Lately I have fielded a lot of questions about pawning and selling firearms. If you have an Federal Firearms License (FFL) or have been thinking about obtaining one, there are many things to know about the compliance requirements and how PawnMaster can help you manage them. For some shops, pawning, buying and selling firearms are a significant part of their business model, which comes along with many rules, procedures and paperwork. Therefore our PawnMaster software and support staff must stay current on the laws and best practices in order help to keep shops in compliance.
The Federal Firearms License
For most pawnbrokers, the type of FFL needed to conduct business will be a “Type 2” FFL. Believe it or not, there are nine distinct types of FFLs and some of our clients have more than one in order to also be a manufacturer or class 3 dealer. Here is a fact sheet from The Bureau of Alcohol, Tobacco, Firearms & Explosives (ATF) about license types. Wikipedia also has a good explanation here.
The Gun Log
All licensed firearms dealers are be responsible for maintaining consistent and accurate tracking procedures, like an Acquisition and Disposition log book, commonly called “the bound book” or “log book”. On December 17, 2013, the ATF adopted a rule change allowing dealers to use an electronic log in lieu of a paper bound book. There are a few things that the dealer must do in order to stay compliant, such as making a daily backup and performing regular gun counts. The following is a quote from ATF Rul. 2016-1 “The storage system must back-up the firearms acquisition and disposition records on at least a daily basis to protect the data from accidental deletion or system failure.” PawnMaster has all the tools you need to maintain your Gun Log, and perform backups, gun counts, and ATF compliant reports.
Background Checks
Another important part of using firearms for collateral is conducting the required background check when someone is redeeming their firearm after paying off the loan. Many pawn shops will remind their customers of this requirement at the time the original loan is made, to prevent surprises or complications. If the customer fails to pass the background check at redemption, it is critical that the shop takes all necessary measures to avoid a “Straw-man-sale” and stay in compliance. For more detail, check out the ATF’s FAQ for pawnbrokers. Additionally, in the ATF’s FFL Newsletter, there is an article with specific guidelines for pawn redemption denials on page 7.
Recordkeeping
Chapter 12 of the FFL handbook covers recordkeeping. The FFL must retain all 4473s either by name, date or transaction serial number. It has been my experience that transaction number is the easiest method a shop can use to stay in compliance. PawnMaster has a setting to generate a 4473 transaction number at the time of sale. All the employee needs to do is note it in the top right corner of the 4473 and file them in sequence. PawnMaster also has a setting to allow the pawn shop to take payment and hold a gun in the event that the background check is “Delayed”. This is a much better option than placing it in layaway and better than letting money walk out of the shop. If you want to enable this feature please contact support to have it enabled.
PawnMaster has all the controls necessary to keep your shop in compliance with ATF requirements, however it is critical that pawnbrokers and employees understand and maintain good practices to be compliant. Long audits and heavy fines can be time-consuming and damaging to a business. If you have questions about managing your firearms in PawnMaster, or would like to know more prior to or in anticipation of obtaining your FFL please contact the Training Department at Data Age Business Systems.
DISCLAIMER: Our training resources and blogs on such topics are for educational purposes only. Neither I, nor my colleagues at Data Age can provide legal advice, we are not sanctioned government officials, nor legal or financial advisers. This post in no way absolves an FFL holder from knowing how the laws apply to their business.
