The Long Beach City Council has agreed to look at ways to impose stricter regulations on “cash for gold” businesses by making them adhere to the same standards as pawnbrokers and other second-hand dealers.
But experts in the field say gold buyers are already defined as second-hand dealers under California law and are required to apply for a state license to operate, adding that the proliferation of rogue, illegal dealers comes from merely a lack of city enforcement and oversight.
At the July 16 meeting, the Council voted 7-0 to approve the request brought by 6th District Long Beach Councilmember Dee Andrews to have city staff come back with a new ordinance within 90 days. Ninth District Councilmember Steven Neal and Vice Mayor Robert Garcia co-sponsored the proposal.
The proposal is an attempt to go after illegal and unregulated gold sales that police officials said have been contributing to a rise in property crime over the last several years, since unlawful businesses have made it easier for thieves to trade stolen jewelry for cash. In fact, the rush for gold has prompted some criminals to snatch necklaces from people walking the streets, police said.
“Many burglars tell us that they fence stolen items like jewelry at ‘cash for gold’ businesses,” said Long Beach Police Department Deputy Chief Robert Luna in a statement.
The Council’s motion comes after the skyrocketing price of gold in the last few years has generated a gold-selling frenzy, as people across the country have flocked to sell off their scrap gold and unused jewelry to make quick cash. Since 2008, the price of gold has shot up from about $700 an ounce to $1,900 an ounce.
Looking to cash in on the trend, businesses almost everywhere, from gas stations to grocery stores and clothing outlets to mobile operations, began buying up gold jewelry and personal items from customers, making a fast profit by quickly turning around and selling the items to a refinery that then melts it down.
Businesses that buy gold may take in stolen items, which can be scrapped almost immediately, leaving law-enforcement officials no recourse on claims of stolen goods or the ability to trace the item to its seller.
The problem? This type of transaction is illegal, explains Tony DeMarco, legislative analyst and president-elect for the California Pawnbrokers Association (CAPA). He said passing a city law wouldn’t necessarily solve the problem if the City already lacks the resources to enforce the existing law.
“Law enforcement and municipalities are ignorant of the law,” DeMarco said. “We are a very, very regulated industry.”
He said state law considers any buyer of gold or any other precious metal a second-hand dealer, such as a consignment store, thrift shop or pawn shop. And, in California, all second-hand dealers that purchase “tangible personal items” are required to follow a strict set of rules.
Firstly, state law requires dealers to obtain a second-hand dealer license from the State, pass criminal background checks and report to local law enforcement with records of transactions, including filing police reports.
Then, these businesses are required to conduct transactions only on permanent business premises, hold items for a 30-day period and request official identification from sellers.
Gold buyers are required to use specific scales that are tested and certified by the California Department of Food and Agriculture’s County Office of Weights and Measures.
Second-hand dealers also face misdemeanor charges and fines for purchasing known stolen property and not reporting it to police, DeMarco said. He said fines range from $1,500 for the first item and up to $25,000 for the third item.
Many illegal gold-buying businesses, however, are still given a business license by the City and are allowed to operate without required second-hand dealer licenses or necessary certifications, and they don’t follow procedures required by law. Instead, they often take gold for cash with “no questions asked.”
DeMarco says the issue is that many cities lack the resources to enforce the laws and hadn’t anticipated illegal gold-buyers flooding the market. Without the funds or the means to address the problem, many businesses have been able to operate unregulated.
He said the issue was more of a problem from 2010 to 2012 and that today there are fewer gold-buyers as many people have already gotten rid of their gold.
DeMarco said the goal now, however, is to establish a statewide database for all second-hand dealers in California that would help monitor transactions and help regulate the businesses. He said the State increased the second-hand dealer license fee from $12 to $300 in order to pay for the database.
The City’s regulations on pawnbrokers and second-hand dealers, however, currently don’t recognize “cash for gold” businesses since they are relatively a recent phenomenon and they didn’t exist at the time the city ordinance was drafted, said Tonya Martin, spokesperson for Andrews’s office.
City officials are now hoping to change the City’s code to regulate gold buyers.
The changes wouldn’t apply to pawn shops or other second-hand dealers, such as jewelry stores that run deals as a side business and already follow such laws.
Erik Sund, Long Beach’s business-relations manager, said the City could be able to regulate primary “cash for gold” businesses through the City’s administrative-use permit (AUP) process.
Andrews said he hopes the change will help local law enforcement fight crime.
“By raising these standards, we are making it more difficult for criminals to sell stolen property, which will reduce crime,” Andrews said. “When we are identifying those who are selling it, we are helping police officers to make arrests and get the stolen goods back to their proper owners.”
Licensed gold buyers in Long Beach say they support the City’s attempt to eradicate illegal operations but agree that the problem is a matter of a lack of enforcement, not a lack of laws.
“Anybody who comes into our door, we get their ID and, if they don’t have it, there’s no sale,” said Jeffrey Winnick, co-owner of Gems & Jewels, which has been in business for about four months in Bixby Knolls on Atlantic Avenue and buys gold. “We have to hold items for 30 days. That’s the protocol in the state of California.”
He said the matter of illegal operations has more to do with insufficient city resources for police to go after the criminals, adding that there is only one burglary-detail detective who works with all second-hand dealers in Long Beach.
“There is a large amount of ‘cash for gold’ businesses doing it illegally– they just open up a store,” Winnick said. “The City of Long Beach and police are aware of them. They just don’t have the manpower. The city councilmember, I think, is mistaken. It has to be enforced because it’s affecting business. It’s a big problem.”
One business owner of a longtime “cash for gold” business who declined to provide his name said having detectives post out at the business 24-7 wouldn’t be a problem because the operation has followed the rules for years.
Mark Schneider, a third-generation jeweler who took over his father’s business, Dave Schneider Jewelry, of nearly 68 years in downtown Long Beach, said he supports any proposal to go after illegal businesses.
Schneider said his company, which has cameras and double buzzer doors, requires customers to provide their fingerprints and a photo ID. Forms are sent to the Long Beach Police Department, and all items are held for 30 days before any metals are melted down, he said.
“As a gold buyer, I’m all for stopping any criminal activity,” Schneider said. “I’m for full enforcement, because a lot of these companies come in, take a hotel room, and they’re here for one day to three days. I don’t even know if they are following the law. It would be great to have a police department do a check on all gold buyers.”
Some local residents see “cash for gold” businesses as a form of blight or another “predatory” business, likening them to operations that offer loans with high interest rates.
Last October, the City put a one-year moratorium on firms that offer auto-title, payday and consumer-finance loans to come up with a way to regulate the relatively new types of money-lending businesses. The Wrigley Association was the main group that pushed for further regulations on such companies.
Lee Fukui, a Wrigley neighborhood resident and one of the main proponents of regulating loan firms, said he is in favor of Andrews’s proposal but felt it should go even further, suggesting the Council put a permanent moratorium on “cash for gold” businesses or restrict the areas where they are able to locate.
“While I do support the suggested regulations, I view ‘cash for gold’ businesses in the same way as predatory lenders like check cashing, payday, and auto title,” he said in an e-comment for the Council meeting. “They take far more from consumers than any benefit in services they pretend to provide… If we want to attract better businesses to a community, then we’ve got to take the steps to create a secure environment by keeping these blighting influences out.”
CAPA states that customers who sell gold to illegal businesses that don’t comply with regulations run the risk of being misled about the value of their items, since representatives may tamper with scales.
Business owners, however, say there is a legitimate need for the businesses that are doing a “public service” by providing a way for people to exchange their unwanted jewelry for cash during tough financial times.