BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 300|
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UNFINISHED BUSINESS
Bill No: SB 300
Author: Mendoza (D)
Amended: 9/4/15
Vote: 21
SENATE BANKING & F.I. COMMITTEE: 7-0, 4/15/15
AYES: Block, Vidak, Galgiani, Hall, Hueso, Lara, Morrell
SENATE JUDICIARY COMMITTEE: 7-0, 4/21/15
AYES: Jackson, Moorlach, Anderson, Hertzberg, Leno, Monning,
Wieckowski
SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8
SENATE FLOOR: 39-0, 5/22/15
AYES: Allen, Anderson, Bates, Beall, Berryhill, Block,
Cannella, De León, Fuller, Gaines, Galgiani, Hall, Hancock,
Hernandez, Hertzberg, Hill, Hueso, Huff, Jackson, Lara, Leno,
Leyva, Liu, McGuire, Mendoza, Mitchell, Monning, Moorlach,
Morrell, Nguyen, Nielsen, Pan, Pavley, Roth, Runner, Stone,
Vidak, Wieckowski, Wolk
ASSEMBLY FLOOR: 78-0, 9/8/15 - See last page for vote
SUBJECT: Pawnbrokers: regulations
SOURCE: California Pawnbrokers Association
DIGEST: This bill authorizes pawnbrokers to extend replacement
pawn loans electronically, clarifies that replacement pawn loans
may also be taken out via mail or via personal representative of
the borrower, clarifies the effective start dates of replacement
pawn loans, and allows pawnbrokers to substitute electronic
notices for mailed notices, as specified.
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Assembly Amendments delete the provision of the bill allowing
pawnbrokers to extend new pawn loans electronically.
ANALYSIS:
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).
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).
This bill:
1)Provides that the requirement for a written replacement loan
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.).
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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.
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.
2)Applies all of the following rules 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 borrower's 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 then
due are paid in a form acceptable to the pawnbroker.
d) The principal amount of a replacement loan is not
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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
borrower.
Comments
Electronic replacement loans. Under existing law, all pawn loan
contracts, including new loan contracts and replacement loan
contracts, must be consummated in person. This bill retains the
requirement that new pawn loans be consummated in person, but
authorizes replacement pawn loans to be taken out
electronically. This bill also codifies the longstanding
practice of allowing replacement loans to be taken out by mail
and via personal representative.
In order to minimize the potential for miscommunication between
borrowers and pawnbrokers in connection with the dollar amounts
of replacement loans, this bill applies different rules to the
different ways in which replacement pawn loans may be requested.
When a replacement pawn loan is requested in person or
electronically, this bill requires the borrower's signature
(either wet or electronic) on the replacement loan contract and
does not limit the principal amount of the replacement loan.
When a replacement pawn loan is requested by mail or through a
personal representative, this bill does not require the
borrower's signature; instead, the borrower's consent to the
replacement loan is deemed given when the prior loan is fully
paid off in a manner acceptable to the pawnbroker. In these
cases, this bill caps the principal amount of the replacement
loan at an amount equal to or less than the principal amount of
the prior loan.
The logic behind these different rules is as follows: if a
borrower appears before the pawnbroker in person or requests a
replacement loan electronically, the borrower and the pawnbroker
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are communicating with each other directly, and the borrower's
wishes regarding the amount of his or her replacement loan can
readily be confirmed by the pawnbroker. In contrast, when a
borrower mails his or her payment in to a pawnbroker or sends a
third party to make payment on their behalf, the wishes of the
original borrower regarding the size of a replacement loan can
be harder to discern. Thus, when a borrower's signature cannot
reasonably be obtained or verified (as is the case if an
individual sends a personal representative), it is safest to cap
the size of the replacement loan at an amount no greater than
the amount of the prior loan.
Replacement loan start dates. SB 300 also clarifies a provision
of existing law that has been interpreted differently by
different pawnbrokers. Some pawnbrokers have interpreted the
law as allowing a borrower to request, and a pawnbroker to
approve, a replacement loan after the borrower has defaulted on
his or her original loan contract, and thus after title to the
pawned item has reverted to the pawnbroker. This bill clarifies
that a replacement loan may only be issued prior to a default,
and further clarifies when a replacement loan is deemed to
begin. This bill's sponsor asserts that this clarification does
not deprive borrowers of their ability to regain their pawned
items; it merely requires them to purchase the items from the
pawnbroker.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:NoLocal: No
SUPPORT: (Verified9/4/15)
California Pawnbrokers Association (source)
National Federation of Independent Business
OPPOSITION: (Verified9/4/15)
None received
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ARGUMENTS IN SUPPORT: The California Pawnbrokers Association
observes that, "this bill is necessary, because borrowers may
negotiate a pawn loan in person, and then leave the area
serviced by the lender. When the loan becomes due, current law
would essentially mandate the borrower physically return to the
lender to execute a new loan. While some lenders have
contractually expanded the methods by which a replacement loan
might be negotiated, for example, through mail, there is no
uniform manner by which the consent of the borrower can be
determined. This bill would codify specific methods by which a
replacement loan could be entered into, thus codifying uniformly
when the borrower has consented to the terms of a replacement
loan. Further, this bill would lessen the burden on consumers
of limited mobility and means by permitting replacement loans to
be entered into either electronically, by mail or through a
personal representative of the borrower. "
ASSEMBLY FLOOR: 78-0, 9/8/15
AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom,
Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang,
Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd,
Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia,
Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray,
Hadley, Harper, Roger Hernández, Holden, Irwin, Jones,
Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low,
Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin,
Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Perea,
Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago,
Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber,
Wilk, Williams, Wood, Atkins
NO VOTE RECORDED: Chávez, Grove
Prepared by:Eileen Newhall / B. & F.I. / (916) 651-4102
9/8/15 21:47:08
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SB 300
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