BILL ANALYSIS                                                                                                                                                                                                    �



                                                                  AB 424
                                                                  Page  1

          Date of Hearing:   May 4, 2011

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                Felipe Fuentes, Chair

                  AB 424 (Eng) - As Introduced:  February 14, 2011 

          Policy Committee:                              Banking and 
          Finance      Vote:                            11-0

          Urgency:     No                   State Mandated Local Program: 
          Yes    Reimbursable:              No

           SUMMARY  

          This bill makes various changes to California's pawnbroker law.  
          Specifically, this bill would define the term "month" to mean a 
          period of time consisting of 30 consecutive calendar days and 
          would make various conforming changes.  The bill would make 
          other clarifying changes to these provisions that would bring 
          conformity with the Financial code.

           FISCAL EFFECT  

          Negligible local law enforcement costs, not reimbursable.

           COMMENTS  

           1)Purpose  .  According to the sponsor, the Collateral Loan and 
            Secondhand Dealer's Association, current law uses the term 
            "month" for any period after 90 days when calculating maximum 
            compensation for pawnbroker transactions.  Changing the terms 
            will provide uniformity in the Financial Code so the same 
            terminology is used regardless of the length of time of the 
            loan.  The sponsor states, "both pawnbrokers and their 
            customers would more easily be able to ascertain due dates for 
            loans."

           2)Background:   Pawnbrokers are regulated on the local, state and 
            federal level.  Pawnbrokers are required to obtain a 
            second-hand dealers license, report all pledged items to law 
            enforcement on a daily basis, and hold pledged items for 30 
            days before putting the items up for sale.  Pawnbrokers 
            generally function by offering loans to individuals in 
            exchange for items of value.  Most pawn transactions are 








                                                                  AB 424
                                                                  Page  2

            short-term loans of 120 days or less.  According to the 
            California Pawnbrokers Association, approximately 85% of 
            pawned property is redeemed.  Those individuals may, within a 
            certain period of time, purchase the items back for the amount 
            of the loan plus a certain specified fee.  If the time elapses 
            without that payment, the pawnbroker may then sell the items 
            to recoup the amount of the loan, usually only a fraction of 
            its market value.   Pawnbrokers may also choose to purchase 
            the item outright.  Because pawn loans are not reported to 
            major credit bureaus, some borrowers choose pawn loans to 
            avoid impacting their credit scores.  Other borrowers seek out 
            pawn loans, because they cannot obtain similar sized loans and 
            similar loan lengths from depository institutions.


           Analysis Prepared by  :    Roger Dunstan / APPR. / (916) 319-2081