BILL ANALYSIS �
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THIRD READING
Bill No: ACR 101
Author: Jones-Sawyer (D)
Amended: 6/16/14 in Senate
Vote: 21
SENATE JUDICIARY COMMITTEE : 5-1, 6/10/14
AYES: Jackson, Anderson, Lara, Leno, Monning
NOES: Vidak
NO VOTE RECORDED: Corbett
SENATE APPROPRIATIONS COMMITTEE : 5-0, 8/14/14
AYES: De Le�n, Hill, Lara, Padilla, Steinberg
NO VOTE RECORDED: Walters, Gaines
ASSEMBLY FLOOR : 72-0, 5/5/14 - See last page for vote
SUBJECT : Pawnbrokers and secondhand dealers: Internet
transactions
SOURCE : California Pawnbrokers Association
DIGEST : This resolution requests the Department of Justice
(DOJ) to convene meetings in 2014 with representatives from law
enforcement, prosecutors, the secondhand dealer and pawnbroker
industries and interested members of the public to recommend
changes to existing law pertaining to Internet pawnbroking.
ANALYSIS :
Existing law:
CONTINUED
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1.Includes a statement of legislative intent to curtail the
dissemination of stolen property, to facilitate the recovery
of stolen property and to detect possible sales tax evasion by
means of a uniform, statewide, state-administered program of
regulation of persons whose principal business is dealing in
tangible personal property, as specified.
2.Includes legislative intent that reports of transactions in
pawned and second-hand property should be correlated with law
enforcement reports so as to trace and recover stolen
property.
3.Defines a "second-hand dealer" to mean any person or entity
whose business includes buying, selling, trading, taking in
pawn, accepting for sale on consignment, accepting for
auctioning, or auctioning second-hand tangible personal
property. Specifies that a "second-hand dealer" does not
include a "coin dealer" or participants at gun shows or
events, persons who perform the services of an auctioneer, or
persons whose business is limited to the reconditioning and
selling of major household appliances, as specified.
4.Defines "tangible personal property" to mean: (a) all
second-hand personal property that has a serial number or
personalized markings; (b) all tangible property, new or used,
taken by a pawnbroker as security for a loan; and (c) all
tangible personal property commonly sold by second-hand
dealers that constitutes a significant class of stolen
property. Provides that tangible personal property does not
include coins, monetized bullion, or commercial grade ingots
of precious metals.
5.Defines a "pawnbroker" to mean a person engaged in the
business of receiving goods in pledge for security for a
loan."
6.Defines a "coin dealer" to mean any person, firm, partnership,
or corporation whose principal business is the buying,
selling, and trading of coins, monetized bullion, or
commercial grade ingots of gold, or silver, or other precious
metals.
7.Requires every second-hand dealer and coin dealer to report
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daily to law enforcement, on forms or through an electronic
reporting system approved by DOJ, all second-hand tangible
personal property, except for firearms, which he/she has
purchased, taken in trade, taken in pawn, accepted for sale on
consignment, or accepted for auctioning, as specified.
Specifies that such reports shall include, among other things,
a complete and reasonably accurate description of the property
acquired, a certification by the intended seller or pledger
that he/she is the owner of the property or has the authority
of the owner to sell or pledge the property, and a legible
fingerprint taken from the intended seller or pledger, as
specified.
8.Requires every second-hand dealer and coin dealer to retain in
his/her possession for a period of 30 days all tangible
personal property reported in a daily report. Requires every
second-hand dealer and coin dealer to produce tangible
personal property reported in a daily report for inspection by
law enforcement.
9.Provides that it is unlawful for any person to engage in the
business of a second-hand dealer without being licensed for
such activity.
10.Provides that a district attorney or the Attorney General may
seek an injunction to stop or prevent a violation of the laws
governing transactions in pawned and second-hand goods.
11.Provides that when a peace officer has probable cause to
believe that property, other than coins and precious metal
ingots, in the possession of a pawnbroker, second-hand dealer,
or coin dealer is stolen, the officer may place a hold on the
property for up to 90 days. Prohibits the pawnbroker or
dealer from releasing or disposing of the property without a
court order or written receipt from an officer of the agency
that placed the hold. Requires the pawnbroker or dealer to
produce and deliver the property to a peace officer for
purposes of a criminal investigation.
12.Requires, if property reported as lost, stolen, or embezzled
is found in the possession of a pawnbroker, second-hand
dealer, or coin dealer, that the law enforcement agency shall
provide written notice to the person who reported the property
lost or stolen containing specified information or statements.
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13.Provides that if a pledger of property (person using the
property as collateral for a loan) attempts to retrieve the
property during the holding period, the pawnbroker is required
to inform the pledger of the name of the peace officer and law
enforcement agency that placed the hold. If the property is
no longer needed for an investigation, the hold must be
released.
14.Requires that whenever property alleged to have been lost,
stolen, or embezzled is taken from a pawnbroker, the peace
officer, magistrate, court, clerk, or other person having
custody of the property shall not deliver the property to any
person claiming ownership unless:
A. The person making a claim of ownership files a written
statement, signed under penalty of perjury, stating the
factual basis upon which they claim ownership or an
interest in the property with the person having custody of
the property;
B. The person having custody of the property notifies the
pawnbroker of the claim by providing a true and correct
copy of the claim to the pawnbroker; and
C. The pawnbroker makes no claim with respect to the
property within 10 days of such notification.
1.Requires, except as specified, that if the ownership of stolen
or embezzled property and address of the owner and security
can be ascertained, the peace officer in custody of the
property shall notify by mail the owner and security holder,
as specified.
2.Requires, if law enforcement identifies serialized property or
other property reported stolen or lost that has been listed in
the electronic reporting system maintained by DOJ, the agency
shall notify the owner or person claiming to be entitled to
possession of the property within 15 days. If a pawnbroker or
second-hand dealer reported his/her acquisition of the
property to law enforcement, the owner must be given the
contact information of the pawnbroker or dealer and be
informed of the law concerning retrieval of property from the
business. If the property is no longer needed as evidence, it
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must be returned to the owner, as specified.
3.Permits a pawnbroker to charge fees pursuant to a set schedule
of charges that are based upon the amount of the loan,
including a charge not exceeding $1 in any loan for not more
than 30 days which does not exceed $14.99. Provides that
charges for the first 90 days of a loan shall be determined by
that schedule of charges. Charges for any period of time
following the first 90 days of the loan shall be determined by
application of the schedule of maximum compensation.
4.Limits the maximum compensation a pawnbroker may receive in
connection with a loan secured by pledged property to a rate
not exceeding 2.5% per month on the unpaid principal balance
of a loan after the first 90 days, as specified.
5.Limits the amounts a pawnbroker may charge as a loan setup fee
and as a handling and storage fee.
This resolution:
1.Makes specific findings and declarations regarding a type of
out-of-state pawnbroking business called "Internet pawn,"
states that this type of business fails to comply with
existing law governing pawnbrokers and second-hand dealers,
and states that these unlawful "Internet pawn" businesses
place California pawnbrokers and second-hand dealers at a
competitive disadvantage.
2.Calls upon DOJ to convene meetings in 2014 with
representatives from law enforcement, prosecutors, the
second-hand dealer and pawnbroker industry and interested
members of the public to determine the changes to existing law
that: (a) allow California pawnbrokers and second-hand
dealers 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.
This resolution additionally requests DOJ to report its
findings and recommendations for statutory change to the
Legislature by January 1, 2015.
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Background
Until recently, second-hand goods merchants and pawnbrokers in
the United States have been confined to doing business out of
fixed storefronts with customers who visit their physical retail
locations. This geographical limitation has historically
allowed each state to regulate the activities of second-hand
dealers and pawnbrokers doing business within their state as
they saw fit. For second-hand goods merchants and pawnbrokers
doing business in California, existing law governs many aspects
of how these businesses operate. The Legislature, for example,
has enacted various laws to both curtail the dissemination and
facilitate the recovery of stolen property, including property
acquired by pawnbrokers and second-hand dealers, knowing that
these merchants are often utilized by individuals attempting to
sell or pawn stolen or embezzled property.
Generally, existing law requires all second-hand dealers,
including pawnbrokers, and coin dealers to report daily to law
enforcement every piece of tangible personal property that they
purchase, take in trade, take in pawn, accept for sale on
consignment, or accept for auctioning, using an electronic
reporting system maintained by DOJ. Property so acquired by
second-hand dealers must be held for at least 30 days and must
be produced or surrendered to law enforcement when it is
reasonably thought that the property was lost, stolen, or
embezzled. Existing law also regulates the terms by which
pawnbrokers may offer loans secured by tangible property to
consumers, including placing caps on loan setup fees, handling
and storage fees, and caps on maximum compensation.
With the advent of the Internet, however, some out-of-state
pawnbrokers have taken to transacting business with California
residents online, using the Internet and express delivery
companies to accomplish what used to be done at retail
storefronts. According to a recent article:
For consumers, it means that instead of plopping a castoff
wedding ring, camera or china platter onto the counter of a
local pawnshop, you do the entire transaction online and by
mail. . . . The appeal: Online pawning is relatively quick,
completely private, and there's no stigma of walking into a
public place with your personal possessions to hock. And if you
default on your loan, nothing gets reported to a credit bureau.
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(Buck, Pawnshop has spread to the Internet (Mar. 19, 2012) The
Minneapolis Star Tribune (as of May 26, 2014).
Despite its convenience for consumers, the ability of
out-of-state pawnbrokers and second-hand goods merchants to
remotely offer services to Californians may, in effect, leave
California residents unprotected when these merchants transact
business in violation of existing California law. According to
the same article, one California pawnshop owner argues that
these online pawn shops are "in direct competition with
California pawnbrokers," adding that "it's an uneven matchup,
since existing California law requires walk-in pawnshop
customers to provide I.D., fingerprints and a signature. Local
shops also must report each item they receive to law enforcement
to thwart stolen goods. They can't conduct any business
online."
Prior Legislation
SB 762 (Hill, Chapter 318, Statutes of 2013) clarified the
rights and interests of licensed pawnbrokers and second-hand
dealers in property seized from a pawnbroker where a criminal
investigation or case involving the property has been resolved
or terminated. The bill also modified procedures for a law
enforcement agency to seize lost, stolen, or embezzled property
from a pawnbroker or second-hand dealer, including authorizing a
law enforcement officer to seize property, with or without a
warrant, if the pawnbroker or second-hand dealer in possession
of the property refuses to place a hold on the property.
AB 391 (Pan, Chapter 172, Statutes of 2012) required second-hand
dealers and coin dealers to report specified transactions
involving tangible personal property using an electronic
reporting system administered by DOJ, and requires DOJ to charge
specified licensure and renewal fees for the purpose of funding
the electronic reporting system.
AB 704 (Ma, 2011) would have required a person conducting
business as a second-hand dealer to provide a valid second-hand
dealer's license to any peace officer upon demand and would have
authorized a peace officer to impound all tangible personal
property found in the possession or control of the person if a
second-hand dealer's license is not provided, as specified. The
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bill also would have authorized the imposition of storage
charges for impounded personal property and would have
authorized a nonprofit association composed of 50 or more
licensed second-hand dealers to bring an action to enjoin a
person from conducting business as a second-hand dealer without
being licensed. The bill died in the Assembly Committee on
Judiciary.
SB 1893 (Burton, 2004) would have required all second-hand
tangible personal property acquired by a second-hand dealer,
coin dealer, business machine dealer, and pawnbroker to be
reported electronically in an electronic data reporting system
to be developed by DOJ, and would have extended existing
licensure requirements to include coin dealers and business
machine dealers. The bill died in the Assembly Committee on
Business and Professions.
SB 1520 (Schiff, Chapter 994, Statutes of 2000) required DOJ to
develop an electronic reporting system for reporting all
tangible personal property purchased, taken in trade or pawn, or
accepted for sale on consignment or for auctioning, by
second-hand dealers and coin dealers. The bill exempted from
the electronic reporting requirement a coin dealer who engages
in less than 10 transactions each week each consisting of not
more than one item.
FISCAL EFFECT : Fiscal Com.: Yes
According to the Senate Appropriations Committee, potential
one-time costs in the range of $50,000 to $100,000 (General
Fund) for DOJ to hold stakeholder meetings and to report to the
Legislature.
SUPPORT : (Verified 8/15/14)
California Pawnbrokers Association (source)
National Federation of Independent Business
OPPOSITION : (Verified 8/15/14)
Antiques-by-the-bay
Auctions-by-the-bay
ARGUMENTS IN SUPPORT : The author writes:
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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. . . . [It
is estimated] that approximately 9% of the pawn transactions
that originate in California are currently being done by
out-of-state pawnbrokers. Logic suggests that this number will
exponentially increase each year as internet use increases. Law
enforcement never gets a report on these items, and out-of-state
brokers are not subject to the 30-day hold requirement.
Therefore, by enabling California pawnbrokers to do internet
transactions, law enforcement would be getting daily reports of
these items and would be able to inspect them during the hold
period as they currently do with in-store transactions.
This resolution requests that DOJ convene stakeholder meetings
in 2014 with representatives from law enforcement, prosecutors
and the second-hand dealer and pawnbroker industry to identify
changes in existing law which would allow second-hand dealers
and pawnbrokers to conduct Internet-based business.
ARGUMENTS IN OPPOSITION : Per the Senate Judiciary Committee
analysis, Antiques-by-the-bay and Auctions-by-the-bay, two
sister companies that promote antique shows and provide auction
services, respectively, oppose the inclusion of "second-hand
dealers" in this resolution. They argue that "existing law has
long and incorrectly confused second-hand dealers with
pawnbrokers," and suggest that since the stakeholder meetings to
be held pursuant to the resolution will chiefly address problems
with Internet pawnbroking, second-hand dealers ought to be
removed from the resolution.
ASSEMBLY FLOOR : 72-0, 5/5/14
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Bloom,
Bocanegra, Bonilla, Bradford, Brown, Buchanan, Ian Calderon,
Campos, Chau, Ch�vez, Chesbro, Conway, Cooley, Dababneh, Daly,
Dickinson, Eggman, Fong, Fox, Frazier, Beth Gaines, Garcia,
Gatto, Gomez, Gonzalez, Gordon, Gorell, Gray, Grove, Hagman,
Hall, Harkey, Roger Hern�ndez, Holden, Jones, Jones-Sawyer,
Levine, Linder, Lowenthal, Maienschein, Medina, Mullin,
Muratsuchi, Nazarian, Nestande, Olsen, Pan, Patterson, Perea,
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V. Manuel P�rez, Quirk, Quirk-Silva, Rendon, Ridley-Thomas,
Rodriguez, Salas, Skinner, Stone, Ting, Wagner, Waldron,
Weber, Wieckowski, Wilk, Williams, Yamada, John A. P�rez
NO VOTE RECORDED: Bigelow, Bonta, Dahle, Donnelly, Logue,
Mansoor, Melendez, Vacancy
AL:e 8/15/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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