BILL ANALYSIS                                                                                                                                                                                                    



                                                                     SB 300


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          SENATE THIRD READING


          SB  
          300 (Mendoza)


          As Amended  July 16, 2015


          Majority vote


          SENATE VOTE:  39-0


           ------------------------------------------------------------------ 
          |Committee       |Votes|Ayes                  |Noes                |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |----------------+-----+----------------------+--------------------|
          |Banking         |12-0 |Dababneh, Travis      |                    |
          |                |     |Allen, Achadjian,     |                    |
          |                |     |Brown, Chau, Gatto,   |                    |
          |                |     |Hadley, Kim, Low,     |                    |
          |                |     |Perea, Ridley-Thomas, |                    |
          |                |     |Mark Stone            |                    |
          |                |     |                      |                    |
          |----------------+-----+----------------------+--------------------|
          |Privacy         |11-0 |Gatto, Wilk, Baker,   |                    |
          |                |     |Calderon, Chang,      |                    |
          |                |     |Chau, Cooper,         |                    |
          |                |     |Dababneh, Dahle,      |                    |
          |                |     |Gordon, Low           |                    |
          |                |     |                      |                    |
          |----------------+-----+----------------------+--------------------|
          |Appropriations  |16-0 |Gomez, Bigelow,       |                    |
          |                |     |Bloom, Bonta,         |                    |








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          |                |     |Calderon, Chang,      |                    |
          |                |     |Daly, Eggman,         |                    |
          |                |     |Gallagher,            |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |                |     |Eduardo Garcia,       |                    |
          |                |     |Jones, Quirk, Rendon, |                    |
          |                |     |Wagner, Weber, Wood   |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
           ------------------------------------------------------------------ 


          SUMMARY: Authorizes electronic pawn transactions.  Specifically,  
          this bill:  


          1)Provides, beginning January 1, 2017, that the requirement for  
            a written pawn contract signed by a borrower can be met  
            electronically, if all of the following conditions are met:
             a)   The contract and transaction comply with the provisions  
               of the Uniform Electronic Transactions Act (Civil Code  
               Section 1633.1 et seq.);


             b)   Any written disclosures required to be set forth in a  
               specified minimum type size are conspicuously presented to  
               the borrower prior to his or her execution of the  
               electronic contract;
             c)   The pawnbroker discloses the rates and fees applicable  
               to the loan before the borrower executes the electronic  
               contract; and


             d)   The pawnbroker electronically deposits the loan proceeds  
               into a deposit account held in the name of the borrower at  
               a depository institution located in the United States.  










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          2)Applies all of the following to a replacement loan contract: 


             a)   The loan must be processed as and deemed to be a new  
               loan subject to the fees and charges permitted on new loans  
               under the pawnbroker law;


             b)   The unpaid balance of the prior loan must be debited to  
               the replacement loan when the same article or articles are  
               pledged; 


             c)   The borrowers consent to the terms of a replacement loan  
               is deemed given, as follows:


               i)     When the borrower requests the replacement loan in  
                 person or electronically, his or her consent to the terms  
                 of the replacement loan are deemed given when he or she  
                 signs the written replacement loan contract in person or  
                 electronically in conformance with the rules for  
                 electronic pawn loans.
               ii)    When the borrower requests the replacement loan by  
                 mail or through a personal representative, the borrower's  
                 consent to the terms of the replacement loan are deemed  
                 given when all required charges from the prior loan due  
                 are paid in a form acceptable to the pawnbroker.  


             d)   The principal amount of a replacement loan is not  
               constrained, if the replacement loan is requested in person  
               or electronically.  The principal amount of a replacement  
               loan must be equal to or less than the principal amount of  
               the prior loan, if the replacement loan is requested by  
               mail or through a personal representative.
          3)Authorizes a pawnbroker to notify a borrower electronically  
            regarding the termination of the borrower's loan period, as  
            specified, if such method of notice is acceptable to the  








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            borrower.


          4)Authorizes a pawnbroker to notify a borrower electronically  
            regarding the termination of the borrower's loan period, as  
            specified, if such method of notice is acceptable to the  
            borrower.


          5)Removes, in an electronic pawn transaction, the requirement  
            that the pawnbroker collect the fingerprint of the pledger,  
            and instead requires the pawnbroker electronically deposit the  
            loan proceeds into a depository account held in the name of  
            the pledger at a depository institution located within the  
            United States.


          6)Requires in an electronic pawn transaction that the pawnbroker  
            make available, upon request by any peace officer, the account  
            information used to deposit the loan proceeds, in lieu of  
            obtaining the customer's fingerprint.


          EXISTING LAW:   


          1)Defines a pawnbroker as any person engaged in the business of  
            receiving goods, including motor vehicles, in pledge as security  
            for a loan, and defines pledged property as property held as  
            security for a loan, the title to which remains with the pledgor  
            (i.e., borrower) and not the pawnbroker (Financial Code Sections  
            21000 and 21002).


          2)Requires every pawn loan to be evidenced by a written contract, a  
            copy of which must be furnished to the borrower (Financial Code  
            Section 21201).  










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          3)Requires a pawnbroker to notify a borrower in writing, at his or  
            her last known address, regarding the termination of the  
            borrower's loan period, by a means for which verification of  
            mailing can be provided by the pawnbroker (Financial Code Section  
            21201).


          4)Allows a borrower to request, and a pawnbroker to consent, to a  
            replacement loan to take effect before title to the pawned  
            property passes to the pawnbroker.  To obtain a replacement loan,  
            the borrower must pay all charges and interest due under the  
            original loan.  The principal amount of the replacement loan may  
            be lower than, the same as, or higher than the loan being replaced  
            (Financial Code Section 21201.5).


          FISCAL EFFECT:  According to Assembly Appropriations Committee,  
          minor and absorbable enforcement costs to the Department of  
          Justice (DOJ).


          COMMENTS:  


          Need for this bill as stated by the author:


               Under current California law, a California-based  
               pawnbroker providing a loan must obtain and submit to  
               law enforcement the thumbprint of the person pledging  
               property as collateral for the loan. Out-of-state  
               pawnbrokers conducting business inside of California  
               via the internet are exempt from this, and other,  
               requirements. This places California-based pawnbrokers  
               at a competitive disadvantage and prevents the DOJ from  
               regulating internet-based pawn transactions.  
               Additionally, consumers are subject to higher loan fees  
               and less consumer protections because of the DOJ's lack  
               of jurisdiction over out-of-state, online pawnbrokers.








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          Internet Pawn.  Several states allow electronic pawn  
          transactions including:  Colorado, Florida, Texas, New York,  
          Georgia, New Hampshire, Hawaii and Arizona.  Here's how it  
          works:  Customers fill out a form describing the item they wish  
          to pawn.  The online pawn shop then sends the customer an  
          initial estimate and a pre-paid shipping label to mail in the  
          item, which is insured.  Once the item is fully appraised,  
          customers receive a final offer.  The money is either wired to a  
          customer's bank account or in other states is sent to the  
          customer via a pre-paid debit card.


          The significant obstacle to internet pawn activity in California  
          is the requirement that the pawn broker collect the thumbprint  
          of the pledger.  The Assembly Banking and Finance Committee is  
          unaware of any evidence that this requirement has led to any  
          criminal convictions or prevents criminal activity.  Among law  
          enforcement officials it is believed that the requirement to  
          give a thumbprint may act as a deterrent for criminals to pawn  
          stolen goods.  Rather than require a thumbprint for an  
          electronic transaction, which may be practically impossible,  
          this bill requires that the loan proceeds must be deposited into  
          a deposit account in the name of the pledger.  




          Analysis Prepared by:                                             
                          Mark Farouk / B. & F. / (916) 319-3081  FN:  
          0001453















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