
8is tendered by the pledgor or is tendered in a form unacceptable
9to the pawnbroker, the pawnbroker shall, if commercially
10reasonable, return the payment in the same manner that the
11payment was delivered by the pledgor, or by another commercially
12reasonable manner, within five business days, and shall include
13a statement advising the pledgor the reason the payment was
14rejected. The pawnbroker is under no obligation to enter into a
15replacement loan if the amount is insufficient or the form of
16payment or method of tender is unacceptable to the pawnbroker.

end insert
begin insert

17(3) The unpaid balance of the prior loan shall be debited to the
18replacement loan on which the same article or articles have been
19pledged. The replacement loan contract shall disclose the amount
20of the prior loan that is debited and shall otherwise be consistent
21with Section 21201.

end insert
begin insert

22(4) If the pledgor requests a replacement loan in person or
23electronically, the pledgor’s consent to the terms of the replacement
24loan shall be deemed given when he or she signs the written
25replacement loan contract in person or electronically in conformity
26with Section 21201.6.

end insert
begin insert

27(5) If the pledgor requests a replacement loan by mail or
28through a personal representative, the pledgor’s consent to the
29terms of the replacement loan shall be deemed given when all
30required charges from the prior loan then due are paid in a form
31acceptable to the pawnbroker. The principal amount of a
32replacement loan requested by mail or through a personal
33representative shall not exceed the principal amount of the prior
34loan.

end insert
begin insert

35(6) The terms of the replacement loan shall be consistent with
36this chapter on the date the replacement loan is issued.

end insert
begin insert

37(7) The replacement loan shall be evidenced by a written
38agreement or electronic record. The pawnbroker shall mail or
39otherwise transmit a copy of the written agreement or electronic
40record to the pledgor within five business days following receipt
P7    1of payment by means for which verification of mailing or electronic
2transmittal can be provided by the pawnbroker.

end insert
3

SEC. 4.  

Section 21201.6 is added to the Financial Code, to
4read:

5

21201.6.  

The requirement for a written contract signed by the
6pledgor as set forth in Sections 21201 and 21201.5 may be met
7electronically if all of the following conditions are satisfied:

8(a) The contract and transaction comply with the provisions of
9the Uniform Electronic Transactions Act, as set forth in Title 2.5
10(commencing with Section 1633.1) of Part 2 of Division 3 of the
11Civil Code, as may be applicable at the time that the loan is entered
12into between the pawnbroker and the pledgor.

13(b) Any written disclosures specified in this chapter to be set
14forth in a specified minimumbegin delete fontend deletebegin insert typeend insert size are conspicuously
15presented to the pledgor prior to his or her execution of the
16electronic contract.

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

18(1) If the principal loan amount is below two thousand five
19hundred dollars ($2,500), the pawnbroker discloses the maximum
20compensation due a pawnbroker as set forth in Section 21200.7
21prior to the pledgor’s execution of the electronicbegin delete agreement.end delete
22begin insert contract.end insert

23(2) If the principal loan amount is two thousand five hundred
24dollars ($2,500) or more, the pawnbroker discloses the provisions
25of Sections 21051 and 22054 prior to the pledgor’s execution of
26the electronicbegin delete agreement.end deletebegin insert contract.end insert

27

SEC. 5.  

Section 21208 of the Financial Code is amended to
28read:

29

21208.  

(a) Except as provided in subdivision (b), a pawnbroker
30shall comply with the reporting requirements imposed on
31secondhand dealers under Article 4 (commencing with Section
3221625) of Chapter 9 of Division 8 of the Business and Professions
33Code.

34(b) A pawnbroker who has issued a loan electronically pursuant
35to Section 21201.6 shall, in lieu of obtaining and reporting the
36customer’s fingerprint as set forth in subdivision (g) of Section
3721628 of the Business and Professions Code, electronically deposit
38the loan proceeds into a deposit account held in the name of the
39pledgor at abegin delete bank, savings and loan, or credit unionend deletebegin insert depository
40institutionend insert
located in the United States.

P8    1

SEC. 6.  

No reimbursement is required by this act pursuant to
2Section 6 of Article XIII B of the California Constitution because
3the only costs that may be incurred by a local agency or school
4district will be incurred because this act creates a new crime or
5infraction, eliminates a crime or infraction, or changes the penalty
6for a crime or infraction, within the meaning of Section 17556 of
7the Government Code, or changes the definition of a crime within
8the meaning of Section 6 of Article XIII B of the California
9Constitution.



O

    98