Existing law generally prohibits a junk dealer or recycler from providing payment for nonferrous material unless the payment is made by cash or check and specified other requirements are met, including that the check is mailed or the cash or check is provided no earlier than 3 days after the date of sale.

This bill would authorize a junk dealer or recycler to also pay for nonferrous material by general use prepaid card in accordance with specified requirements.

This bill would also make nonsubstantive changes.

This bill would declare that it is to take effect immediately as an urgency statute.

 UNFINISHED BUSINESS  

Bill No: SB 143

Author: Skinner (D)

Amended: 6/18/19

Vote: 27 - Urgency

SENATE BUS., PROF. & ECON. DEV. COMMITTEE: 9-0, 3/25/19

AYES: Glazer, Chang, Archuleta, Dodd, Galgiani, Hill, Leyva, Pan, Wilk

SENATE FLOOR: 38-0, 4/8/19

AYES: Allen, Archuleta, Atkins, Bates, Beall, Borgeas, Bradford, Caballero, Chang, Dodd, Durazo, Galgiani, Glazer, Grove, Hertzberg, Hill, Hueso, Hurtado, Jackson, Jones, Leyva, McGuire, Mitchell, Monning, Moorlach, Morrell, Nielsen, Pan, Portantino, Roth, Rubio, Skinner, Stern, Stone, Umberg, Wieckowski, Wiener, Wilk

ASSEMBLY FLOOR: 78-0, 8/12/19 - See last page for vote

SUBJECT: Junk dealers and recyclers: nonferrous material: payment by general use prepaid cards

SOURCE: West Coast Chapter of the Institute of Scrap Recycling Industries, Inc.

DIGEST:

This bill authorizes general use prepaid cards (general use card) as a form of payment junk dealers or recyclers may provide for nonferrous material; requires the junk dealer or recycler to pay any one-time or initial use fees associated with the card; and prohibits specified fees from being charged to the general use card.

Assembly Amendments

add an urgency clause; specify that this bill does not regulate fees or surcharges charged by a bank or credit union that is not party to the contract, as specified; and, revise the definition of a general use prepaid card.

ANALYSIS:

Existing law:

1. Defines “junk” as any and all secondhand and used machinery and all ferrous and nonferrous scrap metals and alloys, including any and all secondhand and used furniture, pallets, or other personal property, other than livestock, or parts or portions thereof. (Business and Professions Code (BPC) § 21600)
   
2. Defines a “junk dealer” as any person engaged in the business of buying selling, and dealing in junk, any person purchasing, gathering, collecting, soliciting, or traveling about from place to place procuring junk, and any person operating, carrying on, conducting, or maintaining a junk yard or place where junk is gathered together and stored or kept for shipment, sale or transfer. (BPC § 21601)
   
3. Prohibits a junk dealer or recycler from providing payment for nonferrous material unless specified conditions are met including, the payment for the material is made by cash or check, where the check may be mailed to the seller at the address provided or the cash or check may be collected by the seller from the junk dealer or recycler on or after the third business day. (BPC § 21608.5(a)(1-6))

This bill:

1. Authorizes the payment options for nonferrous materials to include a general use card in addition to a cash or check.
   
2. Authorizes the seller to receive the general use card at the time of the sale, but restricts the funds’ availability until the third business day after the sale.
   
3. Requires the junk dealer or recycler to pay any one-time or initial issuance fees associated with the general use card, as specified.
   
4. Defines general use card, for purposes of this bill, to have the same meaning as prepaid account as defined by Section 1005.2 of Title 12 of the Code of Federal Regulations as it reads on April 1, 2019; and specifies that a general use card does not include a card for which certain fees are charged by the card issuer to the card user.
5. Defines, for purposes of this bill, a “designated surcharge-free cash access network location” to mean a location designated in a contract between a junk dealer or recycler and a card issuer, as a location where a general use cardholder can withdraw cash without paying a surcharge.
   

Background

Junk dealers and recyclers. Junk dealers and recyclers are required to follow strict guidelines regarding the retention of records, payment for materials, the photography or video of items being purchased, and the collection of identification and thumbprints of sellers, among others. Additionally, payment is restricted to a check mailed to the seller or a cash or check payment that can be collected by the seller three days after the date of sale.

Nonferrous Metal Recycling Industry. According to the Institute of Scrap Recycling Industries (ISRI), Inc., nonferrous (or not iron-based) metals are among the few materials that do not degrade or lose their chemical or physical properties in the recycling process. Because of this, these metals have the capacity to be recycled a nearly infinite number of times. Nonferrous materials include copper, copper alloys, stainless steel, or aluminum (but not beverage containers, as defined in the California Public Resources Code).

Metal Theft. The rise of metal theft in the early 2000s led California to pass a number of laws aimed at curtailing metal theft. Included in those laws, were a number of requirements placed upon junk dealers and recyclers including: paying additional fees when applying for a weighmasters license; requiring recyclers or junk dealers register with ScrapTheftAlert.com or its successor agency, requiring junk dealers or recyclers collect certain information from sellers including thumb prints and photographs; and limiting payment for nonferrous materials to either cash or check after a three-day waiting period. This bill would maintain the current requirements for junk dealers and recyclers when buying non-ferrous materials, but would allow the sellers to have a third option for receiving payment, the general use card. As consistent with current law, although the card would be available to the seller, the funds would not be accessible until the third business day, which is the current requirement for cash or check payments.

For purposes of this bill, the definition of a “general use card” will be consistent with federal regulations that become effective on April 1, 2019. However, this bill specifies that a general use card for purposes of receiving payment for nonferrous materials does not include a general use card that is associated with certain fees, including a fee to make a balance inquiry, a fee for inactivity, or a fee for lodging disputes, among others. If a junk dealer or recycler chooses to offer a payment through this method, they must be responsible for any initial one-time use fees. Further, this bill will ensure that if a seller decides to accept the general use card as a method of payment, they must be able to access a location where they can withdraw the funds on the card without a paying a surcharge.

FISCAL EFFECT: Appropriation: No Fiscal Com.: No Local: No

SUPPORT: (Verified 8/13/19)

West Coast Chapter of the Institute of Scrap Recycling Industries, Inc. (source)

Association of California Recycling Industries

Schnitzer Steel

State of California Auto Dismantlers Association

Western Center on Law & Poverty, Inc.

OPPOSITION: (Verified 8/13/19)

None received

ARGUMENTS IN SUPPORT: Supporters note that by authorizing the use of prepaid and reloadable debit cards, this bill creates a method of payment that does not either rely on cash, an inherently risky option for both parties, or checks which can be challenging for those who do not have a regular bank account.

ASSEMBLY FLOOR: 78-0, 8/12/19

AYES: Aguiar-Curry, Arambula, Bauer-Kahan, Berman, Bigelow, Bloom, Boerner Horvath, Bonta, Brough, Burke, Calderon, Carrillo, Cervantes, Chau, Chen, Chiu, Choi, Chu, Cooley, Cooper, Cunningham, Daly, Diep, Eggman, Flora, Fong, Friedman, Gabriel, Gallagher, Cristina Garcia, Eduardo Garcia, Gipson, Gloria, Gonzalez, Gray, Grayson, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager-Dove, Kiley, Lackey, Levine, Limón, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Muratsuchi, Nazarian, Obernolte, O'Donnell, Patterson, Petrie-Norris, Quirk, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Salas, Santiago, Smith, Mark Stone, Ting, Voepel, Waldron, Weber, Wicks, Wood, Rendon

NO VOTE RECORDED: Frazier

Prepared by: Elissa Silva / B., P. & E.D. / 916-651-4104

8/14/19 14:45:57

**** END ****

SENATE THIRD READING

STR Bill Id:SB 143

Author:(Skinner)

As Amended Ver:June 18, 2019

2/3 vote. Urgency

SUMMARY:

Authorizes a junk dealer or recycler to provide payment for nonferrous material through a general use prepaid card, with prohibitions on certain associated fees being charged to the recipient of the card.

Major Provisions

1. Authorizes payment for nonferrous material by a junk dealer or recycler to be made through a general use prepaid card in addition to cash or check.
2. Allows for funds to be available through the general use prepaid card only on the third business day after the date of sale.
3. Requires a junk dealer or recycler to pay any one-time initial issuance fee on the general use prepaid card; requires that the general use prepaid card allow for reasonably convenient access to a surcharge-free cash access network location; and prohibits various fees or surcharges from being charged in association with use of the general use prepaid card.
4. Expressly states that the bill's restrictions on fees associated with the use of a general use prepaid card do not implicate third party financial institutions.

COMMENTS:

"Nonferrous" metals are metals that do not contain iron or steel. Because these materials are resistant to degradation, products and goods constructed from them are ideal for recycling and are valuable in the secondhand market of junk or scrap. Junk dealers and recyclers commonly pay as much as $2 or more per pound for copper, brass, aluminum, and other nonferrous metals.

While the buying and selling of nonferrous metals is an important component of the recycling industry, the lucrative nature of the business has historically made metal theft a serious concern. Law enforcement has routinely dealt with reports of thieves who will strip copper wire or dismantle household applicants such as air conditioning units to harvest metals that can be resold. In light of these concerns, financial transactions involving nonferrous metals have traditionally been subjected to substantial regulation.

One such restriction on the metal recycling industry is a limitation as to how a transaction may occur between a seller and a junk dealer. Currently, payment for nonferrous metals may only be made through cash or check. The author of this bill contends that this limitation presents a hardship for sellers who are unbanked or have limited capacity for depositing a check into an account. As a result, many transactions are limited to cash, which carries certain risks for both the business and the seller and is often considered unideal. This is a particularly cogent argument considering many junk metal sellers tend to be representative of lower-income populations.

This bill would expressly authorize a junk dealer or recycler to provide payment for nonferrous metals through a general use prepaid card. These cards typically resemble debit cards and carry a predetermined balance that may be spent anywhere or from which cash may be withdrawn at certain locations. To prevent the use of these cards as payment from financially disadvantaging sellers, the bill requires that any activation fees be paid for by the buyer and that the card used must not charge any of a number of fees to the user. The result of this bill would arguably make both the buying and selling of nonferrous metals easier and safer for dealers and sellers.

According to the Author:

"Due to historical concerns around metal thefts, metal recyclers who purchase non-ferrous metals may not issue payment for three days after the date of sale to the recycler. Under existing state law, metal recycler payments are only made by cash or check and have become an increasing source of attempted fraud. Additionally, people who bring metal in to recycle, and then receive payment via check, but do not have a bank, must pay a cash checking charge in order to utilize their funds. SB 143 allows metal recyclers to offer a prepaid debit card option, along with existing cash and check. It can be used like a regular Visa check card and can be drawn down to little to no expense to the recipient. Additionally, metal theft is one of the fastest growing crimes in the country. Prepaid debit cards will allow recycling administrators to track funds of suspected metal thieves and collect appropriate information. Prepaid debit cards will update metal recycling transactions to meet the needs of metal sellers and protect public safety."

Arguments in Support:

The West Coast Chapter of the Institute of Scrap Recycling Industries, Inc. (ISRI) is sponsoring this bill. According to ISRI, "by authorizing the use of prepaid and reloadable debit cards, SB 143 creates a method of payment that does not either rely on cash – an inherently risky option for both parties – or checks, which can be challenging for peddlers who do not have a regular bank account. Prepaid debit cards provide a safe and dignified way to pay peddlers that does not put the peddler at risk by carrying cash, or require unbanked peddlers to pay check-cashing fees in order to access the funds."

Arguments in Opposition:

None on file.

FISCAL COMMENTS:

This bill is keyed non-fiscal by the Legislative Counsel.

VOTES:

SENATE FLOOR: 38-0-0

YES: Allen, Archuleta, Atkins, Bates, Beall, Borgeas, Bradford, Caballero, Chang, Dodd, Durazo, Galgiani, Glazer, Grove, Hertzberg, Hill, Hueso, Hurtado, Jackson, Jones, Leyva, McGuire, Mitchell, Monning, Moorlach, Morrell, Nielsen, Pan, Portantino, Roth, Rubio, Skinner, Stern, Stone, Umberg, Wieckowski, Wiener, Wilk

ASM BUSINESS AND PROFESSIONS: 17-0-2

YES: Low, Arambula, Bloom, Chen, Chiu, Cunningham, Eggman, Fong, Gipson, Grayson, Holden, Irwin, McCarty, Medina, Mullin, Obernolte, Ting

ABS, ABST OR NV: Brough, Gloria

UPDATED:

VERSION: June 18, 2019

CONSULTANT: Robert Sumner / B. & P. / (916) 319-3301 FN: 0001109

Date of Hearing: June 11, 2019

ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS

Evan Low, Chair

SBPCA Bill Id:SB 143

Author:(Skinner) – As Amended Ver:April 3, 2019

SENATE VOTE: 38-0

SUBJECT: Junk dealers and recyclers: nonferrous material: payment by general use prepaid cards

SUMMARY: Authorizes a junk dealer or recycler to provide payment for nonferrous material through a general use prepaid card, with prohibitions on certain associated fees being charged to the recipient of the card.

EXISTING LAW:

1. Defines “junk” as any and all secondhand and used machinery and all ferrous and nonferrous scrap metals and alloys, including any and all secondhand and used furniture, pallets, or other personal property, other than livestock, or parts or portions thereof. (Business and Professions Code (BPC) § 21600)
2. Defines a “junk dealer” as any person engaged in the business of buying selling, and dealing in junk, any person purchasing, gathering, collecting, soliciting, or traveling about from place to place procuring junk, and any person operating, carrying on, conducting, or maintaining a junk yard or place where junk is gathered together and stored or kept for shipment, sale or transfer. (BPC § 21601)
3. Requires every junk dealer and every recycler to maintain written records including:
   1. The place and date of each sale or purchase of junk made.
   2. Identification consisting of information from either a driver’s license, a passport, or a Matricula Consular.
   3. The vehicle license number, including the state of issue, of any motor vehicle used in transporting the junk to the junk dealer’s or recycler’s place of business.
   4. The name and address of each person to whom junk is sold or disposed of, and the license number of any motor vehicle used in transporting the junk from the junk dealer’s or recycler’s place of business.
   5. A description of the item or items of junk purchased or sold, including the item type and quantity, and identification number, if visible.
   6. A statement indicating either that the seller of the junk is its owner, or the name of the person the junk was obtained from, as shown on a signed transfer document.

(BPC § 21606)

1. Allows a junk dealer or recycler to provide payment for nonferrous material only if the payment for the material is made by cash or check, among other restrictions. (BPC § 21608.5(a))
2. Defines “nonferrous material” as copper, copper alloys, stainless steel, or aluminum, but does not include beverage containers subject to a redemption payment. (BPC § 21608.5(b))

THIS BILL:

1. Authorizes payment for nonferrous material by a junk dealer or recycler to be made through a general use prepaid card in addition to cash or check.
2. Allows for funds to be available through the general use prepaid card only on the third business day after the date of sale.
3. Requires a junk dealer or recycler to pay any one-time initial issuance fee on the general use prepaid card.
4. Requires any general use prepaid card used as payment for nonferrous metals to allow for reasonably convenient access to a surcharge-free cash access network location, and requires the junk dealer or recycler to inform the seller as to the location of a designated surcharge-free cash access location upon issuance of the card.
5. Defines “designated surcharge-free cash access network location” as a location designated, in a contract between a junk dealer or recycler and a card issuer, as a location where a general use prepaid card holder can withdraw cash without paying a surcharge.
6. States that “general use prepaid card” shall have the same meaning as “prepaid account” in existing federal regulations, except that a general use prepaid card does not include a card for which any of the following fees are charged by the card issuer to the card user:
   1. A fee or surcharge to make a purchase with the card.
   2. A fee or surcharge to make a balance inquiry.
   3. A fee or surcharge to withdraw funds at a designated surcharge-free cash access network location.
   4. A fee or surcharge to lodge a dispute regarding the balance of funds on the card.
   5. A fee or surcharge for account inactivity.
   6. A fee or surcharge for a use of the card that would be considered ordinary use.

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

COMMENTS:

Purpose. This bill is sponsored by the West Coast Chapter of the Institute of Scrap Recycling Industries, Inc. According to the author:

“Due to historical concerns around metal thefts, metal recyclers who purchase non-ferrous metals may not issue payment for three days after the date of sale to the recycler. Under existing state law, metal recycler payments are only made by cash or check and have become an increasing source of attempted fraud. Additionally, people who bring metal in to recycle, and then receive payment via check, but do not have a bank, must pay a cash checking charge in order to utilize their funds. SB 143 allows metal recyclers to offer a prepaid debit card option, along with existing cash and check. It can be used like a regular Visa check card and can be drawn down to little to no expense to the recipient.

“Additionally, metal theft is one of the fastest growing crimes in the country. Prepaid debit cards will allow recycling administrators to track funds of suspected metal thieves and collect appropriate information. Prepaid debit cards will update metal recycling transactions to meet the needs of metal sellers and protect public safety.”

Background. “Nonferrous” metals are metals that do not contain iron or steel. Because these materials are resistant to degradation, products and goods constructed from them are ideal for recycling and are valuable in the secondhand market of junk or scrap. Junk dealers and recyclers commonly pay as much as $2 or more per pound for copper, brass, aluminum, and other nonferrous metals.

While the buying and selling of nonferrous metals is an important component of the recycling industry, the lucrative nature of the business has historically made metal theft a serious concern. Law enforcement has routinely dealt with reports of thieves who will strip copper wire or dismantle household applicants such as air conditioning units to harvest metals that can be resold. In light of these concerns, financial transactions involving nonferrous metals have traditionally been subjected to substantial regulation.

One such restriction on the metal recycling industry is a limitation as to how a transaction may occur between a seller and a junk dealer. Currently, payment for nonferrous metals may only be made through cash or check. The author of this bill contends that this limitation presents a hardship for sellers who are unbanked or have limited capacity for depositing a check into an account. As a result, many transactions are limited to cash, which carries certain risks for both the business and the seller and is often considered unideal. This is a particularly cogent argument considering many junk metal sellers tend to be representative of lower-income populations.

This bill would expressly authorize a junk dealer or recycler to provide payment for nonferrous metals through a general use prepaid card. These cards typically resemble debit cards and carry a predetermined balance that may be spent anywhere or from which cash may be withdrawn at certain locations. To prevent the use of these cards as payment from financially disadvantaging sellers, the bill requires that any activation fees be paid for by the buyer and that the card used must not charge any of a number of fees to the user. The result of this bill would arguably make both the buying and selling of nonferrous metals easier and safer for dealers and sellers.

Prior Related Legislation. AB 2059 (Eduardo Garcia) of 2016 would have exempted junk dealers and recyclers from the three-day payment restrictions if the junk dealer or recycler obtains a surety bond. (The bill was never considered by the Assembly.)

AB 841 (Torres) of 2013 would have required junk dealers and recyclers to provide payment to sellers of nonferrous material by mailed check only. (Vetoed by the Governor.)

AB 1095 (Nestande) of 2013 would have required a junk dealer or recycler to pay a seller of nonferrous materials only by mailed check or by a check collected by the seller in person at least 30 days from the date of sale. (Died in the Assembly Committee on Business, Professions, and Consumer Protection.)

AB 2312 (Nestande and Olsen, Chapter 608, Statutes of 2013) required a junk dealer or recycler to request to receive metal theft alert notifications from an internet-based theft alert system and requires a junk dealer or recycler to provide a statement that they have requested to receive theft alert notifications when seeking a weighmasters license.

AB 801 (Brown) of 2013 would have required junk dealers and recyclers to obtain information before providing payment for nonferrous materials marked with an indicia of ownership, and would require that this information be retained as part of the written record of purchases. (Died in the Assembly Committee on Business, Professions, and Consumer Protection.)

ARGUMENTS IN SUPPORT:

The West Coast Chapter of the Institute of Scrap Recycling Industries, Inc. (ISRI) is sponsoring this bill. According to ISRI, “by authorizing the use of prepaid and reloadable debit cards, SB 143 creates a method of payment that does not either rely on cash – an inherently risky option for both parties – or checks, which can be challenging for peddlers who do not have a regular bank account. Prepaid debit cards provide a safe and dignified way to pay peddlers that does not put the peddler at risk by carrying cash, or require unbanked peddlers to pay check-cashing fees in order to access the funds.”

ARGUMENTS IN OPPOSITION:

None on file.

AMENDMENTS:

1. To enable junk dealers and recyclers to immediately begin providing payment through a general use prepaid card upon the chaptering of this bill, an urgency clause should be added.
2. To clarify that the bill’s restrictions on fees associated with the use of a general use prepaid card do not implicate third party financial institutions:

Insert a new subparagraph (D) in subdivision (a) paragraph (1) in Section 1 to read:

(D) Nothing in this section shall prevent or regulate the fees or surcharges charged by a bank or credit union that is not a party to the contract that requires payment to be made by a general use prepaid card.

1. To remove a provision of this bill regarding a category of prohibited fees that is not adequately defined:

Strike paragraph from subdivision (g) in Section 1.

REGISTERED SUPPORT:

West Coast Chapter of the Institute of Scrap Recycling Industries, Inc. (Sponsor)
Association of California Recycling Industries
Schnitzer Steel Industries
State of California Auto Dismantlers Association
Western Center on Law and Poverty

REGISTERED OPPOSITION:

None on file.

Analysis Prepared by: Robert Sumner / B. & P. / (916) 319-3301

 THIRD READING  

Bill No: SB 143

Author: Skinner (D)

Amended: 4/3/19

Vote: 21

SENATE BUS., PROF. & ECON. DEV. COMMITTEE: 9-0, 3/25/19

AYES: Glazer, Chang, Archuleta, Dodd, Galgiani, Hill, Leyva, Pan, Wilk

SUBJECT: Junk dealers and recyclers: nonferrous material: payment by general use prepaid cards

SOURCE: West Coast Chapter of the Institute of Scrap Recycling Industries, Inc.

DIGEST:

This bill authorizes general use prepaid cards (general use card) as a form of payment junk dealers or recyclers may provide for nonferrous material; requires the junk dealer or recycler to pay any one-time or initial use fees associated with the card; and prohibits specified fees from being charged to the general use card.

Senate Floor Amendments of 4/3/19 delete language which would have specified that a violation of one provision of this bill is not a misdemeanor.

ANALYSIS:

Existing law:

1. Defines “junk” as any and all secondhand and used machinery and all ferrous and nonferrous scrap metals and alloys, including any and all secondhand and used furniture, pallets, or other personal property, other than livestock, or parts or portions thereof. (Business and Professions Code (BPC) § 21600)
   
2. Defines a “junk dealer” as any person engaged in the business of buying selling, and dealing in junk, any person purchasing, gathering, collecting, soliciting, or traveling about from place to place procuring junk, and any person operating, carrying on, conducting, or maintaining a junk yard or place where junk is gathered together and stored or kept for shipment, sale or transfer. (BPC § 21601)
   
3. Prohibits a junk dealer or recycler from providing payment for nonferrous material unless specified conditions are met including, the payment for the material is made by cash or check, where the check may be mailed to the seller at the address provided or the cash or check may be collected by the seller from the junk dealer or recycler on or after the third business day. (BPC § 21608.5(a)(1-6))

This bill:

1. Authorizes the payment options for nonferrous materials to include a general use card in addition to a cash or check.
   
2. Authorizes the seller to receive the general use card at the time of the sale, but restricts the funds’ availability until the third business day after the sale.
   
3. Requires the junk dealer or recycler to pay any one-time or initial issuance fees associated with the general use card.
   
4. Defines general use card, for purposes of this bill, to have the same meaning as prepaid account as defined by Section 1005.2 of Title 12 of the Code of Federal Regulations as it reads on April 1, 2019; and specifies that a general use card does not include a card for which certain fees are charged by the card issuer to the card user.
5. Defines, for purposes of this bill, a “designated surcharge-free cash access network location” to mean a location designated in a contract between a junk dealer or recycler and a card issuer, as a location where a general use cardholder can withdraw cash without paying a surcharge.
   

Background

Junk dealers and recyclers. Junk dealers and recyclers are required to follow strict guidelines regarding the retention of records, payment for materials, the photography or video of items being purchased, and the collection of identification and thumbprints of sellers, among others. Additionally, payment is restricted to a check mailed to the seller or a cash or check payment that can be collected by the seller three days after the date of sale.

Nonferrous Metal Recycling Industry. According to the Institute of Scrap Recycling Industries (ISRI), Inc., nonferrous (or not iron-based) metals are among the few materials that do not degrade or lose their chemical or physical properties in the recycling process. Because of this, these metals have the capacity to be recycled a nearly infinite number of times. Nonferrous materials include copper, copper alloys, stainless steel, or aluminum (but not beverage containers, as defined in the California Public Resources Code).

Metal Theft. The rise of metal theft in the early 2000s led California to pass a number of laws aimed at curtailing metal theft. Included in those laws, were a number of requirements placed upon junk dealers and recyclers including: paying additional fees when applying for a weighmasters license; requiring recyclers or junk dealers register with ScrapTheftAlert.com or its successor agency, requiring junk dealers or recyclers collect certain information from sellers including thumb prints and photographs; and limiting payment for nonferrous materials to either cash or check after a three-day waiting period. This bill would maintain the current requirements for junk dealers and recyclers when buying non-ferrous materials, but would allow the sellers to have a third option for receiving payment, the general use card. As consistent with current law, although the card would be available to the seller, the funds would not be accessible until the third business day, which is the current requirement for cash or check payments.

For purposes of this bill, the definition of a “general use card” will be consistent with federal regulations that become effective on April 1, 2019. However, this bill specifies that a general use card for purposes of receiving payment for nonferrous materials does not include a general use card that is associated with certain fees, including a fee to make a balance inquiry, a fee for inactivity, or a fee for lodging disputes, among others. If a junk dealer or recycler chooses to offer a payment through this method, they must be responsible for any initial one-time use fees. Further, this bill will ensure that if a seller decides to accept the general use card as a method of payment, they must be able to access a location where they can withdraw the funds on the card without a paying a surcharge.

FISCAL EFFECT: Appropriation: No Fiscal Com.: No Local: No

SUPPORT: (Verified 4/5/19)

West Coast Chapter of the Institute of Scrap Recycling Industries, Inc. (source)

Schnitzer Steel

State of California Auto Dismantlers Association

Western Center on Law & Poverty, Inc.

OPPOSITION: (Verified 4/5/19)

None received

ARGUMENTS IN SUPPORT: Supporters note that by authorizing the use of prepaid and reloadable debit cards, this bill creates a method of payment that does not either rely on cash, an inherently risky option for both parties, or checks which can be challenging for those who do not have a regular bank account.

Prepared by: Elissa Silva / B., P. & E.D. / 916-651-4104

4/5/19 13:58:13

**** END ****

 THIRD READING  

Bill No: SB 143

Author: Skinner (D)

Amended: 3/20/19

Vote: 21

SENATE BUS., PROF. & ECON. DEV. COMMITTEE: 9-0, 3/25/19

AYES: Glazer, Chang, Archuleta, Dodd, Galgiani, Hill, Leyva, Pan, Wilk

SUBJECT: Junk dealers and recyclers: nonferrous material: payment by general use prepaid cards

SOURCE: West Coast Chapter of the Institute of Scrap Recycling Industries, Inc.

DIGEST:

This bill authorizes general use prepaid cards (general use card) as a form of payment junk dealers or recyclers may provide for nonferrous material; requires the junk dealer or recycler to pay any one-time or initial use fees associated with the card; and prohibits specified fees from being charged to the general use card.

ANALYSIS:

Existing law:

1. Defines “junk” as any and all secondhand and used machinery and all ferrous and nonferrous scrap metals and alloys, including any and all secondhand and used furniture, pallets, or other personal property, other than livestock, or parts or portions thereof. (Business and Professions Code (BPC) § 21600)
   
2. Defines a “junk dealer” as any person engaged in the business of buying selling, and dealing in junk, any person purchasing, gathering, collecting, soliciting, or traveling about from place to place procuring junk, and any person operating, carrying on, conducting, or maintaining a junk yard or place where junk is gathered together and stored or kept for shipment, sale or transfer. (BPC § 21601)
   
3. Prohibits a junk dealer or recycler from providing payment for nonferrous material unless specified conditions are met including, the payment for the material is made by cash or check, where the check may be mailed to the seller at the address provided or the cash or check may be collected by the seller from the junk dealer or recycler on or after the third business day. (BPC § 21608.5(a)(1-6))

This bill:

1. Authorizes the payment options for nonferrous materials to include a general use card in addition to a cash or check.
   
2. Authorizes the seller to receive the general use card at the time of the sale, but restricts the funds’ availability until the third business day after the sale.
   
3. Requires the junk dealer or recycler to pay any one-time or initial issuance fees associated with the general use card.
   
4. Defines general use card, for purposes of this bill, to have the same meaning as prepaid account as defined by Section 1005.2 of Title 12 of the Code of Federal Regulations as it reads on April 1, 2019; and specifies that a general use card does not include a card for which certain fees are charged by the card issuer to the card user.
5. Defines, for purposes of this bill, a “designated surcharge-free cash access network location” to mean a location designated in a contract between a junk dealer or recycler and a card issuer, as a location where a general use cardholder can withdraw cash without paying a surcharge.
   

Background

Junk dealers and recyclers. Junk dealers and recyclers are required to follow strict guidelines regarding the retention of records, payment for materials, the photography or video of items being purchased, and the collection of identification and thumbprints of sellers, among others. Additionally, payment is restricted to a check mailed to the seller or a cash or check payment that can be collected by the seller three days after the date of sale.

Nonferrous Metal Recycling Industry. According to the Institute of Scrap Recycling Industries (ISRI), Inc., nonferrous (or not iron-based) metals are among the few materials that do not degrade or lose their chemical or physical properties in the recycling process. Because of this, these metals have the capacity to be recycled a nearly infinite number of times. Nonferrous materials include copper, copper alloys, stainless steel, or aluminum (but not beverage containers, as defined in the California Public Resources Code).

Metal Theft. The rise of metal theft in the early 2000s led California to pass a number of laws aimed at curtailing metal theft. Included in those laws, were a number of requirements placed upon junk dealers and recyclers including: paying additional fees when applying for a weighmasters license; requiring recyclers or junk dealers register with ScrapTheftAlert.com or its successor agency, requiring junk dealers or recyclers collect certain information from sellers including thumb prints and photographs; and limiting payment for nonferrous materials to either cash or check after a three-day waiting period. This bill would maintain the current requirements for junk dealers and recyclers when buying non-ferrous materials, but would allow the sellers to have a third option for receiving payment, the general use card. As consistent with current law, although the card would be available to the seller, the funds would not be accessible until the third business day, which is the current requirement for cash or check payments.

For purposes of this bill, the definition of a “general use card” will be consistent with federal regulations that become effective on April 1, 2019. However, this bill specifies that a general use card for purposes of receiving payment for nonferrous materials does not include a general use card that is associated with certain fees, including a fee to make a balance inquiry, a fee for inactivity, or a fee for lodging disputes, among others. If a junk dealer or recycler chooses to offer a payment through this method, they must be responsible for any initial one-time use fees. Further, this bill will ensure that if a seller decides to accept the general use card as a method of payment, they must be able to access a location where they can withdraw the funds on the card without a paying a surcharge.

FISCAL EFFECT: Appropriation: No Fiscal Com.: No Local: No

SUPPORT: (Verified 3/25/19)

West Coast Chapter of the Institute of Scrap Recycling Industries, Inc. (source)

Schnitzer Steel

State of California Auto Dismantlers Association

Western Center on Law & Poverty, Inc.

OPPOSITION: (Verified 3/25/19)

None received

ARGUMENTS IN SUPPORT: Supporters note that by authorizing the use of prepaid and reloadable debit cards, this bill creates a method of payment that does not either rely on cash, an inherently risky option for both parties, or checks which can be challenging for those who do not have a regular bank account.

Prepared by: Elissa Silva / B., P. & E.D. / 916-651-4104

3/27/19 13:15:03

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SENATE COMMITTEE ON

BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT

Senator Steven Glazer, Chair

2019 - 2020 Regular

Bill No: SB 143 Hearing Date: March 25, 2019

Subject: Junk dealers and recyclers: nonferrous material: payment by general use prepaid cards

SUMMARY:

Includes general use prepaid cards (general use card) as a form of payment junk dealers or recyclers may provide for nonferrous material; requires the junk dealer or recycler to pay any one-time or initial use fees associated with the card, and prohibits specified fees from being charged to the general use card.

Existing law:

1. Defines “junk” as any and all secondhand and used machinery and all ferrous and nonferrous scrap metals and alloys, including any and all secondhand and used furniture, pallets, or other personal property, other than livestock, or parts or portions thereof. (Business and Professions Code (BPC) § 21600)
   
2. Defines a “junk dealer” as any person engaged in the business of buying selling, and dealing in junk, any person purchasing, gathering, collecting, soliciting, or traveling about from place to place procuring junk, and any person operating, carrying on, conducting, or maintaining a junk yard or place where junk is gathered together and stored or kept for shipment, sale or transfer. (BPC § 21601)
   
3. Requires every junk dealer and recycler to keep a written record of all sales and purchases made in the course of their business, as specified. (BPC §§ 21605, 21606)
   
4. Prohibits a junk dealer or recycler from providing payment for nonferrous material unless, in addition to meeting the written record requirements, all of the following conditions are met:
5. The payment for the material is made by cash or check, where the check may be mailed to the seller at the address provided or the cash or check may be collected by the seller from the junk dealer or recycler on or after the third business day;
6. At the time of sale, the junk dealer or recycler obtains a clear photograph or video of the seller;
7. The junk dealer or recycler obtains the required identification;
8. The junk dealer or recycler obtains a clear photograph or video of the nonferrous material being purchased;
9. The junk dealer or recycler must preserve the written record for a period of two-years; and,
10. The junk dealer or recycler obtains a thumbprint of the purchaser, as specified. (BPC § 21608.5(a)(1-6))
    

This bill:

1. Authorizes the payment options for nonferrous materials to include a general use card in addition to a cash or check.
   
2. Authorizes the seller to receive the general use card at the time of the sale, but restricts the funds’ availability until the third business day after the sale.
   
3. Requires the junk dealer or recycler to pay any one-time or initial issuance fees associated with the general use card.
   
4. Defines general use card, for purposes of this bill, to have the same meaning as prepaid account as defined by Section 1005.2 of Title 12 of the Code of Federal Regulations as it reads on April 1, 2019; and specifies that a general use card does not include a card for which any of the following fees are charged by the card issuer to the card user:
5. A fee or surcharge to make purchases with the card;
6. A fee or surcharge to make a balance inquiry;
7. A fee or surcharge to withdraw funds at a designated surcharge-free cash access network location;
8. A fee or surcharge to lodge a dispute regarding the balance of funds on the card;
9. A fee or surcharge for account inactivity;
10. A fee or surcharge for a use of the card that is considered an ordinary use of the card.
    
11. Defines, for purposes of this bill, a “designated surcharge-free cash access network location” to mean a location designated in a contract between a junk dealer or recycler and a card issuer, as a location where a general use cardholder can withdraw cash without paying a surcharge.
    
12. Makes other minor and technical changes.

FISCAL EFFECT:

None. This bill is not keyed fiscal by the Legislative Counsel.

COMMENTS:

1. Purpose. This bill is sponsored by the West Coast Chapter of the Institute of Scrap Recycling Industries, Inc. According to the Author, “prior existing law is outdated and does not account for unbanked individuals selling non-ferrous material. If the seller receives a check, they may have to pay a $10 cash-checking fee. With this prepaid card, this fee would be removed, sellers can avoid leaving facilities with large quantities of cash, and can aid in concerns of check fraud and metal theft.”
2. Background.
3. Junk dealers and recyclers. AB 844 (Berryhill, Chapter 731, Statutes of 2008) imposed additional recordkeeping requirements and payment restrictions on junk dealers and recyclers when purchasing nonferrous materials. Junk dealers and recyclers are required to follow strict guidelines regarding the retention of records, payment for materials, the photography or video of items being purchased, and the collection of identification and thumbprints of sellers, among others. Additionally, payment is restricted to a check mailed to the seller or a cash or check payment that can be collected by the seller three days after the date of sale. The payment restrictions are exempted for individuals redeeming nonferrous materials with a value less than $20 in a single transaction, when the primary purpose of the transaction is the redemption of beverage containers, or if the junk dealer and seller completed five or more transactions per month.
4. Nonferrous Metal Recycling Industry. According to the Institute of Scrap Recycling Industries (ISRI), Inc., nonferrous (or not iron-based) metals are among the few materials that do not degrade or lose their chemical or physical properties in the recycling process. Because of this, these metals have the capacity to be recycled a nearly infinite number of times. Nonferrous materials include copper, copper alloys, stainless steel, or aluminum (but not beverage containers, as defined in the California Public Resources Code).
5. Metal Theft. The rise of metal theft in the early 2000s led California to pass a number of laws aimed at curtailing metal theft. Included in those laws, were a number of requirements placed upon junk dealers and recyclers including: paying additional fees when applying for a weighmasters license; requiring recyclers or junk dealers register with ScrapTheftAlert.com or its successor agency, requiring junk dealers or recyclers collect certain information from sellers including thumb prints and photographs; requiring individuals selling certain nonferrous materials to provide proof of ownership when selling those items; and limiting payment for nonferrous materials to either cash or check after a three-day waiting period. This bill would maintain all of the current requirements for junk dealers and recyclers when buying non-ferrous materials, but would allow the sellers to have a third option for receiving payment, the general use card. As consistent with current law, although the card would be available to the seller, the funds would not be accessible until the third business day, which is the current requirement for cash or check payments.

While metal theft is still an active consumer and public safety concern, according to a press release from the National Insurance Crime Bureau in 2017, nationally, “compared with 2014, insured metal thefts were down a whopping 60 percent in 2016.” Recent amendments clarify that this bill allows the seller to determine the payment method for nonferrous materials and does not require a seller to receive the payment by a general use card.

1. Prepaid General Use Cards. The Sponsor notes that this bill provides another payment option for sellers of nonferrous materials, which may be a safer alternative for sellers as opposed to carrying cash and may be less risk for businesses who often have checks compromised (lost/stolen). Additionally, there can be fees associated with check cashing at financial institutions where sellers of nonferrous materials do not have a banking relationship. However, general use cards are not prohibited from charging fees for varying transactions. According to information available on the Consumer Financial Protection Bureau’s website, some of the common fees associated with general use cards can include a variety of fees. Examples include: monthly fees, balance Inquiry fees, cash reload fees, statement fees, inactivity fee, and card replacement fees to list a few.

For purposes of this bill, the definition of a “general use card” will be consistent with federal regulations that become effective on April 1, 2019. However, this bill specifies that a general use card for purposes of receiving payment for nonferrous materials, does not include a general use card that is associated with certain fees, including a fee to make a balance inquiry, a fee for inactivity, or a fee for lodging disputes, among others. Also for purposes of this bill, recent amendments clarify that if a junk dealer or recycler chooses to offer a payment through this method, they must be responsible for any initial one-time use fees. Further, this bill will ensure that if a seller decides to accept the general use card as a method of payment, they must be able to access a location where they can withdraw the funds on the card without a paying a surcharge.

1. Prior Related Legislation. AB 2059 (Eduardo Garcia) of 2016 would have exempted junk dealers and recyclers from the three-day payment restrictions if the junk dealer or recycler obtains a surety bond, as specified, requires a study to be conducted on the impact of the bond, and sunsets the provision authorizing the exemption for the bond on January 1, 2020. (Status: The bill was never considered by the full Assembly.)

AB 841 (Torres) of 2013 would have required junk dealers and recyclers to provide payment to sellers of nonferrous material by mailed check only, as specified. (Status: This bill was vetoed by the Governor due to prior legislation, namely SB 485, already addressing the issue; the Governor stated that the existing laws needed to be enforced rather than introducing more legislation.)

AB 1095 (Nestande) of 2013 would have required a junk dealer or recycler to pay a seller of nonferrous materials only by mailed check or by a check collected by the seller in person at least 30 days from the date of sale, requires a junk dealer or recycler to hold the purchased material for 30 days unless specified conditions are met, and deletes existing provisions exempting a seller who completes at least five or more separate transactions per month from specified payment requirements. (Status: This bill died in the Assembly Committee on Business, Professions and Consumer Protection.)

AB 2312 (Nestande and Olsen, Chapter 608, Statutes of 2013) required a junk dealer or recycler to request to receive metal theft alert notifications from an Internet-based theft alert system and requires a junk dealer or recycler to provide a statement that they have requested to receive theft alert notifications when seeking a weighmasters license.

AB 801 (Brown of 2013) would have required junk dealers and recyclers to obtain specified information before providing payment for nonferrous materials marked with an indicia of ownership, as defined, and would require that this information be retained as part of the written record of purchases. (Status: This bill failed passage in the Assembly Committee on Business, Professions and Consumer Protection.)

1. Arguments in Support. The West Coast Chapter of the Institute of Scrap Recycling Industries writes in support, “By authorizing the use of prepaid and reloadable debit cards, [this bill] creates a method of payment that does not either rely on cash- an inherently risky options for both parties- or checks which can be challenging for peddlers who do not have a regular bank account.”

The State of California Auto Dismantlers Association writes in support, “By authorizing the use of prepaid and reloadable debit cards, SB 143 creates a method of payment that does not either rely on cash—an inherently risky option for both parties—or checks, which can also be challenging from a management and fraud standpoint.”

Schnitzer Steel writes in support, “By authorizing the use of prepaid and reloadable debit cards, SB 143 creates a method of payment that does not either rely on cash – an inherently risky option for both parties – or checks, which can be challenging for peddlers who do not have a regular bank account. Prepaid debit cards provide a safe and dignified way to pay peddlers that does not put the peddler at risk by carrying cash, or require unbanked peddlers to pay check-cashing fees in order access the funds.”

Western Center on Law and Poverty, writes in support, “We are very grateful to the author, committee and sponsor of this bill who have worked with us to address concerns we had with the language, as introduced, and we are satisfied that the junk sellers many of whom are low-income, will have their consumer rights protected as a result of these amendments.”

1. Policy Consideration. Much of the prior legislation related to the regulation of junk dealers and recyclers and sellers of nonferrous materials stemmed from increased reports of metal theft across the state, and aimed to curb this growing metal theft trend by ensuring individuals selling nonferrous metals were not selling stolen items in order to earn fast cash.

In order to ensure that, by authorizing an additional payment method as this bill proposes, California’s current efforts to deter metal thefts are not jeopardized, the Author may wish to consider adding a five-year sunset date to the new payment provisions. A sunset date would provide law enforcement, junk dealers, and recyclers and consumers an opportunity to assess the payment system for any potential problems, and will allow for the consideration of additional statutory changes at that time, including recognizing additional payment methods that may be available as technology and the banking systems evolve.

SUPPORT AND OPPOSITION:

Support:

West Coast Chapter of the Institute of Scrap Recycling Industries (sponsor)

Schnitzer Steel

State of California Auto Dismantlers Association

Western Center on Law & Poverty, Inc.

Opposition:

None on file as of March 20, 2019.

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