BILL ANALYSIS                                                                                                                                                                                                    



                                                                     SB 300


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          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,   |                     |








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          |                |     |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  








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                 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).








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          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  








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          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