Regulation Needed for Transient Buyers of Gold and Precious Items

Norman Gornbein

Licensed pawn shops are losing a significant amount of their business to transient buyers of gold and other precious items.

Most likely you have seen full-page newspaper advertisements announcing the arrival of a transient buyer coming to town. These advertisements typically state: We are Buying Rare Coins, Gold, Silver, Estate Jewelry, Vintage Watches, and Diamonds–this coming weekend—two days only from 10:00am until 4:00pm at the Acme Garden Motel. Free Appraisals, No Appointment Necessary!

Precious metals, essentially gold, silver and platinum, are hot commodities these days especially now that they are selling at or near new highs. The secondary market in precious metals is booming and transient buyers are out to make a kill—at the expense of legitimate and licensed pawn shops.

These transient buyers, usually from out of state (to keep their back yard clean), are largely unregulated in most jurisdictions and don’t have to meet the same stringent regulations that apply to legally licensed pawn shops.

These regulations require pawn shops to be in compliance with state and local requirements, and, in addition, to well over one dozen Federal laws including the Patriot Act.

These regulations put pawn shops and jewelry stores at a great competitive disadvantage when compared to transient buyers.

Legally, a pawn shop is normally required to collect personal identification, including photographs and fingerprints for police or governmental reports of any person pawning or selling an item. Purchases must be held for up to 30 days, depending on the jurisdiction, before being re-sold—this delay can be costly in a volatile market.

The transient buyer needs no licenses and can re-sell his purchased gold and other precious items for cash the very next business day.

Fortunately, some steps have been taken to control the transient buyers. In 2010, Alabama enacted a law making it harder for transient precious metal buyers to set up shop.

The Alabama law requires that any business purchasing precious items cannot be transient, but has to have a fixed place of business and to have been in business for a minimum of one year and must be licensed. In addition, there are requirements for strict record keeping, similar to those currently imposed on pawn shops. In Alabama, purchased items must be held a minimum of 15 business days for police investigation, if necessary.

Since 2010, similar laws have been enacted by Illinois, Maryland, Mississippi, and the State of Washington (House Bill 1716).

Even cities are now getting into the act. In 2011, Chicago Heights, Illinois, passed a local ordinance, regulating the transfer or conveyance of precious metals and gems.

Still in most states, transient buyers of gold and precious items are unregulated. Even in those states and local jurisdictions which do have laws regulating transient buyers of second-hand gold and precious items, the laws are loose or are not strictly enforced—if they are enforced at all.

So what can pawnbrokers do to solve the problem? Pawnbrokers must take the initiative to push to have strict laws enacted in all states to regulate the transient buyers of gold and other precious items.

To do this, pawnbrokers should lobby through their state associations and/or directly to their state representatives or senators to have a law regulating transient buyers in their state.

In putting forth their reasons for the necessity of such a law, unfair competition from the transient buyers may not be the best argument. It is better to put forth an argument that will benefit all the constituents of the state.

An excellent example of such an argument can be taken from the wording in the state of Washington’s House Bill 1716 (which became law on 7/22/2011) which states:

The market price of gold has increased significantly in recent years and there has been a proliferation of secondhand dealers, including temporary, transient secondhand businesses, engaging in “cash for gold” type precious metal transactions. Frequently, these “cash for gold” type operations are operated by persons desiring to exploit unsuspecting consumers based on current market conditions;

The increasing number of “cash for gold” type transactions in communities and neighborhoods throughout Washington has been linked to increased crimes involving the theft of gold and other precious metal objects, including home burglaries, robberies, and other crimes, resulting in depressed home values and other threats to the health, safety, and welfare of Washington state residents…

These are convincing reasons that pawnbrokers should put forth for the enactment of laws regulating transient buyers of gold and precious items in all states.

This reasoning worked in the State of Washington where House Bill 1716 passed overwhelmingly in the house 86 to 10, and in the senate 45 to 2—it could work in your state, as well.

Norman Gornbein,

Mr. Gornbein wrote a book called” How To Open A Successful Pawnshop” through Amazon books, And any questions please call 619-540-7189