California Legislature—2013–14 Regular Session

Assembly Concurrent Resolution No. 101

Introduced by Assembly Member Jones-Sawyer

February 19, 2014

Assembly Concurrent Resolution No. 101—Relative to pawnbrokers and secondhand dealers.

LEGISLATIVE COUNSEL’S DIGEST

ACR 101, as introduced, Jones-Sawyer. Pawnbrokers and secondhand dealers: Internet transactions.

This measure would request the Department of Justice to convene meetings in 2014 with representatives from law enforcement, prosecutors, and the secondhand dealer and pawnbroker industry to determine the changes to existing law that would (1) allow California pawnbrokers and secondhand dealers to fairly compete with out-of-state internet pawnbrokers, (2) keep available to law enforcement merchandise pawned over the Internet that would otherwise go out-of-state and not be reported or held for inspection, and (3) protect California consumers transacting pawn loans over the Internet from higher interest rates and fees than those permitted in California.

Fiscal committee: yes.

WHEREAS, In the past decade, a new business model has
emerged in other states called “Internet pawn.” Operators in other
less regulated states are aggressively and openly operating in
California over the Internet, but are not in compliance with the
laws governing California pawnbrokers and secondhand dealers;
and

WHEREAS, Existing law requires that California pawnbrokers
and secondhand dealers report transactions involving tangible
personal property using a statewide, uniform electronic reporting
system developed by the Department of Justice; and

WHEREAS, Although pawnbrokers and secondhand dealers
are required to make these electronic reports, existing law poses
several barriers to electronic pawn loans in California; and

WHEREAS, Existing law requires the report made by a
pawnbroker or secondhand dealer to include a legible fingerprint
taken from the intended seller or pledger. Existing law further
requires a pawnbroker or secondhand dealer to retain the reported
tangible personal property for 30 days for possible inspection by
law enforcement. Out-of-state pawnbrokers are not required to
collect a fingerprint, nor are they subject to a 30-day hold of the
property; and

WHEREAS, As a result, a significant amount of reportable
merchandise pawned over the Internet that would otherwise be
reported to the Department of Justice goes unreported and is not
held for law enforcement; and

WHEREAS, This puts California pawnbrokers and secondhand
dealers at a competitive disadvantage. In addition, merchandise
pawned over the Internet escapes detection by law enforcement
and is physically absent from the state as soon as the transaction
is completed; and

WHEREAS, California has been a leader in consumer protection
for decades; and

WHEREAS, California pawnbrokers and secondhand dealers
provide loans at the lowest interest rates in the United States.
California law caps interest rates and fees applicable to these
transactions at very low levels. In other states, the interest rates
are either capped at much higher levels or are completely
unregulated; and

WHEREAS, There are impediments to a licensed pawnbroker
or secondhand dealer in California transacting business solely on
the Internet. Unlike any other lending model in California, the
physical presence of the borrower is required in order to obtain
the legally required fingerprint; and

WHEREAS, The convenience of transacting a pawn loan over
the Internet from one’s home is proving to be a powerful lure to
Californians who would ordinarily transact that loan at a physical
pawn shop. As the world becomes more dependent on the Internet,
secondhand dealers and pawnbrokers in California will lose a
greater market share to out-of-state Internet pawn; Californians
who choose that form of pawn will also be subject to higher interest
rates and fees. In addition, law enforcement will lose a greater
percentage of tangible personal property reports and will lose the
ability to inspect and seize property needed for criminal
investigation and prosecution; and

WHEREAS, Good public policy demands that the Legislature
address this inequity that is so harmful to California business,
California consumers, and law enforcement; now, therefore, be it

Resolved by the Assembly of the State of California, the Senate
thereof concurring, That the Legislature requests the Department
of Justice to convene meetings in 2014 with representatives from
law enforcement, prosecutors, and the secondhand dealer and
pawnbroker industry to determine the changes to existing law that
would (1) allow California pawnbrokers and secondhand dealers
to fairly compete with out-of-state Internet pawnbrokers, (2) keep
available to law enforcement merchandise pawned over the Internet
that would otherwise go out-of-state and not be reported or held,
and (3) protect California consumers transacting pawn loans over
the Internet from higher interest rates and fees than those permitted
in California; and be it further

Resolved, The Department of Justice is requested to report its
findings and recommendations for statutory change to the
Legislature by January 1, 2015; and be it further

Resolved, That the Chief Clerk of the Assembly transmit copies
of this resolution to the Department of Justice and to the author
for appropriate distribution.