BILL ANALYSIS �
ACR 101
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ASSEMBLY THIRD READING
ACR 101 (Jones-Sawyer)
As Introduced February 19, 2014
Majority vote
BUSINESS & PROFESSIONS 14-0
APPROPRIATIONS 15-0
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|Ayes:|Bonilla, Jones, |Ayes:|Gatto, Allen, Bocanegra, |
| |Bocanegra, Campos, | |Bradford, Ian Calderon, |
| |Dickinson, Eggman, | |Campos, Eggman, Gomez, |
| |Gordon, Hagman, Holden, | |Holden, Linder, Pan, |
| |Maienschein, Mullin, | |Quirk, Ridley-Thomas, |
| |Skinner, Ting, Wilk | |Wagner, Weber |
| | | | |
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SUMMARY : Requests that the California Department of Justice
(DOJ) convene stakeholder meetings in 2014 with representatives
from law enforcement, prosecutors and the secondhand dealer and
pawnbroker industry to identify changes in current law which
would allow secondhand dealers and pawnbrokers to conduct
Internet-based business. Specifically, this resolution :
1)Makes the following declarations:
a) In the past decade, a new business model has emerged in
other states called "Internet pawn" and operators in less
regulated states are aggressively and openly operating in
California over the Internet, but are not in compliance
with California law pertaining to secondhand dealers and
pawnbrokers;
b) Existing law requires California secondhand dealers and
pawnbrokers to report transactions involving tangible
personal property using a statewide, uniform electronic
reporting system developed by the DOJ;
c) Although secondhand dealers and pawnbrokers are required
to make these electronic reports, existing law poses
several barriers to electronic pawn loans in California;
d) Existing law requires the report made by a secondhand
dealer or pawnbroker to include a legible fingerprint taken
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from the intended seller or pledger and retain the reported
tangible personal property for 30 days for possible
inspection by law enforcement. Out-of-state pawnbrokers
are not required to collect fingerprints or subject to the
30-day hold policy;
e) As a result, a significant amount of reportable
merchandise pawned over the Internet that would otherwise
be reported to the DOJ goes unreported and is not held for
law enforcement;
f) This puts California secondhand dealers and pawnbrokers
at a competitive disadvantage, and merchandise pawned over
the Internet escapes detection by law enforcement and is
physically absent from the state as soon as the transaction
is completed;
g) California has been a leader in consumer protection for
decades;
h) California secondhand dealers and pawnbrokers provide
loans at the lowest interest rates in the United States,
and 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 unregulated;
i) There are impediments to a secondhand dealer or licensed
pawnbroker in California transacting business solely on the
Internet. Unlike any other lending model in California,
the physical presence of the borrower is required to obtain
the legally required fingerprint;
j) 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, California's secondhand dealers and
pawnbrokers will lose a greater market share to
out-of-state Internet pawn and 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
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criminal investigation and prosecution; and,
aa) Good public policy demands that the Legislature address
this inequity that is so harmful to California business,
consumers and law enforcement.
2)Resolves that the Legislature requests the DOJ 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 necessary to do the
following:
a) Allow California secondhand dealers and pawnbrokers to
fairly compete with out-of-state Internet pawnbrokers;
b) Keep available to law enforcement merchandise pawned
over the Internet that would otherwise go out-of-state and
not be reported or held; and
c) Protect California consumers transacting pawn loans over
the Internet from higher interest rates and fees than those
permitted in California.
3)Resolves that the DOJ is requested to report its finding and
recommendations for statutory changes to the Legislature by
January 1, 2015.
4)Resolves that the Chief Clerk of the Assembly transmit copies
of this resolution to the DOJ and to the author for
appropriate distribution.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, one-time costs to the DOJ of approximately $100,000
(GF) to hold stakeholder meetings and to report to the
Legislature on its findings and recommendations.
COMMENTS :
1)This measure simply calls upon the DOJ to convene an
unspecified number of stakeholder meetings in 2014 to address
concerns around the growing Internet pawn and secondhand
dealer industry. According to the author, individuals
residing outside of California are participating in pawnbroker
and secondhand dealer activities online without meeting the
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same reporting, holding and interest rate requirements that
California's pawnbrokers and secondhand dealers are obligated
to comply with. These meetings should identify the means for
California's regulated dealers to fairly compete with
out-of-state brokers, keep merchandise transacted over the
Internet available for law enforcement inspection, and protect
consumers in California from higher fees and interest rates.
This resolution is sponsored by the California Pawn Brokers'
Association.
2)According to the author, "Competition from out-of-state
pawnbrokers using the Internet has become a significant
problem for California pawnbrokers, as they are unable to
compete against the internet-based business model due to the
requirement to obtain a fingerprint from the borrower. The
technology to transmit an electronic fingerprint, and reliably
link it to the borrower does not exist. The purpose of this
resolution is [to] implore the [DOJ] to convene a stakeholder
meeting in 2014-including industry representatives, law
enforcement and prosecutors-to explore and devise alternatives
to the fingerprint requirement for Internet based transactions
only. [A] stakeholder group already exists, with the
exception of the California District Attorneys Association, to
administer the new statewide electronic database for tangible
personal property."
3)The National Pawnbroker Association (NPA) recommends that
"[c]onsumers dealing with online interstate pawn lenders ask
where collateral will be stored, how long it will take for
their loan to be funded after the collateral reaches the
lender, how they can redeem their collateral and how long it
may take to receive the collateral from the lender after
redemption, and whether the consumer protection laws of the
state where the consumer resides will govern the pawn loan's
terms and conditions."
4)When secondhand dealers or pawnbrokers take in items, whether
buying outright or loaning money and holding for collateral,
they are required to report daily or on the first working day
after they have taken possession of an item on a "JUS 123"
standardized form which must be completed for each item
purchased, taken in trade, taken in pawn or accepted for sale
on consignment. The forms require very specific information
including name and identification of the seller, a description
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of the property (such as serial numbers or other identifying
marks), certification of ownership, certification that the
seller's knowledge of the item is correct, and a fingerprint.
Once completed, a copy is provided to local law enforcement, and
a copy is retained by the dealer. This is to help ensure that
items received by a secondhand dealer or pawnbroker are not
stolen. Because secondhand dealers and pawnbrokers in
California are required to hold items for a specified time,
report items to law enforcement, obtain fingerprints and
follow other specified procedures, this resolution requests
that the DOJ convene stakeholder meetings to address the
Internet-based secondhand dealer and pawnbroker industry which
are not necessarily bound by such laws or complying with them.
Analysis Prepared by : Elissa Silva / B., P. & C.P. / (916)
319-3301
FN: 0003146