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May 15 - If passed into law, this legislation would require any dealer who purchases ALMOST ANY TYPE OF CONSUMER PRODUCT THAT HAS BEEN PREVIOUSLY OWNED to pay for a special license that is the same one required of pawnbrokers. Dealers must fingerprint their customers and electronically report to the California State Dept. of Justice and then hold the material for thirty days before being able to resell it.
Coin and precious metals have never been considered "second hand merchandise." In fact, when they are manufactured by the U.S. Mint, the very PURPOSE of a coin REQUIRES that it be spent in order to fulfill its function. Although coins and precious metals are currently exempt from reporting in AB1178, the California Coin & Bullion Merchants Association (CCBMA) is concerned about the thousands of other collectibles, such as stamp collections, coin jewelry, medals, sports cards, and exonumia, which now will require special statewide licensing and must be reported electronically to a state-wide database. This bill would treat all businesses that purchase or sell previously-owned merchandise as though they were pawnbrokers, but without the special exemptions and provisions that pawnbrokers enjoy. The fingerprinting requirement presumes that every customer is a criminal, regardless of any longstanding relationship or how small the transaction.
The main sponsor of AB 1178 is the Collateral Lenders & Secondhand Dealers Association (CLSDA), which is the California Pawnbrokers Association. They are seeking to expand the current licensing & reporting requirements in an effort to force thousands of other businesses to shoulder the burden of the estimated $2 million cost to launch the Department of Justice's (DoJ) electronic reporting program.
For decades it has been mandatory in California for pawnbrokers to report when they issue a loan or purchase secondhand merchandise as part of their licensing requirement. Pawnbrokers enjoy a special exemption from the state’s usury laws to issue loans that are secured by the customer’s collateral at annualized rates greater than 60%, which is perfectly legal. The loaned amount is a fraction of the value of the product, not a fair market value, which enables a pawnbroker to enjoy a windfall profit if a customer does not “redeem” his pawned collateral. Very often pawnbrokers’ clients are more transient, while others businesses who purchase secondhand items outright (such as antiques) often have worked hard over years to develop a relationship with their customers who do repeat business and also refer others. AB 1178 would require that these good clients be treated as criminals by being fingerprinted and reported to the state, irrespective of the fact that the client may have purchased the same item from the dealer.
This bill is intended to change the pawnbrokers’ reporting from a cumbersome, inefficient paper system to a more useful and convenient electronic system. When implemented, this system will make the pawnbrokers’ reporting easier and more efficient. Pawnbrokers already have the necessary computers and software programs; for all other businesses, they will have the additional cost to purchase these.
Most significantly, pawnbrokers will be the greatest beneficiary of AB1178. By the very nature of their business, they will use the new electronic system on 100% of their transactions, just as they have had to do via the current paper reporting system. Other businesses to which the state licensing requirement has been extended under AB 1178 will only use the system part time, many for as little as 1% or 2% of their transactions. Also, only pawnbrokers purchase or pawn such a wide range of merchandise from cars to electronics to guns, etc. Other businesses that might purchase previously-owned items usually specialize in their field. A car dealer buys cars, not digital cameras. A jeweler takes used items in trade for other jewelry items—they do not take in a television set.
The initial fees total $552, plus $175 every two years for licensing are specifically designated to fund this system. Additional costs for specialized software and hardware would be required for most non-pawnbroker locations. These costs and other aspects of this licensing are identical whether the business is a full time pawnbroker or an occasional buyer of scrap gold or silver.
This bill is not only extraordinarily onerous for small businesses, it is unfair to both the coin dealer and their customers. Additionally, since there is no minimum transaction amount, a dealer will be required to report everything from a $5 sterling spoon to a $50 stamp collection. There is no dealer to dealer exemption in AB1178, so if it is resold to another dealer that DEALER has to be fingerprinted and the process starts all over again. Neither of these types of reports contributes anything positive to a reporting system; indeed, they serve only to bog down the system with worthless data.
As proposed AB1178 states that a license dealer is restricted to a single business location. Therefore, any licensed California dealer cannot purchase or sale material at any trade show or convention within California without having a second license for that location. UNBELIEVABLE, considering that any unlicensed individual selling or buying 2nd hand property or collectibles can set up at a swap meet and is exempt from licensing, fingerprinting or holding.
Out-of-state dealers attending coin conventions within our state will require the same licensing, fingerprinting and holding periods. Both the American Numismatic Association and Expos Unlimited LLC have stated passage of AB1178 would result in moving 6-7 major coin shows annually to other states costing California millions of dollars in convention revenues including hotels, dining, entertainment, transportation, etc.
A more efficient and equitable way to pay for the new electronic reporting system has already been implemented in Phoenix, Arizona. The Phoenix, Arizona police department charges $3 per ticket to all 2nd hand dealers and pawnbrokers. This way the companies who use the electronic reporting system pay as they go. Law enforcement not only approved this method but, when challenged in the courts by the pawnbrokers in that state, the courts upheld this “pay to play” method of reporting. Unlike the proven system in Arizona, AB 1178 would force the entire collectible community, over 10,000 businesses to subsidize 700 California pawnbrokers.
Click Here to find out how you can help defeat AB1178.
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