BILL ANALYSIS Ó SB 300 Page 1 SENATE THIRD READING SB 300 (Mendoza) As Amended September 4, 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, Calderon, | | | | |Chang, Daly, Eggman, | | SB 300 Page 2 | | |Gallagher, Eduardo | | | | |Garcia, Jones, Quirk, | | | | |Rendon, Wagner, Weber, | | | | |Wood | | | | | | | | | | | | -------------------------------------------------------------------- SUMMARY: Authorizes pawn transaction replacement loan to be conducted electronically. Specifically, this bill: 1)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 SB 300 Page 3 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. e) Requires the replacement loan to be evidenced by a written agreement or electronic record and requires the pawnbroker to mail or transmit a copy of the record to the pledger within five business days following receipt of payment by means for which verification of mailing or electronic transmittal can be provided by the pawnbroker. 2)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. 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 borrower. 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). SB 300 Page 4 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). 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. COMMENTS: 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 SB 300 Page 5 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. This bill allows a replacement loan to be done electronically, but not the original loan. Previous versions of this bill would have authorized electronic pawn originations without a thumbprint. The author, sponsors and law enforcement opposition were unable to create a system to verify the pledger's identity in an electronic origination so those provisions were taken out of the bill. Analysis Prepared by: Mark Farouk / B. & F. / (916) 319-3081 FN: 0001997