Assembly Bill A9152

                                BILL NUMBER:A9152

TITLE OF BILL:  An act to amend the general business law, in relation to
authorizing collateral loan brokers to extend the holding period for
collateral for an additional three months

PURPOSE:  To offer pledgors the option of an.extended holding period
subject to the relinquishment of surplus in the event of default.

SUMMARY OF PROVISIONS:  Section 1: Amends §§ 44 of the General Business
Law (GBL) which requires Collateral Loan brokers to furnish a notice of
election to borrowers detailing the holding period and other terms of
the pawn transaction including the return of surplus. The bill adds a
new paragraph (t) to the Notice of Election, which affords pledgors
notice of an amendment to §§ 48 of the GBL set forth in Section 2 below.

Section 2: GBL Section 48 is amended to permit the option of electing a
seven month holding period, in lieu of the current four month holding
period, provided that the pledgor permits the Collateral Loanbroker to
retain the article at the end of the extended hold period.

JUSTIFICATION:  This legislation is intended to afford an optional
extended hold period to borrowers utilizing a Collateral Loanbroker
while at the same time improving New York's anachronistic regulatory
environment.  Borrowers in approximately half of all states (including
the three most populated states other than NY (pop 19 million) - Cali-
              

fornia.  (pop 36 million) Texas (pop 22.5 million) and Florida (pop 17.5
million)) utilizing a Collateral Loanbroker surrender any claim to the
collateral in the event of a default. The ability of the Collateral
Loanbroker to retain the article in the event of a default has provided
an incentive for the growth of the industry in states which permit pawn-
brokers to treat defaulted loans as his or her own property.

In the two states with populations most similar to N.Y. (pop. 19
million) the disparity in the number of pawnbrokers is striking.  Texas
with a population of 22.5 million has 1,300 pawnbrokers.  Florida with a
population of 17.5 million has 1,200 pawn shops. In contrast, New York
has about 320 pawnbrokers. And, while the permissible interest rate in
Florida and Texas substantially exceed the rate permitted in New York,
the ability of the pawnbroker to retain title to defaulted property
makes Texas and Florida much more desirable states to locate a pawnshop.

This legislation does not impact the vast majority of loans. In New York
only 10% (approx.) of all loans are not redeemed by the borrower, This
legislation will afford those borrowers seeking to extend the holding
period a means to do so, while improving the regulatory environment from
the perspective of the Collateral Loanbroker. Under this legislation
pawn loans in all cases will continue to be non-recourse loans. Unlike
other lenders, including banks and finance companies, in the event of a
default a pawnbroker cannot pursue the borrower for a deficiency if the
sate of the item foreclosed is insufficient to cover the loan balance.
To the extent that there are no pawnbrokers located in various communi-

ties people are force to either travel great distances or actually sell
an item which may have significant sentimental value.  New York's law
should strike a fair balance which will encourage the growth and avail-
ability of the industry while protecting consumers,

LEGISLATIVE HISTORY: 2005-2006 (A.10927/S7451)

FISCAL IMPLICATIONS: Undetermined,

EFFECTIVE DATE:  Section 3: This act shall take effect 30 days after it
shall become a law and apply to new loans transacted on and after such
date.