A Short History of the Secondhand Dealers Law
California began the regulation of secondhand dealers in 1957 to help prevent trafficking in stolen goods where local government did not already require the reporting of transactions involving identifiable secondhand tangible personal property.
Over the years, the law expanded to mandate the filing of the reports with local government, but many local governments chose not to enforce the law because it was not very successful as a means of tracing stolen property and the paperwork burden. Because pawnbrokers conduct their business in such a completely different way than most other secondhand dealers, to a great extent, the current reporting requirements are primarily enforced on pawnbrokers under the Collateral Loan Law.
In 2000, the Legislature passed Senate Bill 1520 to require the Department of Justice to develop a statewide system for the electronic reporting of certain transactions by dealers involving secondhand goods. However, the legislation failed to provide a funding mechanism for the estimated $2.8 million cost of creating the electronic reporting system. Pawnbrokers, the principal users of the future electronic reporting system, don’t want to pay the entire development costs of the new system, so they’ve sponsored several bills over the past years attempting to get other businesses to share the pain. If successful, the proposed assessment would be levied in the form of licensing fees for secondhand dealers to the tune of several hundred dollars each year.
Under current law, a “secondhand dealer” is any person or entity taking in pawn, trading, accepting for sale on consignment for auction, or auctioning, any tangible personal property. The law requires secondhand dealers and pawnbrokers to be licensed by local law enforcement agencies, but in many cases, local government chooses to require only a general business license.
A traditional analysis of current law finds that “tangible personal property” is all secondhand 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. “Tangible personal property” also includes all goods received in pledge as a security for a loan by a pawnbroker. For the purposes of this law, if a type of personal property (laptop computers, for instance) sold by secondhand dealers is found to constitute a “significant class of stolen goods” these too, are considered “tangible personal property.” The California Attorney General publishes a list of items that constitute a “significant class of stolen goods” and supplies it to local law enforcement agencies. Unfortunately, a traditional analysis of laws originally written in 1957 no longer accurately reflects how business is done in this new millennium.
At the beginning of the applicable regulations, it states that “tangible personal property” includes, but is not limited to, the categories of property listed in the paragraph above. Therefore, under current law, the definition of what is “tangible personal property” is extremely broad. Only a few items are expressly excluded such as new goods, coins, monetized bullion, commercial ingots of precious metals. Because of this broad definition of “tangible personal property,” almost anyone who engages in the business of buying, selling, auctioning or consigning of used merchandise could be subject to the Secondhand Dealers Law. If successful, the pawnbroker’s proposal would require all such property to be reported to local law enforcement, held for 30 days before it can be resold, and you would be required to fingerprint and ID the person from whom you acquired the property. Imagine!
Most recently, the pawnbrokers sponsored Assembly Bill 1178 by Assemblyman Leland Yee (D-San Francisco). That bill would have expanded the definition of “secondhand dealer” even further by including more items of tangible personal property subject to the law. It would have included coin dealers who are presently exempt from the law. It would also have included dealers in jewelry, sterling silver, precious metals, stones and gems and any other personal property that bears a serial number. Ironically, as a result of a purely political maneuver, it would have excluded many common transactions, garage sales for instance, which are often significant venues involving stolen goods.
A coalition made up of the many members of CARMAC, eBay, coin dealers, consignment stores, auctioneers, and other concerned parties managed to prevent passage of AB 1178 this past January. Nevertheless, the pawnbrokers plan to return to Sacramento to fund the electronic reporting system by forcing many private businesses to pay several hundred dollars each year.
CARMAC’s short-run objective is to once again defeat this special-interest legislation sponsored by the pawnbrokers’association which would force our members to underwrite and subsidize the creation of a statewide electronic reporting system for tracking secondhand goods transactions.
In the long-run, CARMAC will sponsor and support legislation to reform the antiquated Secondhand Dealers Law and bring it into the 21st Century. It no longer makes sense to maintain a mid-20th Century law, however well intended and necessary. Our goal will be to update the Secondhand Dealer’s Law to reflect today’s marketplace without compromising the need to help law enforcement track and recover stolen goods in an effective way.
CARMAC will do everything possible to lift the cloud of uncertainty overhanging so many honest, hard-working men and women doing business in California. Some of you may be violating current law while many more would become criminals if the pawnbrokers get their way.
CARMAC urges all buyers, sellers, consignees, auctioneers and collectors to join this association and help fight this expensive intrusion into your business affairs. Join today, and get your friends and colleagues to join, too.