BWM C.S.H.B. 2338 75(R)BILL ANALYSIS FINANCIAL INSTITUTIONS C.S.H.B. 2338 By: Goolsby 5-12-97 Committee Report (Substituted) BACKGROUND Currently, Texas law allows for pawnshops to provide law enforcement agencies with copies of pawn and purchase transaction receipts. Law enforcement agencies gather the paper slips and have them entered into their computer systems for stolen checks and information purposes relating to criminal intelligence. This is a labor intensive process that utilizes police man-hours in the mere effort of data gathering. Many pawnshops, especially the larger ones, already operate with computer systems that generate their transaction information. Some shops are already operating on a voluntary basis of transmitting the transaction information to law enforcement agencies by electronic media. Agencies should have uniform standards to adhere to and the pawnshops should also have rules to abide by relating to police holds and other procedures. PURPOSE As proposed, H.B. 2338 sets forth specific guidelines for the transmittal of electronically gathered pawn and purchase transaction data from licensed pawnshops. The bill brackets larger counties over 500,000 in population and provides allowance for smaller jurisdictional participation. It would not require any pawnshop to purchase computer systems if they do not already use them. It establishes standardized rules for the placing of police holds on property in the possession of pawnshops. RULEMAKING AUTHORITY It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency or institution. SECTION-BY-SECTION ANALYSIS SECTION 1. Section 2, Texas Pawnshop Act (Article 5069-51.02, Vernon's Texas Statutes), is amended by adding Subsection (i) through (m). Subsections (i)-(m), defines the following terms: "appropriate law enforcement official," "claimant," "conveying customer," "misappropriated," and "pledgor." SECTION 2. Texas Pawnshop Act is amended by adding Section 17A. Sec. 17A. PROVIDING DATA TO LAW ENFORCEMENT OFFICIALS. (a) Defines "reportable data." (b) This section applies only to a pawnbroker who possesses computer hardware and software necessary to comply with the requirements for providing reportable data under this section. This section only applies to a pawnbroker who has conducted at least 1,800 pawn transactions during the most recent reporting period, January 1 through June 30 or July 1 through December 31. A pawnbroker who becomes eligible under this section remains eligible regardless of the number of pawn transactions in subsequent reporting periods. (c) An appropriate law enforcement official in a county with a population of 500,000 or more will adopt a policy requiring each eligible pawnbroker operating in the county or municipality, to provide reportable data to the official in accordance with this section. The official will take appropriate action to facilitate the receipt of reportable data. An appropriate law enforcement official in a county with a population under 500,000 may adopt a policy under this subsection. (d) Within 60 days after a pawnbroker receives written notice from an appropriate law enforcement official that has adopted a policy under this subsection, the pawnbroker must notify the official in writing whether or not the pawnbroker possesses the necessary computer equipment necessary to comply with this section providing reportable data. (e) If the pawnbroker possesses the necessary computer equipment, the pawnbroker must make available all reportable data to the official within 60 days after the date the pawnbroker receives notice from the official. All reportable data must be in official ASCII text in a form generated by the pawnbroker's computer system. The data must be reported on reusable media provided by the law enforcement official, such as a diskette, secure telephone modem transmission, or a hosted bulletin board system, that is mutually acceptable to the pawnbroker and the law enforcement official. Diskettes will be provided by the law enforcement official. The commissioner can not require a special format for electronic data reporting before January 1, 2002. A pawnbroker who modifies or updates their computer software must attempt to obtain the designated and accepted format design. A pawnbroker is not responsible for any delay that results from the law enforcement officials' inability to facilitate the receipt of the data. (f) The reportable data a pawnbroker provides must contain information for all transactions during a particular business period and must be available to be picked up by or be electronically transferred to the law enforcement official by the end of the next business day. (g) During a test period, the pawnbroker must make all available copies of all transaction documents to enable the law enforcement official to ensure the proper operation of the reporting system. The length of the test period must be agreed upon by the law enforcement official and the pawnbroker, and the test period may not exceed 90 days. (h) A law enforcement official, upon written notice, may require reporting pawnbrokers under the jurisdiction of the official to provide the reportable data to an alternative law enforcement agency. (i) A pawnbroker is responsible for training the pawnbroker's employees in reporting data correctly and must make efforts to provide complete and accurate data to the law enforcement official. If a pawnbroker or a law enforcement official discovers an error in the reportable data, the pawnbroker will be allowed at least 30 days after the law enforcement official has contacted the pawnbroker to correct the error. If a pawnbroker experiences a computer malfunction, the pawnbroker will have at least 30 days to correct the malfunction. A pawnbroker who makes a reasonable effort to make the appropriate system modifications during the periods prescribed by this subsection, is not in violation of this section during those periods. During those periods, the pawnbroker must make other arrangements for reporting data with law enforcement officials (j) All reportable data is confidential and may be used for official law enforcement purposes relative to official investigations and the enforcement of this Act. SECTION 3. Texas Pawnshop Act is amended by adding Section 17C. Sec. 17C. POLICE HOLDS. (a) If an appropriate law enforcement official has reasonable suspicion that property in possession of a pawnbroker is misappropriated, the official may place a written hold order on the property. (b) The law enforcement official may place a verbal hold on misappropriated property, but if the pawnbroker does not receive a written order within 10 days after the date of the verbal order, the verbal hold will automatically expire. The term of a written hold may not exceed 60 days from the date a pawnbroker was issued a verbal hold or written hold order. If there is an unexpected delay in the investigation relating to the property in question, the law enforcement official may extend the term of the hold order for up to 30 days by notifying the pawnbroker in writing. Once a hold order expires, the pawnbroker will notify the law enforcement official by certified mail, return receipt requested, the the hold order is no longer valid. If the pawnbroker has not received an order from an appropriate court or magistrate after the 10th day of a written notice by the pawnbroker, the hold order will be lifted. (c) A hold order must specify: (1) the name and address of the pawnbroker, (2) the name, title, and identification number of the law enforcement official placing the hold order, (3) a complete description of the property to be held, including model and serial number, and the number assigned to the claim of the property, (4) the name of the person reporting the property to be misappropriated, (5) the expiration date of the holding period, (6) the name of the law enforcement agency that prepared the offense report on the claim regarding the property and the number of the report. (d) The pawnbroker will sign and date a copy of the hold order as evidence of receipt and the beginning of the hold period. A written order may be transmitted to the pawnbroker by fax. The pawnbroker will sign and date a hold order sent by fax machine and may return the copy to the appropriate law enforcement official by fax. (e) Except as provided by this subsection, the pawnbroker may not release or dispose of property subject to a hold order except under a court order, a written release, seizure by the official, or when the hold order expires. A pawnbroker will release property to the custody of the law enforcement official when requested, for use in a criminal investigation, if the official has furnished the pawnbroker with a written receipt for the property. The release of the property to the law enforcement official by the pawnbroker does not release the pawnbroker's rights to the property. Upon completion of the criminal investigation or the expiration of the hold order, the property will be returned to the pawnbroker, unless a court order provides for other disposition. If other disposition is ordered by a court order, the court may order the conveying customer to pay restitution to the pawnbroker for the amount received for the property, plus accrued pawn service charges, and reasonable attorney's fees and costs. SECTION 4. Section 17B(m), Texas Pawnshop Act, is amended. (m) A pawnbroker will hold an item of tangible personal property purchased or acquired from the general public for a period of at least 20 days before the property may be modified, changed, sold, or disposed of. The commissioner may provide for a shorter period of time once written application has been made by the pawnbroker. A reduction in the hold period may be granted if the pawnbroker and the law enforcement agency have implemented a reporting procedure under Section 17A of this Act. An application for a shorter period of time must be approved by the law enforcement official before being submitted to the commissioner. SECTION 5. This Act takes effect September 1, 1997. SECTION 6. Emergency clause. COMPARISON OF ORIGINAL TO SUBSTITUTE Section 2, Subsection (b), is changed by striking "1500" and adding "1800." Section 2, Subsection (e), is changed by striking the majority of this Subsection and adding new language. The substance in this subsection is changed to reflect better communication between law enforce officials and pawnbrokers. The commissioner also may not require a specific format for reporting data before January 1, 2002. Section 2, Subsection (f), is changed by adding the words "or electronically transferred to" on Page 4, Line 1. Section 2, Subsection (h), is changed by striking the word "entity" and adding " law enforcement agency" on Page 4, Line 14. Section 2, Subsection (i), is changed by striking the word "bona fide" and adding "reasonable" on Page 4, Line 27. Section 2, Subsection (j), is changed by striking the words on Page 5, Lines 9 and 10, and adding "relative to official investigations and the enforcement of this Act".