November 10, 2010
OLR BACKGROUNDER: PAWNBROKERS AND PRECIOUS METAL AND STONE DEALERS
By: Duke Chen, Legislative Analyst II
A pawnbroker is an individual or business that offers secured loans to people with items of personal property used as collateral. A “precious metal and stone dealer” is anyone who is in the business of buying gold; silver; items plated with gold, silver, or platinum; watches; jewelry; precious stones; or coins.
State law requires both pawnbrokers and precious metal and stone dealers to be licensed and have a record-keeping system for the property they buy and sell. Additionally, both are required to (1) verify the seller's identity, (2) allow law enforcement to inspect their premises and goods, and (3) make payments to sellers only by check, draft, or money order. Neither can make purchases from minors, but it is only explicitly prohibited in the precious metal statute.
The law differs in its treatment of these businesses in a few ways. Pawnbrokers must keep the goods they purchase for two months before they can sell them and must make weekly statements on their transactions. The law also sets the maximum interest rate a pawnshop may charge on loans. Conversely, precious metal and stone dealers do not have to keep purchased goods for a specified time; and since they are not offering loans, they do not charge interest. And their weekly statement is not mandatory, rather it is upon the licensing authority's discretion.
Any person, corporation, limited liability company, or partnership that engages in the business of loaning money upon the deposit or pledge of personal property, or of purchasing personal property conditioned on selling it back at a fixed price, must be licensed as a pawnbroker (CGS § 21-39).
A town's selectmen or a city's police chief is the licensing authority. The licensing authority may require any applicant to submit to state and national criminal history checks. No convicted felon may be licensed. The licensing authority may revoke the license for cause.
The pawnbroker must pay an initial $50 licensing fee and an annual $25 renewal fee. He or she also must file a $2,000 bond with competent surety with the city's mayor or the town's first selectman, conditioned on the pawnbroker's faithful performance of the law's duties and obligations. The license also designates the pawnshop's location (CGS § 21-40).
Any person who engages in the pawnbroker business without a license or with a revoked license is guilty of a class D felony, punishable by up to five years in prison, a $5,000 fine, or both. He or she may be liable for treble damages in the amount loaned on the property pledged to any person who is injured and then sues (CGS § 21-47(a)).
Identification, Record, and Inspection Requirements
Pawnbrokers must obtain proof of the seller's identity when the seller deposits his or her personal items. This must include a photograph; address; and if available on the identification, an identifying number. Pawnbrokers who willfully violate this requirement are guilty of an infraction for the first offense. It is a class A misdemeanor for any second or subsequent offense within two years of a prior violation (CGS § 21-41(a)). A class A misdemeanor is punishable by up to one year in prison, a $2,000 fine, or both.
Pawnbrokers also must maintain a record-keeping system that the licensing authority deems appropriate. The entries must be in English and include: the seller's name, residence, and proof of identity; a general
description of the seller; and the date and hour the pawnbroker received
the property (CGS § 21-41(b)). The pawnbroker must also provide the seller with a memorandum or note containing the same information (CGS § 21-42).
At any time, any law enforcement officer with jurisdiction may examine the pawnshop's record-keeping system, physical place of business, and all its goods. The officer, in the course of his or her examination, may require any employee on the premises to provide proof of his or her identity (CGS § 21-41(b)).
Pawnbrokers must provide weekly sworn statements on their transactions, describing the goods received and the name, residence, and description of the person from whom the goods were received to a city's police chief or a town's clerk. Anyone who willfully fails to comply with this requirement can be fined up to $100 (CGS § 21-43).
Interest Rate, Payment Terms
Pawnbrokers may charge the following monthly interest rates for money loans: $15 or less, 5%; exceeding $15 but less than $50, 3%; and exceeding $50, 2% (CGS § 21-44).
Pawnbrokers may pay for any property they receive only by check, draft, or money order. They cannot pay cash for any property except when the pawnbroker cashes a check, draft, or money order for the person selling the property. If the pawnbroker cashes a check, draft, or money order, he or she must require proof of the seller's identity. A pawnbroker who willfully violates this provision is guilty of a class A misdemeanor (CGS § 21-42).
Pawnbrokers may not sell or dispose of any personal property left with them until two months after they receive the property. They may sell the property at a public or private sale, but only after advertising the sale at least two days in advance in a daily newspaper published in the town or city where the business is located. The advertisement must identify the pledge ticket number for the property items offered for sale and the date each ticket was issued (CGS § 21-45).
Property Seizure by Law Enforcement Officers
Whenever a law enforcement officer seizes property from a pawnshop, the officer must give the pawnbroker a duly signed receipt for the seized property containing a case number, a description of the property, the reason for seizure; the name and address of the officer, the name and address of the person claiming a right to the property other than the pawnbroker; and the name of the pawnbroker. If the pawnbroker claims
ownership interest in the property, he or she may request the return of the property by filing a request with the law enforcement agency in accordance with the seized property procedures (CGS § 21-46a).
Any person who (1)willfully violates any statutory pawnbroker provisions where no penalty is provided, (2) violates the record-keeping or inspection requirements, or (3) purchases from a minor, is guilty of a class A misdemeanor (CGS § 21-47(b)).
PRECIOUS METAL AND STONE DEALERS
Any person who engages in the business of purchasing gold or gold-plated ware, silver or silver-plated ware, platinum ware, watches, jewelry, precious stones or coins must be licensed and pay a $10 annual licensing fee. These requirements do not apply to manufacturers who purchase from wholesalers, which is defined as a person in the business of selling tangible personal property to be resold at retail or raw materials to be manufactured into suitable forms for use by consumers.
A town's selectmen or a city's police chief is the licensing authority. The licensing authority may require any applicant to submit to state and national criminal history checks, and no convicted felon may be licensed. The licensing authority may also revoke the license for cause (CGS § 21-100(a)).
Identification, Record, and Inspection Requirements
Precious metal and stone dealers must keep a record of the time of each transaction, the good's description, price paid, the seller's name and address, and the date and hour the good was received. They must also verify the seller's identity and record the type of identification used (CGS § 21-100(b)).
When making a purchase, precious metal and stone dealers must deliver to the seller a receipt containing the information recorded in the record-keeping system, the amount paid for any goods sold, and the purchaser's name and address (CGS § 21-100(d)).
At all times, any law enforcement officer with jurisdiction may examine the record-keeping system, place where business is carried, and any goods purchased or received (CGS § 21-100(b)).
The licensing authority may require precious metal and stone dealers to make weekly sworn statements, describing the goods and identifying the seller. This statement is not a public record for purposes of the Freedom of Information Act (CGS § 21-100(e)).
Buying from Minors Prohibited; Payment Terms
Precious metal and stone dealers are prohibited from purchasing any goods from a minor unless the minor is accompanied by a parent or guardian.
They may also only pay for goods by check, draft, or money order. No cash can be transferred to either party in the course of any transaction (CGS § 21-100(c)).
A person who violates any of these provisions can be fined up to $1,000 (CGS § 21-100(f)).