Amid uncertain economic conditions and today’s struggling job market, relevance of pawnshops and secondhand dealers cannot be ignored. A large percentage of population is either jobless or underpaid and inflation adds insult to injury. Despite all technological and economic progress, a large population in the United States is still unbanked or underbanked. When they have an unexpected and urgent financial need, pawnshops become their financial institutions.
Some pawn shops also operate as secondhand dealers. They buy your stuff and sell it to others with a profit margin. They, in a way, help people own pre-owned goods in fairly low prices.
Due to their nature of business, pawn shops and secondhand dealers can be highly vulnerable to illegal activity in which criminals may sell them stolen goods. To safeguard pawnshops and secondhand dealers, catch criminals and recover stolen items, law-enforcement agencies mandate certain guidelines for pawnshops and second hand dealers, which they need to adhere to.
Pawn shop rules and regulations
It may sound surprising to some but pawn shops are one of the highly regulated outfits in their category. They have to comply with many regulations and coordinate with law enforcement agencies. In the U.S., pawn shop regulations may vary state-to-state. In California, rules and regulation for pawn shops are laid by California Department of Justice and pawnbrokers also has to comply with State Financial Code requirements set by the department.
Starting and running a pawn shop requires a valid pawn shop licence. Licencing allows government to perform necessary checks before granting permission to start as a pawnbroker.
Limits on transaction charges, loans and interest rates
To safeguard people from accepting loans on higher interest rates or accepting high transaction charges due to urgent financial need, Californian regulations for pawn shops puts stringent limits on the interest rates charges as well as the value of transactions. Pawn shop rules and regulations laid by the government regulate even the minute aspects of the transactions so that people taking the pawn loans can be protected from accepting unfair interest rates and charges.
Personal identification requirements
California’s pawn shop rules and regulations require pawnbrokers to capture a valid photo ID from the customers in order to establish confidence in identity claim. Capturing a legitimate proof of identification ensures that if a pawn transaction is performed on a stolen item, the person who pawned it can be tracked and the item can be recovered.
No matter how good a pawn shop owner knows an individual personally, it will never be enough to fulfil the legal requirements without capturing a legitimate ID. Since the introduction of CAPSS (discussed later), California’s pawn and secondhand dealers also require to capture fingerprints for pawn transactions.
Reporting of cash transactions beyond a limit
As per California’s pawn shop rules and regulations, pawn shops owners are also required to report IRS (Internal Revenue Services) for cash transactions beyond a certain limit.
Detailed rules and regulations for pawnshop and secondhand dealers in California can be found here.
California AB 391 and CAPSS
California Assembly Bill 391 was enacted in 2012 in order to set new requirements for pawn brokers for electronic reporting of pawn transactions including all second hand tangible items that have been purchased, pawned, accepted for sale on consignment, or accepted for auctioning. Pawn brokers need to report these transactions to DoJ (Department of Justice) using a web based software application.
Pursuing mandates laid by California AB 391, DoJ initiated development and implementation of CAPSS. In January 2016, the DoJ mailed out all of the CAPSS registration letters to ALL pawnbrokers and secondhand dealers (PB/SHD). DoJ wanted these business holders to contact their local authorities to get the final dates, beyond which, no paper based transaction reporting would be possible.
Equipment required for CAPSS
Laptop / desktop computer with internet access
Since CAPSS is a web based system, it requires an internet connection to operate. There is no installation required to run the application except the internet browser, which comes either pre installed on most operating systems, or can be download for free via the internet. CAPSS application loads within the browser as a web application and require an internet connection to report the data. It will work on most popular browsers and operating systems with an internet connection.
|Browser||Supported Versions||Supported OS|
|Internet Explorer||10, 11||Windows 7, Windows 8.1|
|Firefox ESR||31 ESR, 38 ESR||Windows 7, Windows 8.1, Mac OS X 10.8, Mac OS X 10.9|
|Chrome||32 through 44||Windows 7, Windows 8.1, Mac OS X 10.10, Mac OS X 10.11, Android 4.2 (Jelly Bean), Android 4.4 (Kit Kat), Android 5.0 (Lollipop)|
|Safari||7, 8||Mac OS X 10.10, Mac OS X 10.11, iOS 7, iOS 8|
CAPSS requires a fingerprint scanner so that pawnbrokers can capture fingerprints of the customers who are willing to sell or pawn their property. We have a range of budget as well as premium fingerprint scanners for pawnshops to choose from.
Fingerprint image capture software
Just as your computer cannot function without the underlying software, a fingerprint scanner is only a piece of hardware and will do nothing without accompanying fingerprint image capture software.
Fingerprint image capture software enables the fingerprint sensor to scan fingerprints. Before choosing the right fingerprint image capture software for pawn shops, you should keep the compatibility part with your operating system in mind.
Upon installation (which is very easy and comes with adequate online / offline guiding material), the fingerprint image capture software should be able to recognize your fingerprint scanner.
Electronic signature pad
CAPSS requires pawnbrokers and secondhand dealers to capture signature of their customers electronically and report it to the system. To achieve this, an electronic signature pad is used. As its name suggests, electronic signature pad is a device that can be used to captures a person’s handwritten signature. A stylus comes wired with the signature pad that can be used as a pen to place signature on the panel. The tip of the stylus is equipped with a sensor which can record the pressure out of placing signature.
Pawn shop software
Pawn shop can be a confusing place, not only for the customers, but for the pawn brokers as well. Pawnbrokers and secondhand dealers have to deal with a number of pawned and inventory items in their shops. They have their own set of unique challenges, which can be an extremely complex to manage if done only with manual efforts. Pawn shop software can greatly reduce manual efforts required to manage different aspects of running a pawn brokering business.
Tracking of inventory and pawned items
Pawn shops can have a number of pawned and inventory items to manage. Things can quickly get out of control if you chose to manage inventory with manual methods. Pawn shop software with inventory management feature can help manage pawned as well as inventory items using custom filters. You can quickly view item-wise lists, and create custom lists with date, value, type, etc. using pawn shop software with inventory management feature. It also allows you to move items from pawned to inventory database to change the status of the items.
Managing customer identification data
Pawn shop software can expedite the identification process of a customer by quickly processing identification formalities. If a customer is already on records, the software can quickly fetch details of the customer using a fingerprint scan, unique ID or with some biographic data. Pawn shop software can also help you organize identification data of customers including scanned IDs, fingerprints and biographical details.
To keep criminals and money launderers out of the business and make sure that a customer is who he/she claims to be, customer verification is one of the biggest challenges at pawn shops. Identification requirements at pawn shops and secondhand dealers depend on the jurisdiction and applicable local laws, however, standard process is to capture a copy of a government issued valid photo ID.
Pawn valuation, accounts management
A pawnbroker has to know the value or anything of value. From precious metals to guns and antiques to electronics, they have to have the ability to evaluate almost everything. If the transaction involves loan, the pawnbroker also has to write new loans, calculate interests, track previous loans, etc. Thing can quickly go out of control if a pawnbroker chooses to do all this own his/her own, while a pawn shop software can do all this without the need of any manual calculation.
Regulatory compliances and coordination with law enforcement agencies
Keeping the transaction and identification data organized is the first step towards being compliant. In California, reporting to CAPSS requires submission of data in XML format, which cannot be done without a software system.
You may be surprised to know that when a pawn transaction takes place, it comes under 15 federal statutes and regulations including the Servicemembers Civil Relief Act, Truth in Lending Act, the USA PATRIOT Act and the Gramm Leach-Bliley Act. Pawnshops are one of the highly regulated places, they not only have to comply with local, state, and federal regulations but also have to work closely with local law enforcement agencies.
CAPSS sets forth requirements for pawn and secondhand transaction reporting to the Department of Justice in California. CAPSS was introduced to replace tedious and time consuming paper based process and improve overall efficiency and bringing down cost. CAPSS, however, also gives pawn brokers and secondhand dealers a chance to elevate the level of trust among customers while being compliant with local and federal regulations.
Hi-Tech pawn using computers, fingerprint scanner, pawn shop software and electronic processing of transactions makes pawn shops look more like a financial outfit than a disorganized place where people come to sell their stuff during a financial need.
Will pawn and second-hand dealers continue to exist?
In the era of online loans and credits cards, what makes pawn and secondhand dealer to survive and even grow?
Pawning has always existed since the inception of human civilization and changed its form as we grew. But why pawn shops are still relevant and will they continue to exist?
Pawning has been an easy way for people to meet their unexpected and urgent financial needs, when they have all other doors closed. There are communities and individuals who lack access to conventional banking and financial services. Pawnshops and pawnbrokers enable these people and even small scale business to get a quick loan out of their property.
Mainstream banking and financial services put stringent requirements and perform extensive credit history and background checks before lending. A large number of people become ineligible for loan due to these extensive requirements. Another good thing is pawn transactions do not affect one’s credit rating.
Modern pawn shops are now turning hi-tech with electronic pawn transaction ability. With high-tech pawns, pawn shops can feel closer to mainstream financing and win over trust of the people who are suspicious about pawning.
Pawning has been around for a very long period of time and has proved their usefulness in financial system, especially in challenging times. Pawn shops have also been a place where people may try to sell stolen or illegally acquired property. To safeguard pawn brokers as well as to track stolen or illegally acquired items, pawn shops have to follow stringent requirements placed by law enforcement agencies.
In California, pawn transaction reporting with CAPSS, is one of such requirement mandated by California AB 391. Since it is a legislative requirement, pawn shops and secondhand dealers have to report their transactions CAPSS to stay compliant to the regulations.
With the use technology pawn shops have chance to transform into small scale financial institutions.