AB 1182 Page 1 Date of Hearing: April 28, 2015

ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS Susan Bonilla, Chair AB 1182 Santiago – As Amended April 21, 2015

SUBJECT: Secondhand goods: tangible personal property.

SUMMARY: Narrows the current definition of tangible personal property, as specified, and requires the Department of Justice (DOJ) to annually update the list of items which represent a significant class of stolen goods and post it on its website.

EXISTING LAW:

1) Defines a "secondhand dealer" as any person, co-partnership, firm, or corporation whose business includes buying, selling, trading, taking in pawn, accepting for sale on consignment, accepting for auctioning, or auctioning secondhand tangible personal property and specifies that a "secondhand dealer" does not include a coin dealer or participant at gun shows or events, as specified. (Business and Professions Code (BPC) Section 21626 (a))

2) Specifies that "secondhand dealers" are not persons who perform the services of an auctioneer for a fee or salary, or persons whose business is limited to the reconditioning and selling of major household appliances, as long as specified conditions are met. (BPC Section 21626.5)

3) States that "tangible personal property" includes, but is not limited to, all secondhand tangible personal property which bears a serial number or personalized initials or inscription, or which at the time it is acquired by the secondhand dealer, bears evidence of having had a serial number or personalized initials or inscription. (BPC Section 21627(a))

4) States that tangible personal property also includes, but is not limited to, the following: (BPC Section 21627(b))

a) All tangible personal property, new or used, including motor vehicles, received in pledge as security for a loan by a pawnbroker;

b) All tangible personal property that bears a serial number or personalized initials or inscription which is purchased by a secondhand dealer or a pawnbroker or which, at the time of such purchase, bears evidence of having had a serial number or personalized initials or inscription; and,

c) All personal property commonly sold by secondhand dealers which statistically is found through crime reports to the DOJ to constitute a significant class of stolen goods. A list of such personal property shall be supplied by the DOJ to all local law enforcement agencies. The list shall be reviewed periodically by the DOJ to insure that it addresses current problems with stolen goods. AB 1182 Page 2 5) Specifies that “tangible personal property” does not include any new goods or merchandise purchased from a bona fide manufacturer, distributor, or wholesaler of such new goods or merchandise by a secondhand dealer, and requires a secondhand dealer to retain for one year from the date of purchase, and make available for inspection by any law enforcement officer, any receipt, invoice, bill of sale or other evidence of purchase of such new goods or merchandise. (BPC Section 21627(c))

6) Specifies that “tangible personal property” does not include coins, monetized bullion, or commercial grade ingots of gold, silver, or other precious metals, as specified. (BPC Section 21627(d))

7) Requires every secondhand dealer or coin dealer, as specified to report daily, or on the first working day after receipt or purchase of secondhand tangible personal property, on forms or through an electronic reporting system approved by the Department of Justice (DOJ), all secondhand tangible personal property, except for firearms, which he or she has purchased, taken in trade, taken in pawn, accepted for sale on consignment, or accepted for auctioning, to the chief of police or to the sheriff, as specified. (BPC Section 21628)

8) Requires the report to be legible, prepared in English, completed where applicable, and include, but not be limited to, the following information: (BPC Section 21628)

a) The name and current address of the intended seller or pledger of the property;

b) The identification of the intended seller or pledger, as specified;

c) A complete and reasonably accurate description of serialized property, including, but not limited to: serial number and other identifying marks or symbols, owner-applied numbers, manufacturer’s named brand, and model name or number;

d) A complete and reasonably accurate description of non-serialized property, including, but not limited to: size, color, material, manufacturer’s pattern name (when known), owner- applied numbers and personalized inscriptions, and other identifying marks or symbols;

e) A certification by the intended seller or pledger that he or she is the owner of the property or has the authority of the owner to sell or pledge the property;

f) A certification by the intended seller or pledger that to his or her knowledge and belief the information is true and complete;

g) A legible fingerprint taken from the intended seller or pledger, as specified; and, AB 1182 Page 3

h) When a secondhand dealer complies with all of the provisions of this section, he or she shall be deemed to have received from the seller or pledger adequate evidence of authority to sell or pledge the property, as specified.

9) Requires the DOJ, in consultation with appropriate local law enforcement agencies, to develop clear and comprehensive descriptive categories denoting tangible personal property, as specified. (BPC Section 2168(j))

10) Requires the DOJ to develop a single, statewide, uniform, electronic reporting system to be used to transmit required secondhand dealer reports, as specified. (BPC Section 21628(j) (1)).

THIS BILL:

1) Narrows the definition of "tangible personal property" to mean only those elements listed in current law.

2) Requires the DOJ, to update its list annually of personal property commonly sold by secondhand dealers which is statistically found through crime reports to constitute a significant class of stolen goods and post the list on the DOJ's website.

FISCAL EFFECT: Unknown. This bill is keyed fiscal by the Legislative Counsel.

COMMENTS:

1) Purpose. This bill is sponsored by the California Association of Resellers, ReUsers and Buyers. According to the author, "…with the passage of AB 391[(Pan) Chapter, 172, Statutes of 2012], secondhand dealers (who do not sell serialized goods or goods which are statistically found through crime reports to the [DOJ] to constitute a significant class of stolen goods to be licensed as a secondhand dealer) will now need to take the name and current address of the intended seller of the property, take the identification of the intended seller or pledger and a legible fingerprint from the intended seller, to report daily, and to retain for 30 days all tangible personal property reported.

As outlined, California law imposes all of the above-mentioned regulatory requirements on every secondhand dealer, regardless of how large the number of identical items or how low the value of each item bought and sold. As written, separate individual reports will need to be made for every used book, every old doorknob, every piece of colored glass, every old name badge or game piece (amongst thousands of other items) sold within the state of California. There is also no consideration made for items that have been gathered over the past several decades for which re-sellers would be unable to locate the initial owners (for purposes of gaining their information, fingerprints, and identification)….With this in mind, [this bill] seeks to clarify existing law, provide law enforcement useful data they need in order to curtail the dissemination of stolen property and to facilitate the recovery of such property, and remove an unnecessary burden on secondhand dealers."

2) Background. This bill seeks to revise the definition of "tangible personal property" by narrowing the list of items which are considered to be "tangible personal property." By AB 1182 Page 4 narrowing the list of items considered "tangible personal property," this bill will limit the category of secondhand items that need to be reported to local law enforcement on a daily basis. Currently, "tangible personal property" is defined as the items referenced in BPC Section 21627(b), but current law does not restrict the definition to only those items listed. This bill will revise the definition by specifying that "tangible personal property" only includes the items that are listed under BPC 21627(b), such as items that bear a serial number and all personal property commonly sold by secondhand dealers which are found through crime reports to the DOJ that constitute a significant class of stolen goods. This bill does not alter the reporting requirements for secondhand dealers if they acquire an item that would meet the revised definition of tangible person property.

According to the DOJ, the regulation of secondhand dealers occurred as a result of legislation in 1980 in an effort to provide law enforcement agencies with a means to curtail the selling of stolen property and to facilitate its recovery by means of a uniform statewide, state- administered secondhand dealer licensing and reporting program.

Pursuant to BPC Section 21641, local entities such as police chiefs, the sheriff, or where appropriate the police commission have the responsibility to incorporate the Secondhand Dealer and Pawnbroker licensing process into their local programs. It is the responsibility of the local licensing agency to administer, maintain, and enforce state law regarding the secondhand dealer or pawnbroker licenses. Persons, entities, or corporations wishing to conduct business as a secondhand dealer or pawnbroker, must first apply for a specific license to conduct the business with the local licensing agency (chief of police or sheriff) who then receives background check results and a license number issued by the DOJ's Secondhand Dealer and Pawnbroker Unit.

Secondhand Dealers. A secondhand dealer includes a person, business or corporation whose main purpose is to buy, sell, trade, take in pawn, accept for sale on consignment, or accept for auction, secondhand tangible personal property. Current law specifically exempts certain individuals from the definition of a secondhand dealer, including coin dealers, certain auctioneers and certain appliance repair persons.

Secondhand Dealer Transactions and Reporting Requirements. Traditional secondhand dealer transactions typically take place through face-to-face encounters where applicable state and local laws can apply, such as California's 30-day hold requirement. Under current law, secondhand dealers are required to report daily or on the first working day after the receipt or purchase of secondhand personal property on forms or through the electronic database (once completely functional), all of the secondhand tangible personal property which has been purchased, taken in trade, taken in pawn, or accepted for sale or consignment. Because the electronic database is not currently available, the reports of tangible personal property items are currently required to be submitted directly to local law enforcement. As noted by the author, because the definition of personal tangible property is so broad, the secondhand dealers feel compelled to report all secondhand transition items, even those which may be of minor material value such as door knobs, used books or old game pieces.

DOJ List. The intent of narrowing the definition of "tangible personal property" is to limit the number of secondhand transactions that must be reported by secondhand dealers to those which are of significance for crime tracking purposes. As noted, the definition of "tangible personal property" includes all personal property that bears a serial number or personalized AB 1182 Page 5 initials or inscription and those items found on a list compiled by the DOJ. Currently, BPC Section 21627(3) requires the DOJ to provide its list of personal property which statistically is found through crime reports to constitute a significant class of stolen goods to local law enforcement. Depending on the size, type, and number of items reported on the list as determined by the DOJ, it could significantly expand or reduce those items which are considered "tangible personal property." Currently, there are only two items on the DOJ's Secondhand Dealer Report including: jewelry and sterling silverware. This limited list means that the definition of "tangible personal property" will only include those two items along with anything that has a serial number.

According to the author, the Federal Bureau of Investigation provides a list of stolen goods which contains an expansive list of items including tangible goods such as handbags, pelts or skins for apparel purposes, and bikes. It is unclear how often or the last time DOJ updated its list of items found through crime reports to be statistically significant. However, this bill will require the DOJ to update its list annually which depending on the process for obtaining the necessary data for its list, could expand or reduce those items that need to be reported annually.

Electronic Reporting Database. In 2012, AB 391 (Pan) was enacted and established a new requirement that secondhand dealers and pawnbrokers electronically report to the DOJ all secondhand tangible property which has been purchased, taken in trade, taken in pawn, accepted for sale on consignment or accepted for auctioning. The enacted statute mandates licensed secondhand dealers and pawnbrokers use the new system, the California Automated Pawn and Secondhand Dealer System (CAPPS), to submit the requisite tangible personal property transaction information to the DOJ. The utilization of the electronic database will not change the reporting requirements for secondhand dealers. This bill would potentially decrease the number of items that a secondhand dealer would be required to report daily to local law enforcement who utilize the information to look for stolen property.

The author contends that traditional secondhand dealers typically obtain their "tangible personal property" from estate sales and re-sell that property at brick-and-mortar locations, antique fairs or on the Internet. These venues are typically not magnets for criminal activity or the re-sale of stolen property.

Attorney General Opinion. The current definition of "tangible personal property" is seen as being too broad. Because the definition states items, “including, but not limited to,” it provides for a wide interpretation of what must be included in any secondhand transaction— it could potentially include anything. Because of the reporting requirements, it is necessary for secondhand dealers to understand what is included under the definition of "tangible personal property."

For instance, in 1996, an Attorney General opinion was requested to determine whether or not baseball trading cards constitute "tangible personal property". According to the opinion, "Baseball trading cards purchased by a card shop do not constitute tangible personal property for purposes of regulation under the Secondhand Goods Law" (79 Ops.Cal.Atty.Gen. 103). Given the broad definition of "tangible personal property" there may be other items which fall into the potential category of "tangible personal property," but without a formal DOJ opinion, secondhand dealers must operate as if all property is required to be reported. AB 1182 Page 6 3) Current Related Legislation. AB 632 (Eggman) of the current legislative session, would authorize specified unique identifying numbers to be used as the serial number reported for handheld electronic devices, as specified. STATUS: This bill is pending in the Assembly Committee on Business and Professions.

4) Prior Related Legislation. AB 391 (Pan), Chapter 172, Statutes of 2012, established the process and fee schedule to implement a single, statewide, uniform electronic reporting system for pawnbrokers and secondhand dealers as specified administered by the DOJ.

ARGUMENTS IN SUPPORT:

The California Association of Resellers, Reusers, and Buyers writes in support, "We want to make sure law enforcement has the data they need to go after stolen goods. But current law requires the reporting of many goods that are not necessary for that purpose and impose unreasonable burden on legitimate secondhand dealers like me. The solution to this problem is for the Legislature to clarify exisitng law to provide that "tangible personal property" means all secondhand tangible personal property which bears a serial number or personalized initials or inscriptions which is statistically found through crime reports to the Attorney General to constitute a significant class of stolen goods."

ARGUMENTS IN OPPOSITION:

None of file.

POLICY ISSUE FOR CONSIDERATION:

While the intent of narrowing the definition of "tangible personal property is to mitigate a reporting burden on secondhand dealers who tend to deal with a wide variety of used goods such as doorknobs and colored glass, which may not be related to commonly stolen good, due to the limited number of items currently disclosed on the DOJ's list of commonly stolen items, it may be prudent to authorize a county law enforcement agency to provide a supplemental list to secondhand dealers within their jurisdiction if they choose. In addition, the author may wish to consider establishing a deadline for the DOJ to update its list in order to provide consistency across jurisdictions.

AMENDMENT(S):

On page 2, line 16, after "3", insert: (A)

On page 2, line 23, after "good." Insert: (B) Only until the Attorney General provides the first annual update of that list of personal property, a county law enforcement agency may use its own list.

REGISTERED SUPPORT:

California Association of Resellers, Reusers, & Buyers (sponsor) Californians Against Waste Numerous individuals

REGISTERED OPPOSITION:

None on file. AB 1182 Page 7 Analysis Prepared by: Elissa Silva / B. & P. / (916) 319-3301