BILL ANALYSIS �
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THIRD READING
Bill No: SB 217
Author: Vargas (D)
Amended: As introduced
Vote: 21
SENATE BANKING & FINANCIAL INSTIT. COMMITTEE : 7-0, 4/6/11
SENATE JUDICIARY COMMITTEE : 5-0, 5/10/11
AYES: Evans, Harman, Blakeslee, Corbett, Leno
SUBJECT : Pawnbrokers: compensation
SOURCE : California Pawnbrokers Association
DIGEST : This bill authorizes pawnbrokers to charge
borrowers the greater of $3 per month or 2.5 percent per
month on the unpaid principal balance of loans greater than
90 days old, and below $2,500.
ANALYSIS : Existing law prohibits a pawnbroker from
charging or receiving compensation at a rate exceeding 2.5
percent per month on that portion of the unpaid principal
balance of any loan up to, including, but not in excess of
$225. For other loan amounts, existing law prohibits a
pawnbroker from charging or receiving compensation at a
rate exceeding specified amounts based upon the unpaid
principal balance of the loan.
Prior and Related Legislation
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SB 217
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AB 424 (Eng), 2011-12 Session, makes technical changes
intended to help pawnbrokers accurately calculate interest
payments on loans of greater than 90 days. The bill is
pending in the Assembly Banking and Finance Committee.
SB 212 (De Leon), 2011-12 Session, clarifies the
circumstances under which replacement loans can be taken
out by borrowers who are unable to undertake these
transactions in person. This two-year bill is pending in
the Senate Banking and Financial Institutions Committee.
AB 580 (Calderon), Chapter 340, Statutes of 2008, enacted
the minimum interest charge and loan set-up fee changes in
the AB 264, which is described below.
AB 264 (Mendoza), 2007-08 Session, would have replaced the
current stair-step interest rates applied to pawn loans of
over 90 days with a single monthly interest rate of 2.5
percent, increased the minimum interest charge per month
from $1 to $3; and changed the cap on loan set-up fees to
the greater of $5 or two percent, capped at $10 (up from $3
on loans of $50 and below and $5 on loans above $50). The
bill was held in the Senate Judiciary Committee.
AB 1297 (Papan), Chapter 505, Statutes of 2001, increased
the maximum loan setup fee on loans of up to $50 from $2 to
$3; increased allowable handling and storage fees from $3,
$9, and $18, to $5, $10, and $20, depending on the size of
the object; and increased the maximum allowable fee for
costs relating to sending a loan expiration notice from $2
to $3.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 5/11/11)
California Pawnbrokers Association (source)
American Federation of State, County and Municipal
Employees
ARGUMENTS IN SUPPORT : The California Pawnbrokers
Association is sponsoring this bill, to help ensure the
continued existence of pawnbrokers in California.
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SB 217
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According to the trade association, the number of
pawnbrokers operating in California has declined over time,
as pawnbroker operating costs have increased, while the
charges they are allowed to impose have remained flat.
Among the operating costs cited by the Pawnbrokers
Association: workers' compensation costs that are among
the highest in the state, the cost of training employees to
accurately value collateral, the need to upgrade security
to ensure the safety of pawned items, antiquated and
burdensome reporting requirements, and the costs of
licenses and permits.
The California Pawnbrokers Association is concerned that,
without an increase in its compensation structure, the
number of pawnbrokers in the state will continue to
decline, which will result in many potential pawn customers
utilizing other, more costly forms of short-term credit.
JJA:kc 5/12/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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