Amended in Assembly September 4, 2015

Amended in Assembly July 16, 2015

Amended in Assembly July 2, 2015

Amended in Assembly June 11, 2015

Amended in Senate May 5, 2015

Amended in Senate April 30, 2015

Amended in Senate March 26, 2015

Senate BillNo. 300


Introduced by Senator Mendoza

February 23, 2015


An act to amend Sectionsbegin delete 21201, 21201.5, and 21208end deletebegin insert 21201 and 21201.5end insert of, and to addbegin delete and repealend delete Section 21201.6begin delete of,end deletebegin insert to,end insert the Financial Code, relating to pawnbrokers.

LEGISLATIVE COUNSEL’S DIGEST

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

(1) 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. Existing law requires the contract to provide a 4-month loan period.

Thisbegin delete bill, on and after January 1, 2017, would permit the requirements for an original 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. Theend delete billbegin delete would alsoend deletebegin insert would, instead,end insert specify that the contract be for a minimum of 4 months.

(2) 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. The bill would provide that the electronic notice of the termination of the loan period would be valid only if the pledgor has previously responded to an electronic communication sent by the pawnbroker to the pledgor’s last known electronic address and would require the pledgor to affirm the electronic address on file, as prescribed.

(3) 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 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. The bill would also permit the replacement loan to be issuedbegin delete electronically, beginning January 1, 2016, subject to the same conditions for the original written contract described above.end deletebegin insert electronically, provided that the contract and transaction comply with the Uniform Electronic Transactions Act and meet certain disclosure requirements.end insert

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(4) 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.

end delete
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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 depository account held in the name of the pledgor at a depository institution located within the United States, and upon request by any peace officer, make available the account information used to deposit the loan proceeds.

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

end delete
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(5) 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.

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

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Vote: majority. Appropriation: no. Fiscal committee: begin deleteyes end deletebegin insertnoend insert. State-mandated local program: begin deleteyes end deletebegin insertnoend insert.

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

P3    1

SECTION 1.  

It is the intent of the Legislature to permit
2begin delete Californians the ability to transact pawn or collateral loans in an
3efficient and expeditious manner wherever they may be located.end delete

4begin insert pawnbrokers to conduct business transactions by electronic means,
5except when establishing an original loan. end insert
It is further the intent
6of the Legislature to permit suchbegin delete loansend deletebegin insert transactionsend insert to be made in
7conformity with the Uniform Electronic Transactions Act, as set
8forth in Title 2.5 (commencing with Section 1633.1) of Part 2 of
9Division 3 of the Civil Code.

10

SEC. 2.  

Section 21201 of the Financial Code is amended to
11read:

12

21201.  

(a) Every loan made by a pawnbroker for which goods
13are received in pledge as security shall be evidenced by a written
14contract, a copy of which shall be furnished to the pledgor. The
15loan contract shall provide a loan period that is a minimum of four
16months, shall set forth the loan period and the date on which the
17loan is due and payable, and shall clearly inform the pledgor of
18his or her right to redeem the pledge during the loan period.

19(b) Every loan contract shall contain the following notice, in at
20least 8-point boldface type and circumscribed by a box,
21immediately above the space for the pledgor’s signature:

22“You may redeem the property you have pledged at any time
23until the close of business on ____ [fill in date no less than four
24months from date loan begins]. To redeem, you must pay the
P4    1amount of the loan and the applicable charges which have accrued
2through the date on which you redeem.”

3(c) Every pawnbroker shall retain in his or her possession every
4article pledged to him or her for the duration of the loan period.
5During such period the pledgor may redeem the articles upon
6payment of the amount of the loan and the applicable charges. If
7the pledgor and the pawnbroker agree in writing that the pawned
8property may be stored off premises, following the request for
9redemption of the loan, the pawnbroker shall return the pledged
10property to the pledgor the next calendar day when both the
11pawnbroker’s store and the storage facility are open, not to exceed
12two business days.

13(d) If any pledged article is not redeemed during the loan period
14as provided herein, and the pledgor and pawnbroker do not
15mutually agree in writing to extend the loan period, the pawnbroker
16shall notify the pledgor within one month after expiration of the
17loan period. If the pawnbroker fails to notify the pledgor within
18one month after the expiration of the loan period, the pawnbroker
19shall not charge interest from the day after the expiration of the
20one-month period. The pawnbroker shall notify the pledgor at his
21or her last known mailing or electronic address of the termination
22of the loan period, by a means for which verification of mailing
23or, at the sole option of the pledgor, electronic transmission of the
24notification can be provided by the pawnbroker, and extending the
25right of redemption, during posted business hours, for a period of
2610 days from date of mailing or electronic transmission of that
27notice. Electronic notice of the termination of the loan period shall
28be valid if the pledgor has previously responded to an electronic
29communication sent by the pawnbroker to the pledgor’s last known
30 electronic address provided by the pledgor. Upon the initiation of
31each new or replacement loan, the pledgor shall affirm that the
32current electronic address on file with the pawnbroker is valid.
33The 10-day notice shall state, in substantially the same format as
34the following: “If the tenth day falls on a day when the pawnshop
35is closed, the time period is extended to the next day that the
36pawnshop is open.”

37(e) The posted schedule of charges required pursuant to Section
3821200.5 shall contain a notice informing the pledgor that if he or
39she desires, the pawnbroker shall send the notice of termination
P5    1of the loan period by registered or certified mail with return receipt
2requested, upon prepayment of the mailing costs.

3(f) If any pledged article is not redeemed within the 10-day
4notice period, the pawnbroker shall become vested with all right,
5title, and interest of the pledgor, or his or her assigns, to the pledged
6article, to hold and dispose of as his or her own property. Any
7other provision of law relating to the foreclosure and sale of
8pledges shall not be applicable to any pledge the title to which is
9transferred in accordance with this section. The pawnbroker shall
10not sell any article of pledged property until he or she has become
11vested with the title to that property pursuant to this section.

12(g) The sale of pledged property is a misdemeanor pursuant to
13Section 21209.

14

SEC. 3.  

Section 21201.5 of the Financial Code is amended to
15read:

16

21201.5.  

(a) During the contractual loan period and any
17extension thereof, but prior to the start of the 10-day grace period
18provided in subdivision (d) of Section 21201, a pledgor may
19request, and a pawnbroker may consent to, a replacement loan to
20take effect upon the expiration of the loan period stated in the
21active loan contract delivered to the pledgor under Section 21201
22or this section.

23(b) Alternatively, a pledgor may request, and a pawnbroker may
24consent to, a replacement loan during the 10-day grace period
25provided in subdivision (d) of Section 21201. Any such
26replacement loan shall become effective on the date it is issued.

27(c) All of the following shall apply to a replacement loan issued
28pursuant to this section:

29(1) The loan shall be processed as, and deemed to be, a new
30loan subject to all other fees and charges permitted by this chapter.

31(2) Before a replacement loan may be issued, the pledgor shall
32pay off all outstanding charges from the prior loan then due,
33including interest or any loan writing, storage, notification, or other
34fee authorized in this chapter, in cash or another form acceptable
35to the pawnbroker. The pledgor’s payment may be delivered to
36the pawnbroker by any method acceptable to the pawnbroker,
37including, but not limited to, United States mail, private mail, a
38personal representative, or electronic transfer. If insufficient
39payment is tendered by the pledgor or is not tendered in cash or a
40form acceptable to the pawnbroker, the pawnbroker shall, if
P6    1commercially reasonable, return the payment in the same manner
2that the payment was delivered by the pledgor, or by another
3commercially reasonable manner, within five business days, and
4shall include a statement advising the pledgor the reason the
5payment was rejected. The pawnbroker is under no obligation to
6enter into a replacement loan if the amount is insufficient or the
7method of payment or form of tender is not cash or acceptable to
8the pawnbroker.

9(3) The unpaid balance of the prior loan shall be debited to the
10replacement loan on which the same article or articles have been
11pledged. The replacement loan contract shall disclose the amount
12of the prior loan that is debited and shall otherwise be consistent
13with Section 21201.

14(4) If the pledgor requests a replacement loan in person or
15electronically, the pledgor’s consent to the terms of the replacement
16loan shall be deemed given when he or she signs the written
17replacement loan contract in person or electronically in conformity
18with Section 21201.6.

19(5) If the pledgor requests a replacement loan by mail or through
20a personal representative, the pledgor’s consent to the terms of the
21replacement loan shall be deemed given when all required charges
22from the prior loan then due are paid in a form acceptable to the
23pawnbroker. The principal amount of a replacement loan requested
24by mail or through a personal representative shall not exceed the
25principal amount of the prior loan.

26(6) The terms of the replacement loan shall be consistent with
27this chapter on the date the replacement loan is issued.

28(7) The replacement loan shall be evidenced by a written
29agreement or electronic record. The pawnbroker shall mail or
30otherwise transmit a copy of the written agreement or electronic
31record to the pledgor within five business days following receipt
32of payment by means for which verification of mailing or electronic
33transmittal can be provided by the pawnbroker.

34

SEC. 4.  

Section 21201.6 is added to the Financial Code, to
35read:

36

21201.6.  

The requirement for a written contract signed by the
37pledgor as set forth in Section 21201.5 may be met electronically
38if all of the following conditions are satisfied:

39(a) The contract and transaction comply with the provisions of
40the Uniform Electronic Transactions Act, as set forth in Title 2.5
P7    1(commencing with Section 1633.1) of Part 2 of Division 3 of the
2Civil Code, as may be applicable at the time that the loan is entered
3into between the pawnbroker and the pledgor.

4(b) Any written disclosures specified in this chapter to be set
5forth in a specified minimum type size are conspicuously presented
6to the pledgor prior to his or her execution of the electronic
7contract.

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

9(1) If the principal loan amount is below two thousand five
10hundred dollars ($2,500), the pawnbroker discloses the maximum
11compensation due a pawnbroker as set forth in Section 21200.7
12prior to the pledgor’s execution of the electronic contract.

13(2) If the principal loan amount is two thousand five hundred
14dollars ($2,500) or more, the pawnbroker discloses the provisions
15of Sections 21051 and 22054 prior to the pledgor’s execution of
16the electronic contract.

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17(d) This section shall remain in effect only until January 1, 2017,
18and as of that date is repealed.

end delete
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19

SEC. 5.  

Section 21201.6 is added to the Financial Code, to
20read:

21

21201.6.  

The requirement for a written contract signed by the
22pledgor as set forth in Sections 21201 and 21201.5 may be met
23electronically if all of the following conditions are satisfied:

24(a) The contract and transaction comply with the provisions of
25the Uniform Electronic Transactions Act, as set forth in Title 2.5
26(commencing with Section 1633.1) of Part 2 of Division 3 of the
27Civil Code, as may be applicable at the time that the loan is entered
28into between the pawnbroker and the pledgor.

29(b) Any written disclosures specified in this chapter to be set
30forth in a specified minimum type size are conspicuously presented
31to the pledgor prior to his or her execution of the electronic
32contract.

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

34(1) If the principal loan amount is below two thousand five
35hundred dollars ($2,500), the pawnbroker discloses the maximum
36compensation due a pawnbroker as set forth in Section 21200.7
37prior to the pledgor’s execution of the electronic contract.

38(2) If the principal loan amount is two thousand five hundred
39dollars ($2,500) or more, the pawnbroker discloses the provisions
P8    1of Sections 21051 and 22054 prior to the pledgor’s execution of
2the electronic contract.

3(d) This section shall become operative on January 1, 2017.

4

SEC. 6.  

Section 21208 of the Financial Code is amended to
5read:

6

21208.  

(a) Except as provided in subdivision (c), a pawnbroker
7shall comply with the reporting requirements imposed on
8secondhand dealers under Article 4 (commencing with Section
921625) of Chapter 9 of Division 8 of the Business and Professions
10Code.

11(b) A pawnbroker who has issued a loan electronically pursuant
12to Section 21201.6 shall electronically deposit the loan proceeds
13into a depository account held in the name of the pledgor at a
14depository institution located within the United States.

15(c) A pawnbroker who has issued a loan electronically pursuant
16to Section 21201.6 shall make available, upon request by any peace
17officer, the account information used to deposit the loan proceeds,
18in lieu of obtaining and reporting the customer’s fingerprint as set
19forth in Section 21628 of the Business and Professions Code.

20

SEC. 7.  

No reimbursement is required by this act pursuant to
21Section 6 of Article XIII B of the California Constitution because
22the only costs that may be incurred by a local agency or school
23district will be incurred because this act creates a new crime or
24infraction, eliminates a crime or infraction, or changes the penalty
25for a crime or infraction, within the meaning of Section 17556 of
26the Government Code, or changes the definition of a crime within
27the meaning of Section 6 of Article XIII B of the California
28Constitution.

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