BILL ANALYSIS
SB 1893
Page 1
Date of Hearing: June 22, 2004
ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS
Lou Correa, Chair
SB 1893 (Burton) - As Amended: June 14, 2004
SENATE VOTE : 33-3
SUBJECT : Pawnbrokers and secondhand dealers: regulation.
SUMMARY : Provides for the creation of an "electronic data
reporting system" within the Department of Justice (DOJ) to
record acquisition of "secondhand tangible personal property" by
dealers and pawnbrokers, prescribes fees for licensure of
dealers and pawnbrokers, and expands the scope of "secondhand
tangible personal property" items that are subject to the
reporting requirements of existing law. Specifically, this
bill :
1)States legislative intent that the purpose for creating an
"electronic data reporting system" is to curtail the
dissemination of stolen property and the evasion of sales tax
and that licensing fees collected by DOJ are to provide for
the creation and operation of the "electronic data reporting
system."
2)Provides for the creation of an "electronic data reporting
system" within DOJ which shall interface with other automated
systems within DOJ and receive transaction reports detailing
the acquisition of "secondhand tangible personal property," as
defined, once the Attorney General (AG) certifies that the
system is fully operational. The AG shall report to the
Legislature by January 1, 2006 on the progress made in
creating the system, and the system shall be operational by
January 1, 2007 if certain conditions are met. If possible,
the system shall receive all transaction reports
electronically by January 1, 2008.
3)Charges the AG with maintaining the "electronic data reporting
system" and allows the AG to write regulations for that
purpose. Access to the information in the system shall be
restricted to law enforcement agencies or officers that have
reason to believe a crime involving property has been
committed or that a seller, trader, pledgor, or consignor is
evading sales tax. The DOJ or any local agency may not charge
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a fee for reporting transactions via the electronic data
reporting system.
4)Extends existing licensure requirements for "secondhand
dealers" and "pawnbrokers," as defined, to "coin dealers" and
"business machine dealers," as defined.
5)Provides that any person engaging in the business of a
"secondhand dealer," "coin dealer," "business machine dealer,"
or "pawnbroker," as defined, shall be subject to the following
fees:
a) An initial license processing fee of $195 to be paid to
DOJ;
b) A license-issuing fee of $100 to be paid to DOJ;
c) A criminal background check processing fee of $32 to be
collected by the local licensing authority (e.g., a local
law enforcement agency) and forwarded to DOJ;
d) A biennial license renewal fee of $175 to be paid to
DOJ;
e) An additional license application processing fee of up
to $50 to be assessed by the local law enforcement agency
issuing the license and to be for the purpose of licensing
enforcement; and,
f) A license renewal fee of up to $50 to be assessed by the
local law enforcement agency issuing the license and to be
for the purpose of licensing enforcement.
6)States that all license processing and license renewal fees
paid to DOJ shall be deposited in the Electronic Data
Reporting System Fund, which this bill establishes, and shall
be for the purpose of running and maintaining the electronic
data reporting system created by this bill.
7)Conforms sections of the Financial Code, relative to
pawnbrokers, to provisions of this bill so that pawnbrokers
are subject to the same licensing fees and penalties as
secondhand dealers, coin dealers, and business machine
dealers.
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8)Expands the definition of "secondhand dealer" and "coin
dealer" to include franchisors, franchisees, auction houses,
and any other business entity.
9)Excludes the following from the definition of "secondhand
dealer":
a) An auctioneer as long as that person does not take
possession of the property;
b) A charitable organization that receives secondhand
tangible personal property as a non-monetary donation;
c) A participant at a gun show who is not a "gun show
trader," as defined, or is not required to be licensed
pursuant to existing law regulating gun dealers;
d) Swap meet operators, as defined; and,
e) A person whose business is limited to the buying,
selling, trading, or accepting for sale on consignment
secondhand clothing that is not a fur or clothing
ornamented with precious stones or gems.
10)Defines "business machine dealer" as any person, firm,
partnership, corporation, franchisor, franchisee, or other
business entity whose business includes the purchasing,
trading, or accepting for sale on consignment a "business
machine," as defined.
11)Renames "tangible personal property" as "secondhand tangible
personal property" and expands that definition to include any
"business machine," as defined, any non-serialized but
identifiable item with a value of $250 or more, jewelry,
sterling silver, utensils, coin collections, precious metals,
stones, and gems. Further states that this definition shall
remain in effect until the AG certifies that the electronic
data reporting system is operational and provides for the
repeal of that definition. All items of property included in
this definition shall be subject to the reporting requirements
under existing law.
12)Provides a definition of "secondhand tangible personal
property" that shall supersede the definition of "secondhand
tangible personal property" in paragraph (11) once the AG
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certifies that the "electronic data reporting system" is
operational. This definition includes any item that may be
seen, weighed, measured, felt, or touched and that is acquired
by a secondhand dealer, coin dealer, business machine dealer,
or pawnbroker through sale, trade, pledge, or acceptance for
consignment or auction.
13)Excludes from both definitions of "secondhand tangible
personal property" the following:
a) Chattel paper, documents of title, financial
instruments, and money securities;
b) New merchandise purchased by a secondhand dealer, coin
dealer, business machine dealer, or pawnbroker from a
manufacturer, distributor, or wholesaler;
c) Coins, monetized bullion, or commercial grade ingots of
gold, silver, or other precious metals; and,
d) A "business machine" that is taken for repair and that
is to be returned to its owner after repair.
14)Requires a "secondhand dealer," "coin dealer," "business
machine dealer," or "pawnbroker," as defined, to report, as
specified, all "secondhand tangible personal property" that is
acquired by purchase, trade, or accepted for sale on
consignment or for auction unless the item is excluded from
either definition of "secondhand tangible personal property."
The report is to be made to the local licensing authority or
via the "electronic data reporting system" once that system
becomes operational.
15)Requires the report to include a legible fingerprint of the
item's seller, trader, pledgor, or consignor to be affixed to
a form approved by DOJ or in an electronic format consistent
with the "electronic data reporting system."
16)Requires a secondhand dealer to retain evidence of the
purchase of new merchandise from a manufacturer, distributor,
or wholesaler for one year from the date of purchase. This
information is to be made available for inspection by any law
enforcement officer.
17)Prohibits a secondhand dealer, coin dealer, business machine
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dealer, or pawnbroker from selling, buying, trading,
auctioning, accepting for auction, accepting for consignment,
or taking in pawn any item that possesses an altered or
obliterated serial number.
18)Requires any person who advertises as a secondhand dealer,
coin dealer, or business machine dealer to comply with the
provisions of this bill and of existing law relative to
transaction reporting.
19)Makes it a misdemeanor for any person to advertise as a
secondhand dealer, coin dealer, or business machine dealer, as
defined, unless that person is properly licensed.
EXISTING LAW :
1)Defines a "secondhand dealer" as any person or entity taking
in pawn, trading, accepting for sale on consignment or for
auction, or auctioning any tangible personal property, as
defined.
2)Defines a pawnbroker as a "person engaged in the business of
receiving goods in pledge for security for a loan."
3)Defines "tangible personal property" as all secondhand
tangible personal property that bears a serial number,
personalized initials, or inscription or appears to have had a
serial number, personalized initials, or inscription at the
time that property is acquired by a secondhand dealer. Any
tangible personal property received in pledge as a security
for a loan by a pawnbroker and all personal property commonly
sold by secondhand dealers that is statistically found to
constitute a "significant class of stolen goods" are also
considered "tangible personal property." The AG generates the
list of which items constitute a "significant class of stolen
goods" and supplies it to local law enforcement agencies.
4)Requires secondhand dealers, as defined, and pawnbrokers to be
licensed by local law enforcement agencies. Licensure is
denied to any applicant with a history of property related
crime, and that denial lasts for a period of two years. The
law permits the local licensing authority and DOJ to charge an
initial processing fee, but does not specify the amount of
that fee. The fee for licensure renewal is not to exceed $12.
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5)Provides that pawnbrokers and secondhand dealers shall report
daily on forms approved or provided by DOJ, all "tangible
personal property purchased," taken in trade, taken in pawn,
or accepted for sale on consignment or for auction, to local
law enforcement. The report shall include the following
information:
a) The name and current address and identification of the
intended seller or pledgor of the property;
b) A complete and reasonably accurate description of
serialized or non-serialized property;
c) A certification by the intended seller or pledgor that
he or she is the owner of the property, or has the
authority of the owner to sell or pledge the property and
that any information provide is true and complete; and,
d) A legible fingerprint taken from the intended seller or
pledgor.
6)Requires secondhand and coin dealers to hold for a period of
30 days any tangible personal property acquired before
disposing of that tangible personal property. Pawnbrokers
must wait for a period of four months before disposing of
tangible personal property that is acquired.
7)Provides that DOJ shall, in consultation with local law
enforcement, develop clear and comprehensive categories of
property subject to reporting requirements. The categories
shall be incorporated by secondhand dealers and coin dealers
for reporting requirements. DOJ and local law enforcement, in
consultation with secondhand dealer and coin dealer
representatives, shall develop a standard statewide format for
electronic reporting. Twelve months after the format and the
categories have been developed, each secondhand dealer and
coin dealer shall make reports electronically. Until that
time, each secondhand dealer and coin dealer may either
continue to report this information using existing forms and
procedures or may begin electronically reporting this
information under the reporting categories and using the new
format when it has been developed.
8)Provides that a coin dealer who engages in less than 10
transactions each week in which he or she has purchased, taken
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in trade, taken in pawn, accepted for sale or consignment, or
accepted for auctioning "tangible personal property," shall
report the required information using a form developed by the
AG. The dealer shall fax or mail the report to the chief of
police or sheriff. A transaction shall consist of not more
than one item. Where transactions increase to 10 per week,
the coin dealer shall electronically report his or her
transactions.
FISCAL EFFECT : Unknown
COMMENTS :
1)Purpose of this bill . According to the sponsor, provisions in
this bill will curtail the dissemination of stolen property,
encourage the rapid recovery of stolen property, and aid the
state in detecting possible sales tax evasion by creating an
electronic data reporting system in DOJ. To provide funding
for the system, this bill expands the definition of secondhand
dealers who will be licensed by the state and also expands the
definition of tangible personal property. The sponsor asserts
that this bill will implement the electronic reporting
requirements contained in SB 1520 (Schiff), Chapter 994,
Statutes of 2000.
2)Support . Best Collateral, Inc. states that this bill will
facilitate the long-standing legislative goals to prevent the
theft of property and evasion of sales tax. This bill is
designed to build on SB 1520, which sought to develop a
single, uniform, statewide database within DOJ that would be
used by law enforcement to help solve property crimes. This
goal has not yet been achieved because SB 1520 did not provide
a funding vehicle; one of the major goals of this bill is to
provide that funding. Further, the bill clarifies ambiguities
in the definition of secondhand dealers who should already be
licensed by the state and in the definition of reportable
tangible personal property.
The Santa Maria Police Department states that the goal of
existing law to curtail the dissemination of stolen property
and facilitate the recovery of stolen property can only be
enhanced by the establishment of a statewide electronic data
reporting system.
3)Opposition . The Attorney General's Office asserts that, under
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the provisions of this bill, secondhand dealers would end up
reporting items such as straw baskets, books, salt and pepper
shakers, and wall prints. These items would simply clutter up
the existing "Automated Property System" making it more
cumbersome for law enforcement to use. Also, according to the
AG, this bill only allows access to the "Automated Property
System" to investigate property crimes or tax evasion.
The California Coin and Bullion Merchants Association (CCBMA)
notes that one section of the bill excludes coins, commercial
grade ingots and precious metals from its scope, but another
section attempts to regulate those same products with the
terms "coin collections" and "precious metals," without
defining those terms. This ambiguity could cause severe
regulatory and enforcement problems. CCBMA further notes that
this bill requires the licensing of all coin dealers, even if
they transact business exclusively in excluded merchandise,
and CCBMA asks, "why should such a dealer have to become
licensed when the only obvious purpose is to collect licensing
fees to fund the electronic data reporting program in which
the dealer does not participate?"
eBay claims that this bill's "one-size-fits-all" approach would
unfairly discriminate against many legitimate sellers in
California. This approach ignores the transparency inherent
in public markets outside the traditional pawnshop. Resellers
of used goods typically publish or otherwise widely distribute
information about the goods they have for sale. The current
version of this bill would impose onerous information
collection requirements-such as requiring the taking of a
fingerprint of every seller-that would needlessly burden the
vast majority of resellers and stifle the rapidly growing use
of the Internet by ordinary Californians seeking to resell
property.
The Video Software Dealers Association argues that this bill
would effectively terminate the thriving market for used DVDs
and video games. Since the purchase and trade of used DVDs
and video games is a small part of the overall business of
video stores, many stores would likely cease to purchase used
DVDs and video games because the requirements of this bill are
too burdensome.
4)Related legislation . SB 1520 (Schiff), Chapter 994, Statutes
of 2000, requires secondhand and coin dealers to
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electronically report property acquisitions to local law
enforcement agencies on a form developed by the AG. Coin
dealers that have 10 or fewer transactions per week are
exempted from the electronic reporting requirements.
5)Committee staff notes the following technical problems with
this bill .
a) On page 14, line 11, the word "secondhand" should be
included in front of "tangible personal property."
b) On page 21, line 21, the word "to" is repeated
c) On page 47, line 15, and page 48, line 11, the code
section number "21208" is used twice. The reference on
page 48, line 11 is incorrect, as it states "Section 21208
is added to the Financial Code, to read," and Section 21208
already exists in current law and is amended on page 47 of
this bill.
REGISTERED SUPPORT / OPPOSITION :
Support
Collateral Loan and Secondhand Dealers Association (sponsor)
Best Collateral, Inc.
City of Grover Beach Police Department
City of Santa Maria Police Department
San Bernardino County Office of the Sheriff
Cindy Chavez, Councilmember, City of San Jose
1 individual
Opposition
A-Mark Financial Corporation
AuctionDrop, Inc.
California Attorney General
California Coin and Bullion Merchants Association
eBay, Inc.
Expos Unlimited
Home Consignment Center (Danville, CA)
iSold It
NetChoice
PayPal
Video Software Dealers Association
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West Coast Peddler
Analysis Prepared by : Pablo Garza / B. & P. / (916) 319-3301