Second-hand Dealers and Pawnbrokers Regulations 2008 · PDF file4.10 Pawn Ticket and Notice...

Second-Hand Dealers and Pawnbrokers Regulations 2008

Regulatory Impact Statement

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Table of Contents Executive Summary......................................................................................iii 1. Introduction...............................................................................................1

1.1 Legislative Backing ......................................................................................... 1 1.2 Amendments to the Act................................................................................... 2 1.3 Linkage to Consumer Credit Code.................................................................. 3 1.4 This Regulatory Impact Statement.................................................................. 4

2. Nature and Extent of the Problem ...........................................................5 2.1 Overview......................................................................................................... 5 2.2 The Legislative Requirements ........................................................................ 6 2.3 Specific Intervention Required........................................................................ 6

2.3.1 Consumer Protection........................................................................... 7 2.3.2 Information Asymmetry........................................................................ 8 2.3.3 Cost Recovery ..................................................................................... 9

3. The Objectives ........................................................................................11 3.1 Primary Objectives........................................................................................ 11 3.2 Secondary Objectives ................................................................................... 11 3.3 Decision Criteria............................................................................................ 11

4. Proposed Regulations............................................................................12 4.1 Authorising Provisions .................................................................................. 12 4.2 Affected Parties............................................................................................. 12 4.3 Consultation.................................................................................................. 12 4.4 The Proposed Regulations ........................................................................... 13 4.5 Fees (Proposed Regulation 6) ...................................................................... 14

4.5.1 Costs ................................................................................................. 15 4.5.2 Benefits.............................................................................................. 16

4.6 Register (Proposed Regulation 7)................................................................. 16 4.6.1 Costs ................................................................................................. 17 4.6.2 Benefits.............................................................................................. 18

4.7 Prescribed Categories of Evidence as to Identity of Persons Selling or Pawning Goods (Proposed Regulation 8)..................................................... 18

4.7.1 Costs ................................................................................................. 19 4.7.2 Benefits.............................................................................................. 19

4.8 Recording Transactions (Proposed Regulation 9) ........................................ 20 4.8.1 Costs ................................................................................................. 23 4.8.2 Benefits.............................................................................................. 24

4.9 Identifying Mark or Number (Proposed Regulation 10)................................. 24 4.9.1 Costs ................................................................................................. 25 4.9.2 Benefits.............................................................................................. 25

4.10 Pawn Ticket and Notice (Proposed Regulation 11) ...................................... 25 4.10.1 Costs ................................................................................................. 26 4.10.2 Benefits.............................................................................................. 27

4.11 Lost Pawn Ticket (Proposed Regulation 12)................................................. 28 4.11.1 Costs ................................................................................................. 28 4.11.2 Benefits.............................................................................................. 29

4.12 Period of Loan (Proposed Regulation 13)..................................................... 29 4.12.1 Costs ................................................................................................. 29 4.12.2 Benefits.............................................................................................. 29

4.13 Redemption of Goods (Proposed Regulation 14) ......................................... 29 4.13.1 Costs ................................................................................................. 30 4.13.2 Benefits.............................................................................................. 30

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4.14 Sale of Unredeemed Goods (Proposed Regulation 15) ............................... 30 4.14.1 Costs ................................................................................................. 31 4.14.2 Benefits.............................................................................................. 31

4.15 Embargo Notice (Proposed Regulation 16) .................................................. 32 4.15.1 Costs ................................................................................................. 32 4.15.2 Benefits.............................................................................................. 32

4.16 Infringement Penalties (Proposed Regulation 17) ........................................ 32 4.16.1 Costs ................................................................................................. 33 4.16.2 Benefits.............................................................................................. 33

4.17 Implementation and Enforcement ................................................................. 34 4.17.1 Implementation .................................................................................. 34 4.17.2 Compliance and Enforcement ........................................................... 34

4.18 Interstate Legislative Arrangements ............................................................. 35 4.19 Summary of Cost Benefit Analysis................................................................ 36

5. Other Options to Achieve the Objectives .............................................41 5.1 Introduction ................................................................................................... 41 5.2 No Regulations – The Base Case................................................................. 41

5.2.1 Costs ................................................................................................. 41 5.2.2 Benefits.............................................................................................. 42

5.3 No Prescribed Particulars for Transaction Records...................................... 42 5.3.1 Costs ................................................................................................. 42 5.3.2 Benefits.............................................................................................. 43

5.4 Mandatory Computerised Record Keeping................................................... 43 5.4.1 Costs ................................................................................................. 43 5.4.2 Benefits.............................................................................................. 44

5.5 Assessment of Options ................................................................................. 45 5.6 Fees.............................................................................................................. 47

6. Evaluation Strategy ................................................................................49 7. National Competition Policy Assessment ............................................50

7.1 Introduction ................................................................................................... 50 7.2 Definition of Market ....................................................................................... 50 7.3 Test for Restriction on Competition............................................................... 50 7.4 Assessment .................................................................................................. 51

7.4.1 Part 1 – Preliminary (proposed regulations 1-5)................................ 51 7.4.2 Part 2 – Registration (proposed regulations 6-7)............................... 51 7.4.3 Part 3 – Conduct of Business (proposed regulations 8-15)............... 51 7.4.4 Part 4 – Enforcement (proposed regulations 16-17) ......................... 51

8. Impact on Small Business .....................................................................52 9. Administrative Burden ...........................................................................54

9.1 Cost Parameter Assumptions ....................................................................... 56 Appendix 1: Summary of 2007 Research Survey Results........................58 Appendix 2: Comparison of Proposed Regulations with 1997

Regulations .............................................................................................60 Appendix 3: Analysis of Proposed Fees....................................................62 Appendix 4: Second-Hand Dealers and Pawnbroker Controls in Other

Australian Jurisdictions .........................................................................79

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Executive Summary The Second-Hand Dealers and Pawnbrokers Regulations 1997 are due to expire under section 5 of the Subordinate Legislation Act 1994 on 22 December 2008. In accordance with the requirements of the Subordinate Legislation Act 1994 and the Victorian Guide to Regulation, a Regulatory Impact Statement is required to assess the draft Second-Hand Dealers and Pawnbrokers Regulations 2008 (the proposed Regulations) in terms of their objectives and their effect. Also, an assessment of the alternative approaches to achieving those objectives is required. Affected Parties A second-hand dealer is defined in section 3 of the Second-Hand Dealers and Pawnbrokers Act 1989 (the Act) as “a person who carries on the business of buying, selling, exchanging or otherwise dealing in second-hand goods, whether or not he or she deals in other goods and regardless of where goods are bought”. Second-hand goods are defined as “any goods which have been worn or otherwise used”. The definition is broad and therefore the Act and proposed Regulations affect a wide range of businesses including:

• second-hand dealers who operate traditional second-hand goods stores; • scrap metal dealers; • antique dealers; and • persons who regularly operate market stalls at which second-hand goods are

sold (other than for charitable purposes). It is proposed to continue the current exemption for second-hand dealers carrying on business exclusively for charitable, benevolent and philanthropic organisations, as outlined in the draft Second-Hand Dealer and Pawnbroker (Exemption) Regulations 2008. The proposed Regulations will also affect pawnbrokers. A pawnbroker is defined in the Act as “a person who carries on the business of advancing money on the security of pledged goods.” More broadly, the proposed Regulations will affect:

• customers of second-hand dealers and pawnbrokers; • consumer credit industry; • Consumer Affairs Victoria; • Victoria Police; and • the general public.

The Objectives of the Proposed Regulations The primary objectives of the proposed Regulations are:

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• to protect consumers and the public generally from stolen goods being trafficked through second-hand dealers and pawnbrokers and improve the quantity of stolen goods recovered from second-hand dealers and pawnbrokers and returned to their rightful owners;

• to improve the provision of information to consumers about their rights and obligations when dealing with second-hand dealers and pawnbrokers; and

• to recover the costs of efficiently administering the Act and proposed Regulations through cost-reflective and equitable fees.

The secondary objectives, as provided in the proposed Regulations, are to facilitate the operation of the Act and provide for—

(a) fees payable under the Act;

(b) the particulars to be recorded in the register of second-hand dealers;

(c) categories of documents as to identity;

(d) record-keeping requirements;

(e) forms;

(f) the manner of disposal by pawnbrokers of unredeemed goods; and

(g) offences in respect of which an infringement notice may be issued. The Nature of the Problem Being Addressed The objectives of the proposed Regulations are designed to address three problems in the second-hand dealers and pawnbrokers market. First, the problem of stolen goods being trafficked through second-hand dealers and pawnbrokers. There is a need to prevent this practice and improve the quantity of stolen goods recovered from second-hand dealers and pawnbrokers and returned to their rightful owners. Second, there is an imbalance of information between pawnbrokers and their customers. This may result in consumers entering into unfair agreements or pawnbrokers taking advantage of consumers with limited knowledge of their rights in regards to these types of transactions. Third, there is a need to efficiently recover the costs of administering the proposed regulatory framework through fees that reflect the costs of the relevant administrative processes involved. Failure to establish a fee structure based on full cost recovery would mean that the cost of administering the second-hand dealers and pawnbrokers regulatory scheme would ultimately be borne by taxpayers. By charging fees, it is expected that there will be an efficient level of use of the registration and other application processes.

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The Proposed Regulations In summary, the proposed Regulations set out:

• the fees payable under the Act by second-hand dealers and pawnbrokers to be registered and endorsed (proposed regulation 6);

• the information to be contained in the public register (proposed regulation 7); • the types of identification that second-hand dealers and pawnbrokers can

accept from persons selling or pawning goods (proposed regulation 8); • the details of transactions required to be recorded by second-hand dealers and

pawnbrokers (proposed regulation 9); • the requirement to ensure an identifying mark or number is affixed to second-

hand goods received (proposed regulation 10); • the details to be contained in a pawn ticket and notice and the form of the

ticket and notice (proposed regulation 11); • the process for issuing a duplicate pawn ticket in the case of a lost pawn ticket

(proposed regulation 12); • the requirement to fix the period of the loan at the time that goods are pawned

(proposed regulation 13); • the process for redeeming pawned goods (proposed regulation 14); • the process for selling unredeemed goods (proposed regulation 15); • the form of the embargo notice (proposed regulation 16); and • the infringement penalties (proposed regulation 17).

Assessment of the Proposed Regulations The proposed Regulations will produce several benefits. Consumers and the public will ultimately derive most of the benefits, although some will flow to industry. For example, prescribing additional categories of evidence as to the identity of persons selling or pawning goods (proposed regulation 8) provides a benefit to industry as traders may gain legitimate business from people who may not meet the proof of identity requirements under the Act. The main benefits of the proposed Regulations relate to achievement of the primary objectives of the proposed Regulations. First, the proposed Regulations will increase the number of stolen goods recovered by improving the ability of Victoria Police to effectively and efficiently track stolen goods traded through second-hand dealers and pawnbrokers. This benefit is primarily achieved through requiring second-hand dealers to record detailed information regarding their transactions (proposed regulation 10) and by ensuring that the identifying mark or number assigned to goods remains affixed to the second-hand or pawned good (proposed regulation 11). Second, the proposed regulations relating to pawn transactions (proposed regulations 12 to 15) provide benefits to consumers by addressing the imbalance of information between pawnbrokers and their customers by improving the provision of information to consumers about their rights and obligations when dealing with pawnbrokers.

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The only benefit that could be quantified was the benefit derived from recovering the full cost of administering the second-hand dealers and pawnbrokers regulatory scheme. This was estimated to be $247,481 per annum (or $2,130,239 over 10 years using 3.5% discount rate). The main costs of the proposed Regulations will be incurred by industry and include:

• $247,481 per annum for fees payable under the Act to be registered; • $4,528.48 per annum to compile the details to be provided on the application

form for inclusion on the Register; • $242,292 per annum to complete the details required on the pawn ticket; and • $9,036.30 per annum to produce a duplicate pawn ticket, in the case of a lost

ticket, and check the customer’s statutory declaration and identification. The total quantified costs of the proposed Regulations are estimate to be $503,749 per annum (or $4,336,113 over 10 years using a 3.5% discount rate). As most of the benefits of the proposed Regulations could not be quantified, a qualitative assessment (which incorporated the quantified costs and benefits) was used to assess the proposed Regulations. The assessment demonstrated that the estimated benefits of each of the proposed regulations outweighs the estimated costs of each of the proposed regulations. For some of the proposed regulations – for example, proposed regulation 10 – there were significant benefits for only a minor cost. Other Means of Achieving the Objectives In considering the most effective means to achieve the identified objectives, consideration was given to alternatives to the proposed Regulations. An option to not prescribe the particulars of transaction records was considered, as was an option to prescribe mandatory computerised recording of transactions. The option not to prescribe the particulars of transaction records may reduce the costs to industry, by allowing the industry flexibility in determining the information it considers will comply with the Act. Therefore, reducing the time second-hand dealers and pawnbrokers spend on recordkeeping. However, this option could lead to traders recording incomplete information, which could significantly hinder Victoria Police’s ability to effectively and efficiently track stolen goods through second-hand dealers and pawnbrokers. On this basis, this option was not considered appropriate. The primary benefit of mandating that second-hand dealers and pawnbrokers use a computerised record keeping system is that it would facilitate the transfer of up-to-date and detailed information to Victoria Police on goods traded through second-hand dealers and pawnbrokers. Thereby improving the ability of Victoria Police to effectively and efficiently track stolen goods through second-hand dealers and pawnbrokers and apprehend offenders. It would also facilitate sharing of information between jurisdictions, in particular New South Wales and Western Australia. However, there would be significant costs – estimated to be $10,587,600 – to industry from this proposal. Consequently, the costs were considered to outweigh the benefits and therefore, this option was not considered appropriate.

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Comparison of Current and Proposed Regulations There are three major differences between the Second-Hand Dealers and Pawnbrokers Regulations 1997 (the current Regulations) and the proposed Regulations. First, regulation 10 in the current Regulations requires second-hand dealers to display a sign in a prominent position outside each business premises. The proposed Regulations do not include this requirement. Second, regulation 12(4) requires second-hand dealers and pawnbrokers who use a computerised record-keeping system to produce, on a daily basis, a printed and sequentially pre-numbered hard copy of all transactions recorded on the computerised system. The proposed Regulations do not include this requirement. By no longer having this requirement, Consumer Affairs Victoria estimates that a material change in the administrative burden will result. Consequently, Consumer Affairs Victoria intends to undertake a Standard Cost Model (SCM) assessment of the change within three months of the regulations being implemented. To complete the SCM assessment Consumer Affairs Victoria needs to understand the time and financial savings to business resulting from removal of this requirement. Consequently, Consumer Affairs Victoria is interested in hearing feedback from second-hand dealers and pawnbrokers, who use a computerised record keeping system, on the following:

• How many days per week, on average, do you print out a daily record of transactions?

• On average, how many pages long is your daily record of transactions? • How long does it take, on average, to prepare, print, number and file this

information? • What is the hourly wage rate of the person that usually performs this task?

The third change relates to the fees second-hand dealers and pawnbrokers are required to pay under the Act. The proposed Regulations will prescribe the application to vary or revoke conditions fee, late payment or lodgement fee, permission application fee and annual endorsement fee. These fees were previously set out in the Act. Further, the fee unit levels have been updated to recover the current full costs of administering the second-hand dealers and pawnbrokers regulatory scheme. The following table compares the current fee unit levels with the proposed fee unit levels.

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Comparison of Current and Proposed Fees

Fee Type Existing Fee (Fee Units)

Proposed Fee (Fee Units)

Application for registration 11 9

Application to vary or revoke conditions 15 3

Permission application 15 59

Annual registration 3 3

Late payment or lodgment 2 1

Annual endorsement 40 0

Copy of register $5 $5

Except for the permission application fee, the fees under the proposed Regulations will be less than the current fee levels. There will be a significant increase in the permission application fee (from 15 to 59 fee units). Historically, the permission application fee has been set under the Act. Since the setting of this fee in the Act, the scrutiny of permission applications has increased significantly. In particular, a significant Business Licensing Authority time resource is required to process applications. The current permission application fee is under-recovering the costs of processing these applications and the other fees are currently subsidising this service. The proposed permission application fee is reflective of the increase in resources to process these types of applications.

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1. Introduction 1.1 Legislative Backing

A second-hand dealer is defined in the Second-Hand Dealers and Pawnbrokers Act 1989 (the Act) as “a person who carries on the business of buying, selling, exchanging or otherwise dealing in second-hand goods, whether or not he or she deals in other goods and regardless of where goods are bought”. Second-hand goods are defined in the Act as “any goods which have been worn or otherwise used.”

Currently, there are over six thousand registered second-hand dealers in Victoria with two per cent also endorsed as pawnbrokers (i.e. 120). Antique dealers are the most common type of second-hand dealers, some of which are concentrated in particular areas, such as Armadale. Second-hand dealers may typically include auto parts sellers, motor mower and chainsaw dealers, booksellers, music dealers and metal dealers. Most second-hand dealers are sole operators. However, some are franchises like Cash Converters, which has 30 stores throughout Victoria.

The Second-Hand Dealers and Pawnbrokers Regulations 2008 (the proposed Regulations) will apply to registered second-hand dealers only.1

A pawnbroker is defined in the Act as “a person who carries on the business of advancing money on the security of pledged goods”. Pawnbroking is the practice of a consumer taking an item they own to a pawnbroker where it is appraised and a loan is drawn for a percentage of the value of the item being pawned. A date is set by which time the loan must be repaid along with a fee for service and interest. After this date, the lender may sell or otherwise dispose of the goods pawned. Unlike other forms of credit, consumers are not limited to the type of goods that they can offer as security (except under section 23(1A) of the Act, motor cars cannot be received as goods in pawn.).

Pawnbroking in Victoria is regulated by the Act and the Second-Hand Dealers and Pawnbrokers Regulations 1997 (the 1997 Regulations). The regulation of pawnbrokers was reviewed in 1995-96 and 2000-01. The 1995-96 Review focused on the impact of National Competition Policy on pawnbroking, while the 2000-01 Review primarily examined the regulation of pawnbroking and the handling of goods pawned.

Second-hand dealing and pawnbroking are similar businesses in that they both involve obtaining pre-owned goods. However, they are distinct, in that pawnbroking involves the business of lending money on the security of pawned goods. The person pledging the goods is able to reclaim them if repayment is made in accordance with the pawn agreement.

1 Some businesses are exempted from registration. Previously, the exemptions were detailed in the Second-Hand Dealers and Pawnbrokers Regulations. They are now set out in draft Second-Hand Dealers and Pawnbrokers (Exemption) Regulations 2008.

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Prior to the 1989 Act second-hand dealers and pawnbrokers were regulated under different Acts. The Second Reading Speech of the Bill in April 1989 set out the twin objectives of the 1989 Act as “replacing unnecessary regulatory controls with a more efficient scheme of licensing and providing effective measures to combat dealings in stolen goods.” The Act was subsequently amended in 2001 to add the purpose “to enhance protection of consumers dealing with second-hand dealers and pawnbrokers.”

Under the Act, persons cannot trade as a second-hand dealer, alone or in partnership, unless they are registered, and cannot trade as a pawnbroker unless their second-hand dealer registration is endorsed authorising them to do so.

The Act requires second-hand dealers and pawnbrokers to register with the Business Licensing Authority and to update registration details annually. Part 3 of the Act is headed “Conduct of Business” and deals with aspects of conducting a second-hand dealer or pawnbroking business such as identifying persons attempting to sell or pawn goods, recording transactions and storage location of goods. Under the Act, a person is not eligible to be registered for an endorsement of the registration in specified circumstances, such as insolvency or if the person has within the preceding five years been convicted or found guilty of a disqualifying offence as defined in section 3 of the Act. In addition, the Victorian Civil and Administrative Tribunal may order disciplinary measures such as a reprimand, or the suspension or cancellation of the person’s registration or endorsement.

The Act requires a register to be kept of all persons registered as second-hand dealers containing particulars of endorsements if any, and the prescribed particulars. The 1997 Regulations currently prescribe the following particulars to be contained in the register:

• the persons registration number in the register; • the date of the registration; • the person's full name or name of body corporate; • if the person is a body corporate, the corporation's ACN or registration number; • every address at which the person carries on business; and • any business names under which the person carries on business.

The register is available for public inspection.

Persons (including corporations) that trade as a second-hand dealer without being registered or as a pawnbroker without being registered and endorsed, either alone or in partnership, are liable to a penalty of up to 100 penalty units2.

1.2 Amendments to the Act

As referred to earlier a review of the Act was undertaken in 2000-01, which resulted in significant amendments to the Act.

2 One penalty unit is $113.42.

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First, non-compliance by some elements of the pawnbroking industry had given rise to a need for better identification of who in the marketplace is conducting the business of a pawnbroker and for improved enforcement mechanisms to enhance compliance with the Act. A separate endorsement scheme for pawnbrokers was introduced to distinguish pawnbrokers from second-hand dealers and the enforcement mechanisms in the Act were strengthened. Additional inspection powers involving pawnbrokers were also introduced. These powers enable Consumer Affairs Victoria inspectors and Victoria Police to monitor compliance by pawnbrokers with the signage, notification and record-keeping requirements imposed by the Act. These requirements help in tracing stolen goods and ensure that consumers of pawnbrokers’ services are informed of their rights and responsibilities. (It should be noted that enforcement of the second-hand dealer provisions of the Act are the sole responsibility of Victoria Police). The amendments improved compliance by increasing certain penalties that apply to signage and other notice requirements under the Act. The power to issue infringement notices for some offences was also introduced and the Business Licensing Authority was given the power to impose conditions on second-hand dealer registrations and pawnbroker endorsements. Victorian Civil and Administrative Tribunal was given power to discipline second-hand dealers and pawnbrokers in relation to their conduct and the conduct of their businesses. The statutory right for persons who have pawned goods to claim any residual equity in their goods, which are unredeemed and then sold, was reinstated. Residual equity is the amount remaining after the reasonable costs of selling the pawned goods and the amount owing under the loan contract have been deducted from the proceeds of sale. Any residual equity entitlement can be claimed for a period of 12 months from the date of the sale of the unredeemed goods. It is an offence for a pawnbroker not to pay the residual equity to the customer upon request. If the pawnbroker does not pay it, the residual equity becomes a debt, which may be recovered in a court of competent jurisdiction (generally the Magistrates’ Court). The Act was also amended to prohibit the pawning of motor vehicles to stop the practice identified in the review of pawnbrokers advancing disproportionately small amounts of money on the pledge of a motor car of potentially much higher value as security. The review had concluded that it is inappropriate to allow for the pawning of motor cars because in many cases they are one of a person's most valuable assets, a means of transport and even a form of accommodation in extreme circumstances. Finally, as discussed earlier, a new purpose was added to clarify that the Act is intended to enhance protection of consumers dealing with second-hand dealers and pawnbrokers.

1.3 Linkage to Consumer Credit Code

The Consumer Credit Code does not apply to pawn transactions, except sections 70 to 72, which allow a Court to reopen unjust transactions. Pawnbroking ‘loans’ are not subject to

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the interest rate cap applicable to credit providers. This was deregulated in 1997 following a National Competition Policy Review of pawnbroking.

1.4 This Regulatory Impact Statement

The 1997 Regulations are due to sunset under section 5 of the Subordinate Legislation Act 1994 on 22 December 2008. In accordance with the requirements of that Act and the Victorian Guide to Regulation, a Regulatory Impact Statement is required to assess the proposed Regulations in terms of their objectives and their effect, alternative approaches to achieving those objectives, and an assessment of the costs and benefits of the regulations and the alternatives. An assessment has also been undertaken of the implications of the proposed Regulations on competition. In assessing the most effective option to achieve the identified objectives, the Regulatory Impact Statement must determine decision criteria to assess each option. These will relate directly to the objectives of the proposed Regulations and the Act. By virtue of the framing of the Act, the 1997 Regulations and the proposed Regulations respond specifically to particular provisions of the Act rather than being self-contained. Therefore, the assessment of the costs and benefits of the proposed Regulations is only on the ‘incremental’ costs and benefits arising from the proposed Regulations and not the impacts that are attributable to the Act’s provisions.

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2. Nature and Extent of the Problem 2.1 Overview

One of the purposes of the Act is to restrict the traffic in stolen goods and to assist the rightful owners of goods in recovering their lost property. This connection can achieve a high public profile. For instance, in 1993 and 1994 a police operation in New South Wales used the operation of pawnbroker’s shops in breaking down housebreaking gangs throughout Sydney3. Section 1 of the Act sets out the purposes of the legislation as:

(a) to provide for the regulation of second-hand dealers and pawnbrokers; and

(b) to facilitate and expedite the recovery of stolen goods from second-hand dealers and pawnbrokers; and

(c) to enhance protection of consumers dealing with second-hand dealers and pawnbrokers.

Based on the second-reading speeches and the specific provisions of the Act, the following objectives of the legislation were deduced by the Review of Consumer Credit4:

• to regulate the dealing in certain categories of second-hand goods (high risk of theft goods) in order to limit the traffic in stolen goods through pawnbrokers and secondhand dealers;

• the rapid provision to the Police Service of up-to-date information on the sale/pawn of second-hand goods to enhance the enforcement capability of the Police Service to combat property theft;

• require pawnbrokers and second-hand dealers to be more vigilant about clients who offer goods for sale or pawn in regard to documentation clients are required to produce to substantiate their identity and their title to the goods;

• constrain the exercise of market power in respect of the provision of pawnbroking services; and

• provide a mechanism to facilitate the return of stolen property to rightful owners quickly and equitably.

These objectives aim to prevent the socially undesirable activity of property crime within the pawnbroking and second-hand dealing industries. It is also an objective of the Act to address an imbalance in information between pawnbrokers and their customers regarding the rights and obligations under a pawn agreement. Historically, it has been accepted that market forces do not produce a fair 3 Review of the Regulation of Pawnbrokers, Discussion Paper, Page 9, Victoria Consumer and Business Affairs, Department of Justice, 21 November 2000. 4 Report of the Consumer Credit Review, Consumer Affairs Victoria, Department of Justice, 2006.

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market for people needing to borrow money for personal purposes. An unregulated pawnbroking market may produce unfair transactions because individual borrowers often lack the information necessary to challenge those brokers whose practice it is not to disclose the price (and other potential costs) of an advance in credit in terms they can readily understand. Therefore, government intervention is considered warranted on this basis.

2.2 The Legislative Requirements

The regulation of second-hand dealers and pawnbrokers aims to minimise the negative impact on customers and the public generally from detrimental practices of traders and the possible sale of stolen goods. The Act sets out a registration system for second-hand dealers and pawnbrokers and imposes a number of requirements around how traders conduct their business. The Regulations under the Act respond to the Act’s provisions that require the prescribing of particulars. The Act establishes specific rather than broad regulatory controls over second-hand dealers and pawnbrokers. As a result, the 1997 Regulations only respond to specific provisions of the Act where detailed prescriptions are required. For example, the 1997 Regulations identify:

• fees payable, particulars to be included in the Register, categories of evidence of identity to be provided by persons selling or pawning goods and requirements to display a sign - each as required by the Act;

• details of the conduct of business transactions; and • enforcement actions – details to be provided in an embargo notice and additional

offences (with penalties) for the purposes of the Act’s infringement notice system. The Regulations are essentially declaratory or machinery and the primary regulatory burden attaches to the Act’s provisions. Therefore, it is difficult to discuss problems which some of the particular regulations address. For example, the particulars contained in the various forms and notices merely provide detail for the purposes of the Act and do not impose an appreciable burden on the industry or consumers. The use of prescribed forms is of benefit to traders and consumers because they contain accurate and concise information in an accessible form. Some of the major traders have reported that the availability of prescribed information has had a positive impact on business practices and has helped educate consumers with respect to their rights and responsibilities. However, where appropriate this section identifies the specific problems for which government intervention in Regulations is required.

2.3 Specific Intervention Required

Intervention is required to address the following issues: • protecting consumers from the practice of stolen goods being trafficked through

second-hand dealers and pawnbrokers; • the imbalance of information between pawnbrokers and their customers; and

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• recovering the cost of administering the regulatory scheme.

2.3.1 Consumer Protection

Nature of the problem

Stolen goods being trafficked through second-hand dealer and pawnbroking businesses. There is a need to prevent this practice and improve the quantity of stolen goods recovered from second-hand dealers and pawnbrokers and returned to their rightful owners.

Extent of the problem

Victoria Police does not keep specific records of stolen goods that pass through second-hand good and pawnbroker shops. However, Victoria Police has advised that police involvement and interest with second-hand dealers will always be directed at areas that have proven useful in solving crime and recovering stolen goods. Victoria Police has identified home burglaries as such an area because it typically involves the theft of domestic items such as tools, jewellery, lap top computers and consumer electronics, which can be readily disposed of through second-hand dealers.

The latest crime statistics indicate that in 2006-07 Victoria Police recorded 50,331 burglaries (aggravated, residential and other) and 124,356 thefts (from motor vehicle, shopsteal, bicycle and other).5 Where items were stolen and on sold it is likely that some proportion of them would have been offered to second-hand dealers or pawnbrokers. There is no specific Victorian data on the proportion of stolen goods that are sold to second-hand dealers and pawnbrokers. However, a 1998 survey of imprisoned burglars conducted in New South Wales found that 49.2 per cent of the 250 respondents had sold stolen goods to pawnbrokers or second-hand dealers, with 12 per cent selling goods to pawnbrokers or second-hand dealers most of the time and 36.4 per cent some of the time.6

While there is no Victorian specific data on the value of stolen goods recovered from second-hand dealers and pawnbrokers, in New South Wales between 1999 and February 2003, an estimated $12,702,143 worth of stolen property was recovered through police investigations or the outcomes of police investigations where property may have been directly or indirectly7 recovered from the business premises of pawnbrokers or second-hand dealers.8 This works out to be more than $3,000,000 worth of stolen property each

5 Victoria Police 2007, Crime Statistics 2006/2007, pages 26-35. 6 Stevenson, R. J. and L. M. V. Forsythe, The Stolen Goods Market in New South Wales: An Interview Study with Imprisoned Burglars, 1998. 7 An example of an indirect result would be where police go to a pawnshop and as a result of inquiries go to another private premises and recover property. Even though they did not recover property from the pawnshop, they did recover property as a result of inquiries made at a pawnshop. 8 New South Wales Department of Commerce, Office of Fair Trading, Pawnbrokers and Second-Hand Dealers Regulation 2003: Regulatory Impact Statement, May 2003.

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year, and illustrates that significant benefits can be realised through the enforcement of regulation in this sector.

2.3.2 Information Asymmetry

Nature of the Problem

There is an imbalance of information between pawnbrokers and their customers. This may result in consumers entering into unfair agreements or pawnbrokers taking advantage of consumers with limited knowledge of their rights in regards to these types of transactions.

Extent of the Problem

The second-hand dealer and pawnbroking industries have been regulated by government’s throughout Australia for many decades. The breadth of the regulation of these industries means it is difficult to provide evidence to illustrate the extent of the information imbalance and the likely impacts on consumers.

However, there is some similarity between the pawn and payday loans markets and the Queensland Office of Fair Trading has investigated the regulation of payday loans. Box 1 outlines the findings of the Queensland Office of Fair Trading review. Importantly, the Queensland Report highlighted the problem of an information imbalance between lenders and borrowers in the payday loans market.

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Box 1: Payday Loans

Payday lending is the practice of a lender advancing to a borrower a relatively small amount of money until their next Payday in exchange for a fee. Payday lenders are small-loan, high-interest fringe money lenders. Payday loans are aimed at consumers who need immediate cash and are generally unable to obtain this through normal credit lines. Payday loans are not covered by the Consumer Credit Code. The Queensland Office of Fair Trading investigated the regulation of these loans, and recommended that they be regulated by the Consumer Credit Code.

Payday lenders require borrower identification, and for borrowers to have a regular source of income, such as a salary or welfare payments and a bank account. All Payday lenders lend for a fixed fee instead of charging a specific interest rate. The fee is usually in the range of $20 to $25 per $100 advanced. The period of loans offered varies between 7 and 62 days. The average amount of a Payday loan is estimated to be about $250.00.

The most common method of repayment is via a direct debit authority from the borrower usually exercised on the borrower’s next Payday. Some lenders require security for the loan. The effective annual percentage rates charged by Payday lenders was found to vary between 235% and 1,300%, depending on the amount of the fee and the length of time over which the advance is repayable. The Queensland report noted that Payday loans can be up to 70 times more expensive than a credit card cash advance and noted the following problems with current arrangements: • lack of disclosure of relevant terms of the contract, including the fees payable; • lack of disclosure of interest rates to enable comparisons to be made; • lack of compulsion on the lender to provide copies of the contract to the borrower; • potential for borrowers to become over-committed to the extent that they are incapable of paying for

both the loan and the necessities of life; • relatively high fees charged for a Payday loan which might be considered unjust and unconscionable; • the ability of borrowers to “roll over” the Payday loan so borrowers are caught in a “debt trap”; • payday lenders requiring security for small loans over short periods of time and, in particular, requiring

high valued security (e.g. cars worth $,000s) to secure low value loans (worth $00’s); • repossession tactics which would be illegal if regulated by the Consumer Credit Code such as

repossessing items without notice and very soon after a default; and • potential for lenders to charge borrowers excessive repossession fees after goods are repossessed. On the other hand, lenders would argue that Payday loans fill the vacuum left by the majority of mainstream lenders, which no longer make small loans. Source: Review of the Regulation of Pawnbrokers: Discussion Paper, Department of Justice Victoria Consumer and Business Affairs Victoria 21 November 2000

2.3.3 Cost Recovery

Nature of the Problem To efficiently recover the costs of administering the proposed regulatory framework through fees that reflect the costs of the relevant administrative processes involved. Failure to establish a fee structure based on full-cost recovery would mean that the cost of considering applications made under the proposed Regulations would ultimately be borne

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by taxpayers. By charging fees it is expected that there will be an efficient level of use of the registration and other application processes. Extent of the Problem The total efficient costs (direct and indirect) of administering the proposed Regulations – $240,161.23 – need to be recovered.

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3. The Objectives 3.1 Primary Objectives

Linking with the problems identified in section 2, the primary objectives are: • to protect consumers and the public generally from stolen goods being trafficked

through second-hand dealer and pawn broking businesses and improve the quantity of stolen goods recovered from second-hand dealers and pawnbrokers and returned to their rightful owners;



3.2 Secondary Objectives

Secondary objectives as provided in the proposed Regulations are to facilitate the operation of the Act and provide for—

(a) fees payable under the Act;

(b) the particulars to be recorded in the register of second-hand dealers;

(c) categories of documents as to identity;

(d) record-keeping requirements;

(e) forms;

(f) the manner of disposal by pawnbrokers of unredeemed goods; and

(g) offences in respect of which an infringement notice may be issued.

3.3 Decision Criteria

In assessing the most effective option to achieve the identified objectives, the following decision criteria will be used to assess the proposed Regulations and each option:

• the extent to which the option protects consumers and the public generally from stolen goods being trafficked through second-hand dealer and pawn broking businesses and improves the quantity of stolen goods recovered from second-hand dealers and pawnbrokers and returned to their rightful owners;

• the extent to which the option improves the provision of information to consumers about their rights and obligations when dealing with second-hand dealers and pawnbrokers;

• the extent to which the option recovers the costs of efficiently administering the Act and proposed Regulations through cost-reflective and equitable fees; and

• the extent to which the option minimises the costs to industry.

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4. Proposed Regulations 4.1 Authorising Provisions

The proposed Regulations are made under section 31 of the Second-Hand Dealers and Pawnbrokers Act 1989.

4.2 Affected Parties

A second-hand dealer is defined in section 3 of the Act as “a person who carries on the business of buying, selling, exchanging or otherwise dealing in second-hand goods, whether or not he or she deals in other goods and regardless of where goods are bought” with second-hand goods defined as “any goods which have been worn or otherwise used”. The definition is broad and therefore the Act and proposed regulations affects a wide range of businesses including:

• second-hand dealers who operate traditional second-hand goods stores; • scrap metal dealers; • antique dealers; and • persons who regularly operate market stalls at which second-hand goods are sold

(other than for charitable purposes). It is proposed to continue the current exemption for second-hand dealers carrying on business exclusively for charitable, benevolent and philanthropic organisations, as outlined in the draft Second-Hand Dealer and Pawnbroker (Exemption) Regulations 2008. The proposed regulations will also affect pawnbrokers. A pawnbroker is defined in the Act as “a person who carries on the business of advancing money on the security of pledged goods.” More broadly, the proposed regulations will affect:

• customers of second-hand dealers and pawnbrokers; • consumer credit industry; • Consumer Affairs Victoria; • Victoria Police; and • the general public.

4.3 Consultation

In March 2007, as part of the review of the 1997 Regulations, a research project was conducted by Consumer Affairs Victoria. The target audience for the research was all registered Victorian second-hand dealers including registrants who are also endorsed to conduct business as pawnbrokers. Initial consultations were held with the Business

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Licensing Authority, Victoria Police and industry and consumer representatives in order to ascertain whether the 1997 Regulations are adequate or in need of change or modification. As a result, two areas of concern were identified – record keeping requirements and acceptable forms of identification. These matters are governed by sections 19 & 20 of the Act and regulations 11 & 12 of the 1997 Regulations respectively. The research project consisted of a telephone survey of industry participants using a questionnaire prepared by Consumer Affairs Victoria. A total of 130 telephone surveys were completed, 65 in metropolitan Melbourne, 63 in regional/rural Victoria and 2 businesses located in both metropolitan Melbourne and regional Victoria. Of the 130 surveys conducted with second-hand dealers, 39 were with businesses that were also endorsed to act as pawnbrokers. Results from this research have provided valuable data for the development of the proposed Regulations. The results of the research are summarised in Appendix 1. In addition to the research project, it is proposed that this Regulatory Impact Statement and the proposed Regulations will be provided to the affected parties as part of the formal consultation process required for the re-making of sunsetting regulations. In view of the nature of the proposed Regulations and the level of consultation already undertaken, a 28-day consultation period has been proposed for the Regulatory Impact Statement and proposed Regulations as required under the Subordination Legislation Act 1994. Appendix 2 provides a comparison of the 1997 Regulations and the proposed Regulations. The consultation on the remake of the 1997 Regulations to date has provided positive feedback on the current regulatory arrangements and in particular the use of prescribed forms and notices, which some of the major traders contend has made a significant contribution to their business practices and the quality of information provided to consumers.

4.4 The Proposed Regulations

The proposed Regulations are arranged in four Parts: • Part 1 – Preliminary (proposed regulations 1-5). These regulations outline the

objectives, commencement, authorising provision, revocation and definitions. • Part 2 – Registration (proposed regulations 6-7). This Part prescribes the fees

required under the Act and the particulars to be contained in the public register. • Part 3 – Conduct of Business (proposed regulations 8-15). These prescribe the

categories of evidence as to identity for people selling or pawning goods, details of transactions required to be recorded, requirements regarding identifying marks or numbers, details to be contained in pawn tickets and notices, a process for issuing duplicate pawn tickets in the case of lost pawn tickets, period of loans and the procedures for redeeming pawned goods and selling unredeemed goods.

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• Part 4 – Enforcement (proposed regulations 16-17). This Part prescribes the details to be included in an embargo notice, lists the offences which can be enforced by an infringement notice and details the penalties which apply to these offences.

It is proposed to provide details in Schedules to the Regulations as follows:

• Schedule 1 – Revoked Regulations; • Schedule 2 – Pawn Ticket; • Schedule 3 – What are my rights when I pawn goods?; • Schedule 4 – Notice of sale of pawned goods; and • Schedule 5 – Embargo Notice.

Part 1 of the proposed Regulations are largely administrative mechanisms. They do not have a material impact, in terms of costs and benefits, on the affected businesses, their customers or the community generally. However, the other Parts do impact to some extent on businesses and the community. Therefore, an analysis of the proposed Regulations in Parts 2 to 4 follows.

4.5 Fees (Proposed Regulation 6)

It is proposed to prescribe the following fees in the proposed Regulations: (1) For the purposes of section 7(2)(c) of the Act, the fee that must accompany an

application for registration as a second-hand dealer is 9 fee units. (2) For the purposes of section 8B(3) of the Act, the fee for an application by a

person to vary or revoke any conditions imposed on registration is 3 fee units; (3) For the purposes of section 10A(3)(b) of the Act, the fee to accompany a

permission application is 59 fee units; (4) For the purposes of section 11 of the Act, the annual registration fee is 3 fee

units. (5) For the purposes of section 11AA of the Act, the proposed fee for an annual

endorsement is nil fee units. (6) For the purposes of section 11A(4) of the Act, the proposed fee for late payment

or lodgement is 1 fee unit; (7) For the purposes of section 13(3) of the Act, the proposed fee for a copy of the

register is $5. The fee to vary or revoke any conditions imposed on registration, the permission application fee, the annual endorsement fee and the late payment or lodgement fee are currently set out in the Act. However, there is capacity under the Act to prescribe a different fee by regulation. The annual endorsement fee applies to pawnbrokers only. All persons registered under the Act are second-hand dealers. Second-hand dealers who also wish to conduct a

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pawnbroking business must be separately endorsed before they can do so and must pay an annual endorsement fee. Table 1 provides a summary of the existing fee unit levels compared with the proposed fee unit levels, outlining the expected annual revenue for each fee under the proposed Regulations. Table 1: Comparison of Current and Proposed Fees



Expected Annual Revenue

Application for registration 11 9 $49,193

Application to vary or revoke conditions 15 3 $33

Permission application 15 59 $6,501

Annual registration 3 3 $185,565

Late payment or lodgment 2 1 $6,182

Annual endorsement 40 0 $0

Copy of register $5 $5 $5

Total Revenue $247,481

The proposed fees are based on recovering the current full costs of providing each service. Except for the permission application fee, the fees under the proposed Regulations will be less than the current fee levels. There is a significant increase in the application for permission fee (from 15 to 59 fee units). Historically, the permission application fee has been set under the Act. Since the setting of this fee in the Act, the scrutiny of permission applications has increased significantly. In particular, a significant Business Licensing Authority time resource is required to process applications. The current permission application fee is under-recovering the costs of processing these applications and the other fees are currently subsidising this service. The proposed permission application fee is reflective of the increase in resources to process these types of applications. Being cost reflective, the proposed fee is more equitable across the industry. The proposed annual endorsement fee to become a pawnbroker is nil. Similar to the permission application fee, the annual endorsement fee has historically been set under the Act. Since the setting of this fee, the tasks required to process an annual endorsement have been subsumed in the registration application and annual registration processes.

4.5.1 Costs

The fees under proposed regulation 6 will require the industry to fund the full costs of administration of the Act and Regulations. This will cost industry $247,481 per annum.

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4.5.2 Benefits

Consumer Affairs Victoria’s full costs in administering the Act and proposed Regulations will be recovered, providing revenue of $247,481 per annum. Requiring the full costs of administration of the Act and Regulations to be recovered from the industry ensures tax payers are not subsiding the scheme. The persons who derive the benefits from the regulatory scheme, or at least those who can pass on the costs to those who derive benefits from the scheme (i.e. industry can pass on the costs to their customers), pay for the costs of the scheme.

4.6 Register (Proposed Regulation 7)

Section 7(2) of the Act states: An application must be—

(a) in writing in or to the effect of the form approved by the Authority and must be verified by statutory declaration; and

(b) accompanied by evidence as to the identity of— (i) the applicant; or (ii) if the applicant is a body corporate, the directors of the applicant— by means of a birth certificate, passport (if the passport is current or expired for not more than 2 years), driver licence or any other document in one of the prescribed categories; and

(c) accompanied by prescribed fee; and (d) lodged with the Authority not less than 1 month before the day on which the

applicant proposes to commence business as a second-hand dealer. Section 13 of the Act requires a register to be kept of all persons registered under the Act. Section 13(1) requires prescribed particulars to be contained in the register in respect of each person registered under Part 2 of the Act. It is proposed to prescribe the following particulars:

(a) registration number issued by the Authority; (b) name and business name of the person; (c) the date of the grant of the registration or the date of any suspension of the

registration; (d) registration conditions; (e) address and telephone number of each premises from which the person carries on

business; (f) if the person is a registered corporation—

(i) the name of each director; (ii) the date of appointment of each director; and (iii)the date of cessation of appointment of each director.

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(g) an Australian Business Number (if any) held by the person; and (h) the address of any internet site maintained by the person for the purposes of

carrying on a business as second-hand dealer or pawnbroker.

4.6.1 Costs

The requirement to maintain a register is contained in the Act. The identification of particulars to be included in the Register is a cost attributable to the proposed Regulations. There are costs incurred by the applicant (second-hand dealer or pawnbroker) and Consumer Affairs Victoria. The costs to the applicant are in compiling the details to be provided on the application form. The prescribed particulars are anticipated to be readily available to applicants. Consequently, it is estimated that there is only a minor time cost associated with compiling the details to be provided on the application form. A second-hand dealer interviewed for the purposes of determining the time taken to compile this information estimated that it takes 10 minutes. The Australian Bureau of Statistic’s most recent wage statistics indicate that average total weekly earnings for a full time adult in Victoria was $1,086 or $56,472 per annum9. Including on-costs10 and converting this figure to an hourly rate11, gives an hourly rate of $54.78. Therefore, the cost to the applicant of compiling the details to be provided on the application form is $9.13. While there is a time cost to the applicant of photocopying their identification and posting off the application, these costs attach to the Act, not the proposed Regulations. Only a small portion of Consumer Affairs Victoria’s direct costs of processing an application for registration attach to the proposed Regulations (refer Appendix 3 for the details of the direct costs). The majority of Consumer Affairs Victoria’s direct costs are attributable to the Section 7 requirement in the Act. It is estimated that data entry on initial registration – the only part of the application for registration that can be attributed to the proposed Regulations – takes a VPS officer two minutes to complete (see appendix 3 for VPS wage rate calculations). Therefore, the cost to Consumer Affairs Victoria of entering the prescribed particulars for one application in the database is $0.83. 9 The Australia Bureau of Statistics 2007, Average Weekly Earning, Australia November 2006, Catalogue Number 6302.0. 10 An on-cost multiple of 1.75 was applied as suggested in Victorian Competition and Efficiency Commission 2006, Guidance Note: Suggested default methodology and values for staff time in BIA/RIS analysis. 11 It was assumed that full-time employees work 44 weeks per year (after annual leave, public holidays and sick leave entitlements) and the average working week is comprised of 41 hours (in Victorian Competition and Efficiency Commission 2006, Guidance Note: Suggested default methodology and values for staff time in BIA/RIS analysis).

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With 496 applications for registration expected each year12, the industry costs are $4,528.48 (496 x $9.13) and Consumer Affairs Victoria’s costs are $411.68 (496 x $0.83). This amounts to a total cost of $4,940.16 per annum.

4.6.2 Benefits

The benefits of the prescribed particulars to be contained in the register are difficult to quantify. However, the primary benefit is that the data requirements enable clear identification of the registered person or company for effective administration and enforcement of the Act. Victoria Police regards the regulatory regime for second-hand dealers as a strong and necessary tool to combat crime. The prescribed particulars to be contained in the register provide important information that Victoria Police can use for the purposes of tracing and retrieving stolen goods. In New South Wales, a 1993 and 1994 police operation used pawnbrokers’ shops to disrupt domestic break and enter gangs operating throughout Sydney. Consumer Affairs Victoria also uses the prescribed particulars in monitoring compliance of second-hand dealers and pawnbrokers.

4.7 Prescribed Categories of Evidence as to Identity of Persons Selling or Pawning Goods (Proposed Regulation 8)

Section 19(1) of the Act requires a second-hand dealer or pawnbroker to require every person attempting to sell or pawn second-hand goods to the second-hand dealer or pawnbroker to produce evidence as to the person's identity. The section requires evidence to be provided:

(a) by means of— (i) a passport; or (ii) a driver licence; or (iii)a document issued by a statutory authority; or (iv) any other document in one of the prescribed categories— bearing a photograph of the person; or

(b) by means of 2 documents in the prescribed categories but each in a different category.

A penalty of 20 penalty units applies for a breach of this section. In practice, section 19 means that a person may provide:

• one form of identification with a photograph from the categories set out in section 19(1)(a) of the Act (or as prescribed in the regulations); or

12 This figure is based on the current number of applications received each year.

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• two forms of identity without a photo from the categories set out in section 19(1)(b) of the Act (or as prescribed in the regulations) provided that they are not from the same category.

The justification for these requirements is to ensure that the source of the forms of identification is not the same in both cases, which adds to their authenticity. It is proposed to prescribe the following additional categories for the purposes of section 19(1) of the Act:

(a) in the case of a natural person— (i) a full birth certificate or an extract of birth; (ii) a certificate of Australian citizenship; (iii) a marriage certificate; (iv) the following cards issued by or on behalf of the Commonwealth

Department of Families, Community Services and Indigenous Affairs or the Commonwealth Department of Health and Ageing— (A) Commonwealth seniors health cards; (B) health care cards; (C) pensioner concession cards;

(v) any other card issued by or on behalf of the Commonwealth Department of Families, Community Services and Indigenous Affairs, the Commonwealth Department of Health and Ageing or the Commonwealth Department of Veterans' Affairs that certifies entitlement to Commonwealth health concessions;

(vi) an identification card issued by a tertiary education institution; (vii) a licence issued under the Firearms Act 1996;

(b) in the case of a body corporate, a certificate of registration or incorporation.

4.7.1 Costs

There are no material costs associated with proposed regulation 8. Under the Act, it is a requirement that a second-hand dealer or pawnbroker require every person attempting to sell or pawn second-hand goods to the second-hand dealer or pawnbroker to produce evidence as to the person's identity. There is no additional cost to a second-hand dealer or pawnbroker from a person providing a form of identification that is prescribed rather than a form of identification detailed in the Act.

4.7.2 Benefits

One of the purposes of the Act is "to facilitate and expedite the recovery of stolen goods from second-hand dealers and pawnbrokers". The requirement in the Act for customers to provide evidence of their identity is part of this process. Prescribing a range of documents, as outlined in the proposed Regulations, is consistent with the Act’s intentions.

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The prescribed categories provide certainty for second-hand dealers and pawnbrokers when dealing with sellers of goods by clearly setting out what they can accept as proof of identity and thus, reducing the risk that they will accept stolen goods. There are also benefits to second-hand dealers and pawnbrokers of expanding the span of documents that can be accepted as proof of identity. Traders may gain legitimate business from people who may not meet the proof of identity requirements under the Act but can meet those prescribed in the proposed Regulations. Further, there are benefits for persons who would not be able to sell or pawn their goods if the additional categories of identification were not prescribed because they do not possess the requisite identification as provided in the Act.

4.8 Recording Transactions (Proposed Regulation 9)

Section 20 of the Act states that:

A second-hand dealer or pawnbroker must keep, in the form and containing the information required by the regulations, accurate and complete records of every transaction, whether conducted on the business premises or elsewhere, by which the dealer or pawnbroker receives second-hand goods.

Penalty: 20 penalty units. The research survey conducted by Consumer Affairs Victoria (refer to section 4.3) sought responses about the use of recording systems in the industry. The following was found:

• three-quarters of second-hand dealers and pawnbroker respondents use bound books to record their customer transactions;

• almost 20% of respondents use computerised systems; and • 5.4% of respondents stated that they used a combination of manual and

computerised record keeping systems.

Table 2 provides a break-down of the recording systems of various sized businesses from the research survey.

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Table 2: Record-Keeping Systems Used – Classified by Size of Business

Size of Business

(Determined by Number of employees)

Bound Books at All Premises

Computerised Systems at All

Premises

Bound Books at Some Premises and Computerised

Systems at Other Premises

Number % Number % Number %

1-2 employees 62 83% 10 13% 3 4%

3-5 employees 22 77% 5 18% 1 4%

6-10 employees 10 63% 5 31% 1 6%

11-20 employees 1 12% 5 63% 2 25%

21-199 employees 2 100% 0 0% 0 0%

Total 97 75% 25 19% 7 5%

Following from the results of this research survey it is proposed to prescribe the following requirements for recording transactions:

(1) For the purposes of section 20 of the Act, a second-hand dealer or pawnbroker must keep records of transactions in—

(a) a bound record book; or

(b) a computerised record-keeping system.

(2) A second-hand dealer must record in the bound record book or computerised record-keeping system, during or immediately after every transaction in which the second-hand dealer receives second-hand goods, the following information—

(a) an accurate description of the goods received, including a description of any identifying mark or label on the goods;

(b) the identifying mark or number assigned by the second-hand dealer to the goods;

(c) the full name and address of the person from whom the goods were received;

(d) details of identification provided by that person;

(e) the date and time the goods were received;

(f) the price, if any, paid for the goods;

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(g) if applicable, the name of the person acting on behalf of the second-hand dealer in the transaction.

(3) A pawnbroker must record in the bound record book or the computerised record-keeping system, during or immediately after every transaction, the following information in respect of each transaction—

(a) the number of the transaction (corresponding with the number of the pawn ticket issued);

(b) an accurate description of the second-hand goods pawned, including a description of any identifying mark or label on the goods;

(c) the full name and address of the person from whom the goods were received;

(d) details of identification provided by that person;

(e) the address to which notices to the person from whom the goods are received are to be sent;

(f) if the person from whom the goods are received requests an alternative address for the service of notices, that address;

(g) the date on which the goods are pawned;

(h) the amount of any money advanced on the security of goods received in pawn;

(i) the charge imposed on the pawn transaction;

(j) the amount and date of every payment to the pawnbroker as part or full payment of a loan;

(k) the period of any loan made by the pawnbroker;

(l) if the pawned goods are redeemed, the date of the redemption;

(m) if the pawned goods are not redeemed—

(i) the date of any sale of the goods, the price paid and the reasonable costs of sale; or

(ii) if the goods not sold, the manner in which the goods are disposed of.

(4) If a second-hand dealer buys or exchanges second-hand goods—

(a) in a lot or parcel at the same time; and

(b) the value of each item in the lot or parcel is less than $50—

subregulation (2) is satisfied if the lot or parcel is described in one entry in the record book or the computerised record-keeping system.

(5) If a second-hand dealer buys or exchanges second-hand goods—

(a) in a lot or parcel at the same time; and

(b) the value of an item in the lot or parcel is $50 or more; and

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(c) the item valued at $50 or more has an identifying mark or label—

the second-hand dealer must enter a record of that item in the record book or onto the computerised record-keeping system, in accordance with subregulation (2) and the remainder of the lot or parcel may be recorded in accordance with subregulation (4).

(6) If a second-hand dealer buys second-hand goods at auction, subregulation (2) is satisfied if the second-hand dealer—

(a) obtains a receipt signed by the auctioneer containing the following information—

(i) an accurate description of the goods received, including a description of any identifying mark or label on the goods;

(ii) the identifying mark or number assigned by the second-hand dealer to the goods;

(iii) the full name and business address of the auctioneer who conducted the auction;

(iv) the date on which the goods were received from the second-hand dealer;

(v) the price paid for the goods at auction;

(vi) the name of the person acting on behalf of the second-hand dealer in the transaction; and

(b) enters in the record book or computerised record-keeping system a reference to identify the receipt.

(7) If a second-hand dealer imports second-hand goods from outside Australia, subregulation (2) is satisfied if the second-hand dealer—

(a) keeps the documents of consignment and customs documents relating to the goods; and

(b) enters in the record book or computerised record-keeping system a reference to identify those documents.

(8) If a second-hand dealer or pawnbroker receives second-hand goods or pawned goods at any premises other than those notified to the Authority, the second-hand dealer or pawnbroker must record the transaction in the bound record book or computerised record-keeping system as soon as practicable after the transaction.

4.8.1 Costs

The requirement to keep records arises from Section 20 of the Act. Therefore, most of the compliance costs for industry are attributable to the Act. The proposed regulation simply clarifies the requirement by stipulating the record must be in a bound or computerised record system and identifies the particulars required to be recorded.

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Further, all businesses are required to keep records of their transactions for ultimate tax reporting purposes and for their own business management purposes, such as for generating invoices and receipts. Proposed regulations 9(4)–9(8) provide guidance for a second-hand dealer and pawnbroker to comply with proposed regulation 9(1)–9(3). This is beneficial for traders while not imposing compliance costs. Therefore, this proposed regulation will not impose material compliance costs on second-hand dealers and pawnbrokers.

4.8.2 Benefits

Second-hand dealing and pawnbroking businesses can be used as a conduit for the disposal of stolen goods. One of the purposes of the Act is “to facilitate and expedite the recovery of stolen goods from second-hand dealers and pawnbrokers”. The key element in ensuring the Act meets this objective is the requirement for second-hand dealers and pawnbrokers to keep records of transactions, which establishes an audit trail. The proposed Regulations prescribe the particulars of the transactions records that second-hand dealers and pawnbrokers must keep. The details prescribed are the minimum necessary for Victoria Police to effectively and efficiently track stolen goods traded through second-hand dealers and pawnbrokers. The keeping of these detailed records assists Victoria Police in tracking and recovering stolen goods and apprehending offenders, which provides benefits to individuals whose goods and possessions have been stolen and to the community, more generally. Proposed regulations 9(4) to 9(6) are required as they set out what constitutes compliance with the requirement to record transactions for the purposes of section 20 of the Act in specific circumstances, namely where a second-hand dealer buys or exchanges goods in a lot or parcel involving multiple items. This will ensure consistency in compliance by removing the possibility of varying interpretations of what constitutes compliance under these circumstances. It is not possible to quantify these benefits as Victoria Police’s data recording system on offences such as stolen goods does not indicate if the offence involved a second-hand dealer. Victoria Police also advise that the level and type of enforcement varies across the State according to local priorities and there is no central coordination or recording of enforcement action.

4.9 Identifying Mark or Number (Proposed Regulation 10)

This proposed regulation provides that “a second-hand dealer must ensure that the identifying mark or number assigned to second-hand goods received by the dealer remains affixed to the goods at all times until the goods are sold or otherwise disposed of by the second-hand dealer.”

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A penalty of 20 penalty units applies for a breach.

4.9.1 Costs

There are no material costs associated with ensuring the identifying mark or number remains affixed to goods. The marking of goods with an identifying mark or number is considered good business practice. It is not a requirement of the Act or the proposed Regulations. The proposed Regulations only address the permanency of the mark (proposed Regulation 10) and the recording of that mark (proposed Regulation 9). Therefore, the costs associated with marking goods cannot be attributed to the Act or proposed Regulations.

4.9.2 Benefits

This proposed regulation supplements proposed regulation 9 and consequently provides similar benefits to those outlined in section 4.8.2. Ensuring that the identifying mark or number assigned to second-hand goods received by the dealer is affixed makes the item more easily identifiable and it is possible for stock to be traced from the records kept by the registrant. If Victoria Police identifies stolen goods from the records kept by the second-hand dealer or pawnbroker, ensuring the identifying mark or number assigned to the goods is affixed facilitates and expedites the recovery of the stolen goods. This provides benefits to individuals whose goods have been stolen. Further, enforcement of the Act requires that when an inspection is carried out on a trader’s premises goods that have been taken in trade or pawn can be readily compared to the records kept by the second-hand dealer or pawnbroker. For effective enforcement, it is essential that there is a verifiable way of ensuring that the records correspond to the goods. Also, when a consumer has concerns or problems with goods that they have pawned, it is important that these goods can be immediately located and confirmed as being their goods.

4.10 Pawn Ticket and Notice (Proposed Regulation 11)

Section 23(3) of the Act, states that:

A pawnbroker who advances money on the security of goods received in pawn must give to the owner of the goods—

(a) a pawn ticket containing the prescribed particulars; and

(b) a notice in the prescribed form concerning the rights and responsibilities of the parties to the transaction; and

(c) written notice of the charge that will be imposed on the transaction.

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Twenty penalty units apply for a breach. To facilitate the operation of section 23(3) of the Act, the prescribed particulars to be contained in a pawn ticket will be set out in Schedule 2 to the proposed Regulations as follows:

• Name of pawnbroker • Address of pawnbroker • Full name and address of person from whom goods are received • Date of loan • Amount loaned • Description of goods pawned • Number of transaction • Charges • Period of loan • Amount(s) paid and date(s) of payment (if any)

It is also proposed to prescribe a notice that sets out the rights and responsibilities of the parties to the transaction. These details are in the form of Schedule 3. Proposed regulation 11(2) sets out certain requirements with respect to the notice set out in Schedule 3 as follows:

(a) the heading to the form and the headings "In brief", "For further information" and "In more detail" must be printed in bold type and in a font size not less than 14 points; and

(b) the words between "In brief" and "For further information" must be printed in bold type and in a font size not less than 12 points; and

(c) all other headings must be printed in bold type and in a font size not less than 12 points; and

(d) the remainder of the form must be printed in a font size not less than 12 points. Proposed regulation 11(3) prohibits a pawnbroker from charging a fee for the issue of a pawn ticket. A penalty of 20 penalty units applies for a breach of this regulation. The customer pays the pawnbroker a charge, which is the total cost to the consumer.

4.10.1 Costs

The Act requires the provision of a pawn ticket and notice. Therefore, the costs associated with the requirement to provide the pawn ticket and notice (i.e. the costs of printing the ticket and notice) attach to the Act.

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Some of costs incurred by industry in complying with the proposed regulation result from the time taken for the pawnbroker to complete the pawn ticket as specified in the regulations. It is estimated that it takes two minutes to complete the pawn ticket13. Using the costing methodology outlined in section 4.6.1, the cost to the pawnbroker of completing a pawn ticket is $1.83. The second-hand dealer and pawnbroking industry comprises a small number of large and medium sized stores with the majority of businesses being small. Based on results of the research survey conducted by Consumer Affairs Victoria, it is assumed that 2% of the 120 pawnbroking businesses operating in Victoria are large companies (21-199 employees), 18% are medium sized traders (6-20 employees) and 80% are small businesses (1-5 employees). A large company store carries out approximately 70,000 transactions in a year, while a medium sized trader has advised that annual transactions for last year were approximately 4,800. At the other end of the scale some small traders may only carry out 3-4 transactions in a week or approximately 200 per annum. Therefore, it is estimated that there are approximately 264,800 pawnbroking transactions annually. Given the above figures, the costs to the pawnbroking industry of completing a pawn ticket is $484,584 per annum. However, pawnbrokers need to record this information as part of their normal business practices, so it seems reasonable that these costs could be discounted. For the purposes of this Regulatory Impact Statement, the costs have been discounted by 50 per cent to $242,292 per annum.

4.10.2 Benefits

The primary rationale for consumer protection regulation in the credit area is to address the problem of information asymmetry. As discussed in section 2.3.2, there is an imbalance of information between pawnbrokers and their customers, which leads to inefficient outcomes. Hence, an aim of the regulation of pawnbrokers is to ensure that the relationship between the person pawning the goods and the pawnbroker is conducted in a fair and open manner and that there is proper disclosure of price and terms. Consequently, the legislation requires that there is full disclosure of the terms and conditions of the pawn agreement. The proposed Regulations ensure full disclosure is achieved by prescribing the particulars of the pawn ticket and the details to be contained in the notice concerning the rights and responsibilities of the parties to the transaction. Prescribing the particulars of the pawn ticket and details to be contained in the notice ensures both parties have the same information about the transaction, which forms the basis of finalising the loan. This provides persons pawning goods with the information they need to be fully aware of the terms and conditions of the agreement and their rights and responsibilities in relation to their pawn transaction. Requiring this information to be disclosed is of benefit to customers of pawnbrokers who may otherwise have been 13 This estimation is based on the time taken for a Consumer Affairs Victoria staff member to complete the pawn ticket with example details.

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unaware of the various procedures involved in pawning and redeeming good. It allows customers to make an informed choice when deciding to pawn their goods. The use of prescribed forms and notices is also of benefit to pawnbrokers. They can rely on the information contained in them and be assured that it satisfies their legislative obligations. Industry feedback on the use of prescribed forms and notices has been very positive with a major trader contending that the use of the forms and notices has positively impacted on their business practices and the quality of information provided to consumers. Specifying the headings and font sizes in the proposed Regulations further supports achievement of the objective to improve the provision of information to pawnbroker customers. The heading requirements draw consumers’ attention to the key pieces of information regarding their rights and responsiblities, while the font sizes ensure the documents are accessible to a wider group of consumers.

4.11 Lost Pawn Ticket (Proposed Regulation 12)

It is proposed to prescribe a process whereby pawnbrokers can issue duplicate pawn tickets where the original has been lost or stolen. The process is as follows:

A pawnbroker must issue a duplicate ticket if a person who pawned goods produces to the pawnbroker—

(a) a statutory declaration that the person has lost the pawn ticket or the pawn ticket has been stolen; and

(b) evidence as to the person's identity referred to in section 19(1)of the Act. Twenty penalty units apply for a breach. The pawn ticket is the document that provides evidence of the transaction and represents the contractual arrangement entered into between the parties. It must be presented in order to finalise the arrangement. Therefore, it is prudent for arrangements to be established should a pawn ticket be lost or stolen. The proposed regulation provides this precautionary arrangement.

4.11.1 Costs

Costs are incurred by pawners in the purchase of a statutory declaration and locating a witness. However, without the proposed regulation the costs to the pawner of trying to secure ownership of the goods would be much more costly. There is a small time cost to pawnbrokers in replacing a lost ticket. It requires them to check the statutory declaration and identification and produce the replacement ticket (either manually rewriting the ticket or reprinting the ticket from computer records).

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While no overall industry data is available on the frequency of pawnbrokers having to issue replacement tickets, a major trader has estimated that 1.25% of pawn tickets issued need to be replaced. Given the estimate given in section 4.11.1 of the number of pawnbroking transactions annually (264,800), the estimated number of pawn tickets replaced each year is 3,310. Based on the costing methodology outlined in section 4.6.1, if it takes a pawnbroker three minutes to check the statutory declaration and identification and produce the replacement ticket, the cost to the industry is $9,036.30 per annum.

4.11.2 Benefits

The proposed regulation provides benefits to consumers whose pawn ticket is lost or stolen. It allows these persons to establish that the ticket has been lost and if they can produce adequate proof of identity, their pawned goods can be secured without requiring a more costly litigious means to secure ownership of the goods.

4.12 Period of Loan (Proposed Regulation 13)

Under proposed regulation 13, pawnbrokers would be required to fix the period of the loan on the security of pawned goods at the time the goods are pawned. Twenty penalty units apply for a breach. This requirement is consistent with routine and ethical practices.

4.12.1 Costs

There are no costs associated with proposed regulation 13 because the period of the loan must be fixed anyway as it is central to the loan agreement.

4.12.2 Benefits

The period of the loan determines when the repayment period ends and when the pawned goods can be resold if not redeemed. Therefore, it is a critical piece of information for consumers to have when deciding whether to pawn their goods. The period of the loan also impacts on the consumers entitlement to residual equity. Requiring the period of the loan to be fixed at the time the goods are pawned, provides benefits for the pawnbroker customers. It ensures they have full information before entering in to a contract with a pawnbroker. Further, by being fixed and clear, the consumer is protected from any arbitrary change by traders.

4.13 Redemption of Goods (Proposed Regulation 14)

It is proposed to set out a procedure for the redemption of pawned goods as follows:

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(1) A person who has pawned goods may redeem the goods by paying the outstanding amount of the loan and producing to the pawnbroker—

(a) the pawn ticket or duplicate pawn ticket; and

(b) evidence as to the person's identity referred to in section 19(1) of the Act.

(2) A person who has pawned goods may redeem the goods at any time before the pawnbroker sells or disposes of them, despite the expiry of the period of the loan.

4.13.1 Costs

There are no costs to the industry as the transaction must occur anyway and redemption is inherent in the pledge.

4.13.2 Benefits

Having a process for the redemption of pawned goods provides benefits for pawnbrokers and their customers. It sets out the rights and obligations of both parties, so that there is certainty and consistency in dealing with the redemption of goods.

4.14 Sale of Unredeemed Goods (Proposed Regulation 15)

Section 23A(2) requires that if a pawnbroker sells unredeemed pawned goods after the expiry of the loan period, the person who pawned the goods is entitled, for a period of 12 months after the sale, to claim from the pawnbroker the residual equity, if any, in respect of the goods. Section 23A(3) requires that if—

(a) a pawnbroker sells unredeemed pawned goods after the expiry of the loan period; and

(b) the residual equity in respect of the goods is $10, or if another amount is prescribed that amount, or more—

the pawnbroker must, within 14 days after the sale, send to the person who pawned the goods a notice in the prescribed form advising the person that the pawned goods have been sold and that the person is entitled to claim the residual equity from the pawnbroker within the period of 12 months after the sale. A penalty of 20 penalty units applies for a breach. Proposed regulation 15(1) sets out the procedure for sale of unredeemed goods. By requiring that where:

(a) the period of a loan expires and is not extended; and

(b) the goods pawned as security on the loan are unredeemed— the pawnbroker must offer the goods for sale as soon as practicable and so as to receive the best price reasonably obtainable.

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A penalty of 20 penalty units applies for a breach. The prescribed form of the notice referred to in section 23A(3) of the Act is proposed to be set out in Schedule 4 of the proposed Regulations. Proposed regulation 15(2) sets out certain requirements about the form of this notice as follows:

(a) the heading to the form and the words commencing "Name and address of pawnbroker" and ending "Date by which you must claim this money" and the words "What you need to do" and "Details of pawned goods and sale" must be printed in bold type and in a font size not less than 14 points; and

(b) the remainder of the form must be printed in font size not less than 12 points. Proposed regulation 15(3) requires that a pawnbroker must not purchase goods that have been pawned as security with the pawnbroker and have not been redeemed at or after the expiration of the period of the loan. A penalty of 20 penalty units applies for a breach.

4.14.1 Costs

The requirement to offer goods for sale as soon as practicable does not impose any compliance costs on the pawnbroker. The requirement to obtain the best price reasonably obtainable may limit a trader’s ability to sell goods cheaply or clear any long-term stock unless it can be demonstrated that the price obtained was the best price that could be obtained at the time. There is a minimal time cost to industry of completing the particulars required in the prescribed notice to be sent to pawn customers who do not redeem their goods by the loan expiry date. However, as there is no data on the number of pawn transactions that are unredeemed it is difficult to estimate this cost. The costs of printing and sending the notice to the customer attach to the Act.

4.14.2 Benefits

The requirement for a pawnbroker to offer the goods for sale as soon as practicable to receive the best price reasonably obtainable, provides benefits for consumers. It helps to avoid pawnbrokers structuring a transaction to recover their costs but no amount of residual equity for the client. Therefore, the person who pawned the goods is benefited by preventing, or reducing the likelihood, that they will be defrauded. The information contained in the notice sets out a clear process for claiming the residual equity which provides benefits for both pawnbrokers and consumers. The use of a prescribed notice provides certainty for both pawnbrokers and customers and consistency

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and clarity across the industry. Both pawnbrokers and consumers can confidently rely on a prescribed notice, which contains the relevant information in a clear and accurate form. Specifying the headings and font sizes in the proposed Regulations further supports achievement of the objective to improve the provision of information to pawnbroker customers. The heading requirements draw consumers’ attention to the key pieces of information regarding their rights and responsiblities, while the font sizes ensure the documents are accessible to a wider group of consumers.

4.15 Embargo Notice (Proposed Regulation 16)

Section 26P(1) of the Act allows an inspector executing a search warrant who is authorised by that warrant to seize any thing may, if the thing cannot, or cannot readily, be physically seized and removed, to issue an embargo notice in the prescribed form. The embargo notice is issued:

(a) by causing a copy of the notice to be served on the occupier; or

(b) if the occupier cannot be located after all reasonable steps have been taken to do so, by affixing a copy of the notice to the good in a prominent position.

For the purposes of section 26P(1), it is proposed that an embargo notice must be in the form as indicated in Schedule 5 of the proposed Regulations, which sets out details that must be included on the notice. The form, which is completed by the inspector, briefly describes the embargoed item, identifies the name of the person who the notice is served on and is affixed to the item.

4.15.1 Costs

There are no costs to pawnbrokers or their customers from this proposed regulation.

4.15.2 Benefits

The embargo form makes it clear which goods are subject to the embargo notice and the effect the notice has on dealings with those goods. It also sets out the defences available to a prosecution for an offence against section 26P of the Act and details the item embargoed, the name of the person on whom the notice was served and the person who served the notice. The notice prevents the item from inadvertently being removed, providing benefits to individuals whose stolen goods have been sold to a second-hand dealer or pawnbroker.

4.16 Infringement Penalties (Proposed Regulation 17)

Division 3 of Part 5 of the Act sets out the provisions that deal with infringement notices. Section 26ZB of the Act empowers authorised officers (inspectors under the Fair Trading Act 1999, members of the police force and persons authorised by the Director) to issue infringement notices for breaches of certain offences and for offences specified in the

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regulations. Section 31(2A) of the Act sets a maximum level of penalty for infringement notices which is no more than a tenth of the penalty to which the person would be liable under the Act.

It is proposed to prescribe the following offences and penalties for the purposes of infringement notices:

• section 20 offence (recording transaction) – 2 penalty units; • section 21(1) offence (retention of goods for 7 days) – 2 penalty units; • section 21A offence (storage location of goods) – 2 penalty units; • section 23(2) offence (notice showing charge rates by pawnbroker) – 2 penalty

units; • section 23(3) offence (pawnbroker to provide pawn ticket, information about

rights and responsibilities and charges) – 2 penalty units; • section 23A(3) offence (pawnbroker to send pawner a notice when good sold) –

2 penalty units; and • section 24B offence (second-hand dealer and pawnbroker to display sign) – 2

penalty units.

4.16.1 Costs

Victoria Police incurs a cost in administering the infringement system. These costs are met by the Government (rather than by a cost recovery fee) as enforcement of the law is generally an activity funded from general revenues. The Infringements Act 2006 provides a framework for the issuing and serving of infringement notices for offences and the enforcement of infringement notices in Victoria. Therefore, the costs of the infringement system, adopted by the proposed Regulations are attributable to the Infringements Act 2006 rather than the proposed Regulations.

4.16.2 Benefits

The use of infringement notices provides benefits for enforcement agencies, as it allows breaches of the Act to be dealt with administratively rather than through court proceedings. Access to a cheap and timely enforcement tool by enforcement agencies, provides flow on benefits to the community. There is also a benefit to persons who are issued with infringement notices as they have the option of paying a lesser fine and can avoid going to court and risking a criminal conviction. The ability to issue additional infringement notices will assist with enforcement and compliance with the Act and proposed Regulations.

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4.17 Implementation and Enforcement

4.17.1 Implementation

In March 2007, as part of the review of the 1997 Regulations, a research project was conducted by Consumer Affairs Victoria of a sample of registered Victorian second-hand dealers including registrants who are also endorsed to conduct business as pawnbrokers. There were two areas of concern identified from this research. First, the record keeping requirements and second, the acceptable forms of identification. Results from this research have provided valuable data for the development of the proposed Regulations. Consequently, it can be expected that implementation of the proposed Regulations will be effectively achieved.

4.17.2 Compliance and Enforcement

Consumer Affairs Victoria has no powers to investigate second-hand dealers. This is done by Victoria Police. Consumer Affairs Victoria has powers to investigate pawnbrokers. Consumer Affairs Victoria’s compliance monitoring of pawnbrokers is primarily conducted through its regional compliance monitoring exercises. Compliance with the proposed Regulations is expected to be high – 90 per cent. This is because the second-hand dealers and pawnbrokers regulatory scheme is well established and businesses are used to operating under the scheme. Further, to facilitate compliance with the regulatory scheme, Consumer Affairs Victoria produces a trader’s guide to the Act and regulations, while the Business Licensing Authority also maintains information on their website regarding the requirements of the scheme. The majority of the proposed regulations are procedural in nature and consequently, it should be easy to verify that traders are complying with the regulations during inspections of businesses. Some of the proposed regulations deal with conduct, such as proposed regulation 15, which specifies that unredeemed goods must be sold as soon as practicable and so as to receive the best price reasonable obtainable. Conduct regulations are a large part of Consumer Affairs Victoria’s enforcement activity. For example, the core piece of consumer protection legislation in Victoria, the Fair Trading Act 1999, contains provisions on misleading and deceptive conduct. These provisions are not conducive to inspection style compliance regimes. Nonetheless, compliance activity can still be undertaken on these types of regulations. For example, information provision is still an effective tool for encouraging compliance by businesses. Further, a core aspect of compliance in this area is based on complaints by consumers. Complaints can be investigated where it is considered appropriate according to the Compliance and Enforcement Policy of Consumer Affairs Victoria. Any

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investigation will look at the relevant facts regarding the alleged breach of the regulations and form an opinion as to compliance with those regulations. An assessment of compliance with a regulation, such as proposed regulation 15, would be based on all the relevant facts in a similar way to an assessment of whether someone has breached misleading and deceptive conduct provisions of the Fair Trading Act 1999 (or any other conduct provisions in that, or any other, Acts). Whilst a court action can be undertaken, Consumer Affairs Victoria has a wide range of compliance tools available under the Fair Trading Act 1999 which are applicable to all consumer acts, including the Second-hand Dealers and Pawnbrokers Act 1989. For example, warning letters and enforceable undertakings. Victoria Police operates a second hand dealer database (the database). It is administered by police in Dandenong, however, it has application across Victoria. Second-hand dealers are invited to voluntarily provide their records of transactions for inclusion in the database on a regular basis. This can be done electronically (the favoured method) or manually. There are approximately 180 dealers that contribute. The database operates as a centralised database of property transactions. It can be searched by police members on the Victoria Police network. The database does not log the number of searches conducted although Victoria Police have advised that there are numerous searches performed every day. These searches provide valuable information to locate and recover stolen property. There is a broad spectrum and a wide range of businesses that are registered as second-hand dealers. Victoria Police’s involvement and interest with second-hand dealers is directed at areas that have proven useful in solving crime and recovering stolen property. Some types of second-hand goods businesses are subject to minimal police scrutiny. For other businesses the regime is a strong and necessary tool to combat crime. No infringements have been issued. Victoria Police is unable to separate its costs of enforcement relating to the regulations from their costs relating to enforcement of the Act. The total cost to Consumer Affairs Victoria of administering the Act and Regulations is $240,161 per annum (refer to Appendix 3 for details).

4.18 Interstate Legislative Arrangements

Appendix 4 provides a summary of the regulation of second-hand dealers and pawnbrokers in Australia. The regulation is largely consistent Australia-wide. However, the application of fees is not consistent and therefore, a direct comparison is not fruitful (although Appendix 3 does list the fees charged in other Australian jurisdictions).

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4.19 Summary of Cost Benefit Analysis

Table 3 summarises the costs and benefits of the proposed Regulations. In this table the quantified costs appear to outweigh the quantified benefits, but this is because the majority of the benefits from the proposed regulations were unable to be quantified. The assessment shows the total quantified costs of the proposed Regulations to be approximately $500,000 per annum (this includes approximately $250,000 worth of fees paid by second-hand dealers and pawnbrokers). The total quantified benefits are the fee revenues that accrue to government of approximately $250,000 per annum. For the benefits of the proposed regulations to at least equal the costs, benefits equivalent to $250,000 per annum need to accrue to the industry and consumers from the non-fee elements of the regulations. Whilst benefits accrue from the various elements of the regulations, the following example looks at only the record keeping requirements outlined in the proposed Regulations, to establish whether the benefits of the proposal could feasibly exceed the costs. The benefits of the record keeping requirements accrue in two ways. First, by making it difficult to trade stolen goods for cash and thus deterring this type of activity. Second, by making it easier for Victoria Police to locate and recover stolen goods that have been sold to second-hand dealers and pawnbrokers. In terms of the latter, for the benefits of the proposed Regulations to equal the costs, approximately $21,000 worth of stolen goods would need to be recovered per month in Victoria.14 By comparison, in New South Wales between 1999 and February 2003, an estimated $282,270 worth of stolen property was recovered per month through police investigations where property was directly or indirectly recovered from the business premises of pawnbrokers or second-hand dealers.15 This result was largely attributed to the requirement for second-hand dealers and pawnbrokers to keep records of transactions and transmit these to police so that they can monitor suspicious activity. However, it should be noted that in New South Wales all licensees are required to electronically transmit this information to police, whereas in Victoria only the 25% of second-hand dealers and pawnbrokers with computerized record keeping systems can do this, and approximately 180 regularly do so. Second-hand dealers and pawnbrokers without computerized systems are able to provide their manual records to Victoria Police for inspection when required. On the basis of these comparisons it would appear feasible that the benefits of the proposed regulations outweigh the costs.

14 Data on the value of stolen goods recovered with the assistance of second-hand dealers and pawnbrokers is not available for Victoria. 15 New South Wales Department of Commerce, Office of Fair Trading, Pawnbrokers and Second-Hand Dealers Regulation 2003: Regulatory Impact Statement, May 2003. This report estimates that $12,702,143 worth of stolen property was recovered between May 1999 and February 2003 - a period of 45 months.

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While Table 3 demonstrates that the quantified costs of the proposed regulations outweigh the quantified benefits, nearly all of the benefits of the proposed Regulations were not able to be quantified. Consequently, a qualitative analysis was undertaken with the following rating applied:

• Nil – no impact • Minor – some impact but it is not material • Moderate – some material impact • Significant – substantial material impact

The qualitative analysis contained in Table 3 demonstrates that the benefits of each of the proposed regulations outweigh the costs of each proposed regulation, with some of the proposed regulations providing significant benefits to consumers at a minor cost to industry (for example, proposed regulation 10 relating to the recording of transactions).

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Table 3: Summary of costs and benefits of the proposed Regulations No. Regulation Costs Rating Benefits Rating 6 Fees Industry funds the full costs of administration and

enforcement of the Act and Regulations - $247,481 per annum.

Moderate The full costs of administration and enforcement of the Act are recovered from those who derive the benefits of the scheme (or those who can pass on the costs to those who benefit) - $247,481 per annum. The costs are equitably distributed.

Moderate

7 Register There is a cost to industry in compiling the details to be provided on the application form - $4,528.48 per annum. There is a cost to Consumer Affairs Victoria in entering the data provided on the application form - $411.68 per annum. Total costs are $4,940.16 per annum.

Minor The data requirements enable clear identification of the registered person or company for effective administration and enforcement of the Act, which assists Victoria Police in combating crime. It assists Consumer Affairs Victoria in monitoring compliance.

Moderate

9 Prescribed categories of evidence

There are no costs. Nil Prescribing additional categories of evidence as to identity, provides benefits to industry as they may gain legitimate business from people who would be unable to met the identification requirements under the Act. Similarly, there are benefits to persons who do not possess the requisite identification as provided under the Act from being able to sell or pawn their goods.

Moderate

10 Recording transactions

There are no material costs.

Minor The prescribed particulars for recording transactions are the minimum necessary for Victoria Police to effectively and efficiently track stolen goods traded through second-hand dealers and pawnbrokers. Consequently, this proposed regulation will have a significant impact on the ability to achieve the objective of the Act “to facilitate and expedite the recovery of stolen goods from second-hand dealers and pawnbrokers”. In assisting Victoria Police in tracking and recovering stolen goods and apprehending offenders, there are benefits to individuals whose goods have been stolen and the community, more generally.

Significant

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No. Regulation Costs Rating Benefits Rating 11 Identifying mark There are no material costs. Minor Ensuring that the identifying mark or number assigned to goods is

affixed makes the item more easily identifiable and it is possible for stock to be traced from the records kept by the registrant. Thereby, assisting Victoria Police in tracking and recovering stolen goods which provides benefits to individuals whose goods have been stolen. Further, a consumer who has concerns with pawned goods can readily identify their goods.

Moderate

12 Pawn ticket and notice

The costs to the pawnbroking industry of completing pawn tickets is $484,584 per annum. However, pawnbrokers need to record this information as part of their normal business practices, so it appears reasonable to discount these costs. For the purposes of this Regulatory Impact Statement, the costs have been discounted by 50 per cent to $242,292 per annum.

Moderate Prescribing the details to be included in the pawn ticket and notice assists in addressing the imbalance of information between pawnbrokers and their customers. It ensures that both parties have the same information about the transaction which forms the basis of finalising the loan. This is of significant benefit to customers of pawnbrokers. It also provides benefits to pawnbrokers as they can rely on the information contained in the forms and notices and be assured that it satisfies their legislative obligations.

Moderate

13 Lost pawn ticket While there are costs to pawners in obtaining a statutory declaration and locating a witness, the costs to the pawner of trying to secure ownership of the goods without this proposed regulation would be much more costly. There is a cost to the pawnbrokers in checking the statutory declaration and identification and producing a replacement ticket - $9,036.30 per annum.

Minor The proposed regulation provides benefits to consumers whose pawn ticket is lost or stolen as it allows these persons to establish that the ticket has been lost and if they can produce adequate proof of identity, their pawned goods can be secured without requiring more costly litigious means.

Moderate

14 Period of loan There are no costs. Nil Requiring the period of the loan to be fixed at the time the goods are pawned, ensures consumers have full information before entering in to a contract with a pawnbroker. Further, by being fixed and clear, the consumer is protected from any arbitrary changes by the pawnbroker.

Moderate

15 Redemption of goods

There are no costs.

Nil Having a process for the redemption of pawned goods provides benefits for pawnbrokers and their customers. It sets out the rights and obligations of both parties, so there is certainty and consistency in dealing with the redemption of goods.

Moderate

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No. Regulation Costs Rating Benefits Rating 16 Sale of redeemed

goods There are no material costs.

Minor Requiring goods to be offered for sale as soon as practicable to receive the best price reasonably obtainable, provides benefits to customers by preventing, or reducing the likelihood, that they will be defrauded by the pawnbroker. The information requirements of the notice provides benefits for pawnbrokers and their customers as they can both rely on the information contained in the notice, which must be provided in a clear, accurate and accessible form.

Moderate

17 Embargo notice There are no costs.

Nil The notice prevents the embargoes item from being removed, providing benefits to individuals whose stolen goods have been sold to a second-hand dealer or pawnbroker.

Moderate

18 Infringement penalties

There are no costs.

Nil The use of infringement notices provides benefits for enforcement agencies, as it allows breaches of the Act to be dealt with administratively rather than through court proceedings. Access to a cheap and timely enforcement tool by enforcement agencies, provides flow on benefits to the community. There is also a benefit to persons who are issued with infringement notices as they have the option of paying a lesser fine and go avoid going to court and risking a criminal conviction.

Moderate

Total quantified costs: $503,749 per annum or $4,336,113 over 10 years (using 3.5% discount rate)

Total quantified benefits: $247,481 per annum or $2,130,239 over 10 years (using 3.5% discount rate)

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5. Other Options to Achieve the Objectives 5.1 Introduction

In section 3.1, the primary objectives were identified as: • to protect consumers and the public generally from stolen goods being trafficked

through second-hand dealer and pawn broking businesses and improve the quantity of stolen goods recovered from second-hand dealers and pawnbrokers and returned to their rightful owners;



In considering the most effective means to achieve the identified objectives, consideration was given to alternatives to the proposed regulations. The option to not prescribe the particulars of transaction records was considered, as was the option to prescribe mandatory computerised recording of transactions. Consideration of a number of options for recovering the costs of administering the Act and proposed Regulations was also undertaken. The analysis of these options was undertaken as a discrete process separate from the assessment of the proposed Regulations and the options discussed above. There is a brief summary of the fee options considered at the end of this section, with the full analysis in Appendix 3.

5.2 No Regulations – The Base Case

To assess the options, the costs and benefits of each of the options must be considered against the base case, which is to have no regulations.

5.2.1 Costs

If there were no regulations, only the fees specified in the Act would apply16. This would significantly reduce the revenue levels and require administration of the Act to be subsidised by taxpayers. Further, some of the fees in the Act under-recover the costs of processing an application of the type for which a fee is charged, while other fees over-recover the costs. Therefore, there would be cross-subsidisation within the industry. Without regulations, the data requirements for the Register would not exist, making effective administration and enforcement of the Act difficult. Further, members of public

16 These fees are the vary or revoke conditions fee, the permission application fee, the late payment or lodgement fee and the annual endorsement fee.

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would have difficulty obtaining adequate information about second-hand dealers and pawnbrokers. Under the base case, only the categories of documents specified in the Act could be accepted as proof of identity. This would limit the number of people who could undertake legitimate business with second-hand dealers and pawnbrokers resulting in a cost to industry and those consumers who cannot satisfy the identification requirements in the Act. If there were no regulations, the ability of Victoria Police to effectively and efficiently track stolen goods through second-hand dealers and pawnbrokers would be significantly hindered, resulting in a cost to consumers whose stolen goods are sold to second-hand dealers and pawnbrokers. Further, there would be a cost to the community, as Victoria Police would have difficulty apprehending offenders. There would be a cost to the customers of pawnbrokers with no regulations. Not prescribing the details to be contained in the pawn ticket, notice of rights and responsibilities, the notice of the sale of redeemed goods and the requirement to fix the period of the loan at the time goods are pawned would be of detriment to consumers. It may result in a significant imbalance of information between pawnbrokers and their customers and leave customers vulnerable to being defrauded. Finally, without regulations the effectiveness of the enforcement regime would be reduced as there would be no prescribed offences and penalties which would limit the use of infringement notices to the offences set out in the Act. This would result in cost to consumers and the community generally.

5.2.2 Benefits

The costs of the proposed Regulations of $503,749 per annum would be avoided.

5.3 No Prescribed Particulars for Transaction Records

Under this option, consideration was given to retaining all of the proposed regulations, except proposed regulation 9 would be amended so that there would be no prescribed particulars for transaction records. Section 20 of the Act, which puts the onus on the second-hand dealer and pawnbroker to keep “accurate and complete records of each transaction” would be relied upon. Different traders could interpret this requirement differently and consequently, Consumer Affairs Victoria would need to issue guidelines on the recording of transactions.

5.3.1 Costs

This option has the potential for alternative and inappropriate recordkeeping. For example, being non-mandatory, the Guidelines may not be followed and individual second-hand dealers and pawnbrokers may, in good faith, elect to record incomplete information. This would significantly hinder Victoria Police’s ability to effectively and

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efficiently track stolen goods through second-hand dealers and pawnbrokers, resulting in a cost to consumers whose stolen goods are sold to second-hand dealers and pawnbrokers. Further, there would be a cost to the community, as Victoria Police would have difficulty apprehending offenders. Inconsistent recording of information would make enforcement of the proposed Regulations difficult as each case would have the potential to be subject to objection and may involve litigation.

5.3.2 Benefits

By not prescribing the information required in recording transactions, there may be a reduction in costs to the industry. It would allow the industry flexibility in determining the information it considers will comply with the Act and therefore may reduce the time second-hand dealers and pawnbrokers spend on recordkeeping.

5.4 Mandatory Computerised Record Keeping

Under this option, consideration was given to retaining all of the proposed regulations, except proposed regulation 9 would require second-hand dealers and pawnbrokers to keep records of transactions in a computerised record keeping system. Second-dealers and pawnbrokers would not be able to keep their records in a bound record book. In New South Wales, under the Pawnbrokers and Second-hand Dealers Regulations 2003 (NSW), second-hand dealers and pawnbrokers must keep records of transactions in a computerised record keeping system. There is a similar requirement in Western Australia.

5.4.1 Costs

Requiring all second-hand dealers and pawnbrokers to keep records of transactions in a computerised record keeping system would result in a significant cost to the industry. All traders would be required to establish and maintain a computer system. From the research conducted by Consumer Affairs Victoria in 2007, 75 per cent of survey participants used a bound record book to keep records of their transactions. Only 20 per cent of respondents used a computer for record keeping, while 5.4 per cent used both a bound record book and a computer. Further, almost 40 per cent of participants in the industry survey reported having no experience in computer record keeping. Translating this survey data to the wider industry means approximately 4,500 second-hand dealers and 90 pawnbrokers do not have a computer record keeping system and approximately 2,400 second-hand dealers and 28 pawnbrokers have no experience with computer record keeping systems. The costs of compliance with this option include:

• purchase of hardware ($3,000) and software ($1,000) for 75 per cent of the industry;

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• training in using a computer record keeping system ($2,000) for 40 per cent of the industry;

• hardware ($3,000) and software ($1,000) upgrades for 75 per cent of the industry17 twice over the 10 year life of the regulations; and

• ongoing hardware and software maintenance ($500) and operating (electricity and other consumables) ($500) costs for 75 per cent of the industry18.

Given these estimates, the cost per annum to the industry of this option is $10,587,600.

5.4.2 Benefits

The primary benefit of mandating computerised record keeping is that it facilitates the transfer of up-to-date and detailed information to Victoria Police on goods traded through second-hand dealers and pawnbrokers. It would enable direct transmission of records to Victoria Police, enabling significant improvements in the data contained in Victoria Police’s database that was discussed in section 4.17.2. Thus, it provides benefits for consumers and the community as the ability of Victoria Police to effectively and efficiently track stolen goods through second-hand dealers and pawnbrokers and apprehend offenders would be significantly improved. If the records are required to be kept in a format that is directly compatible with police records, there is a major saving in police time which would flow on to consumers and the community. Improvements in the data contained in the Victoria Police database could enable arrangements to be made with the New South Wales Police and Western Australian Police as these jurisdications require second-hand dealers and pawnbrokers (in Western Australia only pawnbrokers are required) to have computerised record keeping systems that are directly linked with police systems. Widening the area where goods can be traced, would provide further benefits to the individuals who have had their stolen goods sold through second-hand dealers and pawnbrokers and the community more generally. A National Police Research Unit Report19 concluded that the introduction of computer-based records which are both easily transmitted to police and comparable with police records appears to be the most efficient way to track stolen goods as they facilitate easy matching and following of transaction (audit) trails with police data both within and across State/Territory borders. In 2002, the New South Wales Police began to bring on line all licensees who were required to keep computerised records. This meant that by the

17 The costs of hardware and software upgrades for the 25 per cent of the industry that already have computerised record keeping systems are assumed to be part of their normal business operations and therefore, not included in the costs. 18 The ongoing maintenance and operating costs for the 25 per cent of the industry that already have computerised record keeping systems are assumed to be part of their normal business operations and therefore, not included in the costs. 19 National Police Research Unit, Approaches to Pawnbrokers and Second-hand Dealers Legislation, Report Series No. 131.1, Australia, page 3, http://www.acpr.gov.au/pdf/ACPR131_1.pdf

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end of 2002 the majority of licensees were transmitting their transaction information directly to the Police within three days of the transaction having taken place. This option would create benefits to the industry from more efficient record keeping. Further, it reduces the time taken for industry to reproduce documents, such as is required when a pawn ticket is lost.

5.5 Assessment of Options

In assessing the most effective option to achieve the identified objectives, the decision criteria identified in section 3.3 will be used to assess the proposed Regulations and each option against the base case (no regulations). The decision criteria are as follows:

• the extent to which the option protects consumers and the public generally from stolen goods being trafficked through second-hand dealer and pawn broking businesses and improves the quantity of stolen goods recovered from second-hand dealers and pawnbrokers and returned to their rightful owners (criteria 1);

• the extent to which the option improves the provision of information to consumers about their rights and obligations when dealing with second-hand dealers and pawnbrokers (criteria 2);

• the extent to which the option recovers the costs of efficiently administering the Act and proposed Regulations through cost-reflective and equitable fees (criteria 3); and

• the extent to which the option minimises the costs to industry (criteria 4). In order to assess the proposed Regulations and options discussed above, a balanced scorecard approach was undertaken. This approach is considered the best method for assessing the options considered in this Regulatory Impact Statement (as opposed to Net Present Value, benefit-to-cost ratio or break-even analysis) because of the inability to quantify and assign monetary values to the costs and benefits of the proposed regulations and the alternatives. Table 4 outlines the results of the balanced scorecard analysis. Table 4: Balanced Scorecard Assessment of Proposed Regulations and Alternatives

Proposed Regulations

No Prescribed Particulars for

Transaction Records

Mandatory Computerised

Record Keeping

Criteria Weight (%)

Assigned score

Weighted score

Assigned score

Weighted score

Assigned score

Weighted score

1 30 8 2.4 2 0.6 10 3 2 30 10 3 10 3 10 3 3 20 10 2 10 2 10 2 4 20 -2 -0.4 -1 -0.2 -10 -2

Total 100 7 5.4 6

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The weightings applied to the decision criteria reflect their relative importance. Given the purposes outlined in the Act, ensuring consumers and the public generally are protected from goods being trafficked through second-hand dealers and pawnbrokers and that adequate information is provided to consumers about their rights and obligations when dealing with second-hand dealers and pawnbrokers are considered to be most important criteria. Hence, they have been given a weighting of 30 per cent each. The criteria to recover the costs of administering the Act and proposed Regulations and minimise the cost to industry are considered of secondary importance, however, not significantly less. Therefore, they have been given a weighting of 20 per cent each. The assigned scores range from -10 for negative outcomes to +10 for positive outcomes resulting from the option. In comparison with the base case, all of the options would improve protection of consumers and the public generally from stolen goods being trafficked through second-hand dealer and pawn broking businesses. However, the option where the particulars of the transaction records would not be prescribed would only provide a marginal improvement. Hence, the assigned score of 2. The proposed Regulations option would significantly improve consumer protection by improving the ability of Victoria Police to effectively and efficiently track stolen goods through second-hand dealer and pawnbroker records. Consequently, it has been assigned a score of 8. The option to mandate computerised record keeping would have the most significant impact as Victoria Police would have access to second-hand dealer and pawnbrokers more quickly and easily and it would improve the ability of Victoria Police to work with other jurisdictions in tracking stolen goods. This option has been assigned a 10. All of the options would significantly improve the provision of information to consumers about their rights and obligations when dealing with second-hand dealers and pawnbrokers in comparison with the base case. However, there is no difference in the size of the improvements between the options. Hence, they have all been assigned a 10. Options for recovering the costs of efficiently administering the legislation were considered as a separate exercise. Therefore, all of the options improve the level of costs recovered in comparison with the base case by the same amount. They have all been assigned a 10 as all of the options fully recover the costs of administering the Act. Finally, all of the options have a negative impact on minimising the costs to industry with each imposing a financial cost to industry in comparison with the base case. The most significant cost to industry arises from the option to mandate the use of a computerised record keeping system. Hence, this option was assigned a score of -10. The proposed Regulations and the option to not prescribe the particulars for transactions records impose similar costs on industry with the second option being slightly less. They have been assigned scores of -2 and -1 respectively.

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The balance scorecard assessment of the proposed Regulations and the alternatives demonstrates that the proposed Regulations are the best option to implement.

5.6 Fees

Appendix 3 provides a detailed analysis of the proposed fees. It outlines the methodology used to determine the costs associated with administering the second-hand dealers and pawnbrokers registration scheme and discusses five options for recovering these costs. Option 1 is the base case where no fees would be charged. Under this option, none of the costs of administering the scheme would be recovered, leaving a shortfall of $240,161 which would need to be funded by Consumer Affairs Victoria out of general taxpaying revenue. This option is inconsistent with the intentions of the Act and Government cost recovery policy. Under Option 2, the current fee levels would be charged. With this option, there would be cross-subsidisation between the fees types and a total over-recovery of costs of $85,837. This is inconsistent with the Government’s cost recovery policy. Under Options 3 and 4 the full costs of administering the second-hand dealers and pawnbrokers regulatory scheme would be recovered. This aligns with the Government’s cost recovery policy. Option 3 proposed to allocate the ongoing (fixed direct and indirect) costs of the scheme (e.g. compliance and enforcement costs, policy costs, etc.) to all the fees, whereas Option 4 proposed to allocate the ongoing costs of the scheme to the annual registration fee only. Option 3 provides for full recovery of cost where ongoing costs are allocated across all fees, and Option 4 provides for full cost recovery where ongoing costs are allocated only to the annual licence fee. Option 5 would recover the variable direct costs of processing the different types of applications. Under this option, there would be an under-recovery of costs of $63,114, which is inconsistent with the Government’s cost recovery policy. As one of the primary objectives is “to recover the costs of efficiently administering the proposed Regulations through cost-reflective and equitable fees”, Option 4 is the preferred option. Under this option, all of the costs of administering the regulations would be recovered and in comparison with Option 3 (which also recovers all of the costs) the fees would be more equitable. Option 3 would require the ongoing costs of administering the proposed Regulations to be allocated across all fees. This is not considered reasonable. Primarily, because under this option an unsuccessful applicant for registration would be required to contribute towards the ongoing costs of a scheme (as the application fee is non-refundable), which it would not be a part of. Further, other than the annual registration fee, which all registrants are required to pay each year, the other fees are applicant-driven. By allocating all of the ongoing costs to the annual registration fee, it ensures that all participants in the registration scheme contribute to the ongoing costs of administering

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the proposed Regulations. Therefore, Option 4 is the preferred option and the proposed fees are based on this option.

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6. Evaluation Strategy Consumer Affairs Victoria does not propose a separate evaluation strategy for the proposed Regulations. Consumer Affairs Victoria has an ongoing review process for the extensive list of legislation it administers. Consumer Affairs Victoria has also established a Performance Measurement Project to develop and implement a more outcomes-focused performance measurement framework across all of it regulatory functions. Existing reporting on Consumer Affairs Victoria’s many regulatory functions provides extensive information on measures of activity and output, but collectively these reports do not satisfactorily indicate the extent to which Consumer Affairs Victoria is achieving good outcomes for Victorian consumers. Consumer Affairs Victoria administers nearly 50 pieces of legislation, including 20 separate schemes of regulation (though some of these have common elements). Establishing a common performance measurement framework across general consumer protection regulation and multiple industry-specific consumer protection regulation is a challenge of substantial complexity. However, the development of a performance indicator framework is intended to result in a set of indicators that:

• reflect the extent to which Consumer Affairs Victoria’s activities are achieving their objectives and how these are translating into outcomes;

• are sourced from stable databases that can be relied upon to provide consistent data in forthcoming years, thereby enabling both comparisons and trend analysis; and

• have the capacity to accommodate changes to the delivery of services and organisational change.

Ultimately, when completed and operating fully, Consumer Affairs Victoria’s new performance reporting framework will serve a number of important functions, including:

• informing the Government through consistent reporting over time about the extent to which Consumer Affairs Victoria is meeting its objectives in the medium and longer term and the impact its services and initiatives are having in the community;

• providing Consumer Affairs Victoria with a tool for developing strategies and programs to deliver optimal outcomes by knowing what is working well and what is not working; and

• enabling Consumer Affairs Victoria to report on outcomes for specific groups within the community, such as disadvantaged and vulnerable consumers and consumers in particular regions.

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7. National Competition Policy Assessment 7.1 Introduction

The National Competition Policy Agreement set out specific requirements with regard to all new legislation adopted by jurisdictions that are party to the agreements. Clause 5(1) of the Competition Principles Agreement sets out the basic principle that must be applied to both existing legislation, under the legislative review process, and to proposed legislation:

The guiding principle is that legislation (including Acts, enactments, Ordinances or Regulations) should not restrict competition unless it can be demonstrated that:

(a) The benefits of the restriction to the community as a whole outweigh the costs; and

(b) The objectives of the regulation can only be achieved by restricting competition.

Clause 5(5) provides a specific obligation on parties to the agreement with regard to newly proposed legislation:

Each party will require proposals for new legislation that restricts competition to be accompanied by evidence that the restriction is consistent with the principle set out in sub-clause (1).

Therefore, all Regulatory Impact Statements must provide evidence that the proposed regulations are consistent with these National Competition Policy obligations.

7.2 Definition of Market

The primary markets affected by the proposed Regulations are the second-hand dealer sector and the pawnbroker sectors.

7.3 Test for Restriction on Competition

Under the Guidelines for the application of the Competition Test to New Legislative Proposals, legislative schemes are deemed to contain restrictions on competition if they:

• allow only one company or person to supply a good or service; • require producers to sell to a single company or person; • limit the number of industry or individual producers; and • limit the number of persons engaged in an occupation.

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7.4 Assessment

7.4.1 Part 1 – Preliminary (proposed regulations 1-5)

These deal with the objectives of the Regulations, their commencement date, authorising provisions, which enable the Regulations to be made, the revocation of regulations set out in Schedule 1 and a definition required for the purposes of the Regulations. These are administrative and procedural regulations that do not restrict competition.

7.4.2 Part 2 – Registration (proposed regulations 6-7)

These prescribe fees required under the Act and the particulars to be contained in the public register. The proposed fees are applicable to all regulated parties and are applied on a full cost recovery basis. Accordingly, there are no restrictions on competition. While proposed regulation 7 imposes costs of compliance it is applicable to all regulated parties and therefore does not act to restrict competition.

7.4.3 Part 3 – Conduct of Business (proposed regulations 8-15)

These prescribe categories of evidence for people selling or pawning goods, details of transactions required to be recorded, requirements regarding identifying marks or numbers, details to be contained in pawn tickets and notices, a process for issuing duplicate pawn tickets in the case of lost pawn tickets, period of loans, and procedures involved for the redemption of pawned goods and the sale of unredeemed goods. While these regulations impose costs of compliance on regulated parties they are applicable to all regulated parties and therefore do not act to restrict competition.

7.4.4 Part 4 – Enforcement (proposed regulations 16-17)

These deal with details to be included in embargo notices and a list of offences which can be enforced by infringement notice and the penalties which apply to these offences. These are administrative/enforcement regulations that do not restrict competition. This assessment indicates that the proposed Regulations do not restrict competition.

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8. Impact on Small Business For this section of the Regulatory Impact Statement the Australian Bureau of Statistics definition of a small business is used, namely that a small business is a business employing less than 20 people. Categories of small businesses include:

• non-employing businesses – sole proprietorships and partnerships without employees;

• micro businesses – businesses employing less than 5 people, including non-employing businesses; and

• other small businesses – businesses employing 5 or more people, but less than 20 people.

The 2007 research project conducted by Consumer Affairs Victoria identified that there are currently over six thousand second-hand dealers registered in Victoria; two per cent (120) are also endorsed as pawnbrokers. Antique dealers are the most common type of second-hand dealers, some of which are concentrated in particular areas, such as Armadale. Other typical second-hand dealers include auto parts sellers, motor mower and chainsaw dealers, booksellers, music dealers and metal dealers. Most second-hand dealers are sole operators while others are franchises like Cash Converters, which has 30 stores throughout Victoria. The research found that the majority of second-hand dealers and pawnbrokers employ one or two people (57.2%) and have been operating for more than 10 years (68.3%). A further 21.5% of second-hand dealers and pawnbrokers surveyed employed three to five people in their business. The results of the survey conducted by Consumer Affairs Victoria indicated that approximately 80% of second-hand dealers and pawnbrokers employ less than 20 people. This suggests that the majority of second-hand dealers and pawnbrokers are small businesses, and as such it is likely that the impacts of the proposed regulations will be similar across these businesses. Less than one per cent of respondents to the survey were franchise businesses. For example, a respondent from Cash Converters would represent the opinion of all Cash Converters’ operators. Of the remaining respondents, 40% were companies, 30.8% were sole traders and 29.2% operated in a partnership structure. Generally, where regulatory obligations are imposed they are often more difficult to comply with for small businesses relative to large ones. Consumer Affairs Victoria is aware of the burden imposed on businesses by the Act and associated regulations, as such a number of changes have been made to the proposed Regulations to reduce the compliance burden on businesses (refer to Appendix 2). The proposed Regulations do not appear to disadvantage small businesses compared with large businesses. The cost benefit

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assessment shows that costs of compliance are relatively modest for small businesses whose recording costs are low due to their comparatively few transactions.

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9. Administrative Burden Under the Reducing the Regulatory Burden initiative, the Victorian Government made a commitment to cut the existing administrative burden of regulation by 15 per cent over three years and 25 per cent over five years.

Progress towards achieving targeted reductions in administrative burdens will be measured using the Standard Cost Model (SCM). The SCM was developed by the Dutch Government to provide a consistent method for estimating the administrative costs imposed on business by government.

The SCM is designed to produce indicative estimates of burdens and to develop a strong understanding of the drivers of these costs. However, the SCM is not designed to provide statistically robust data.

The Victorian Guide to Regulation (the Guide) requires that any change in the administrative burden of any new regulation be identified. Where the changes are considered material the change must be assessed using the SCM. To assess whether the SCM should be used a test for prima facie evidence is to be undertaken. To test whether there is prima facie evidence of a material change, the Guide provides the following indicators for assessment:

• Does the regulation introduce or abolish an information obligation requirement (e.g. removal of the requirement to obtain a licence)?

• Are there significant increases or reductions in the frequency of reporting obligations (e.g. the registration period is changed from one to five years)?

• Does the regulation introduce a new area of regulation? • Does the regulation affect a large number of businesses? (The larger the number

of businesses and/or not-for-profit organisations that will be affected, the more likely it is that the change will be material.)

The Guide states that “the test for materiality will be primarily based on such qualitative indicators rather than quantitative estimates. Where it is unclear whether the change is material, Ministers may ask that indicative data be gathered by seeking the views of some businesses about whether the change will materially affect the cost to business. In general, if the data indicate that the change in administrative burden is of the order of $250,000, then an SCM measurement should be undertaken.”20 The following table (Table 5) analyses each regulation against the prima facie assessment indicators. (Appendix 2 provides a comparison of the existing Regulations and the proposed Regulations.) 20 Victorian Guide to Regulation section 4.4.4

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Table 5: Analysis of Administrative Burden Proposed Regulation

Does the regulation introduce or abolish an information obligation requirement (e.g. removal of the requirement to obtain a licence)?

Are there significant increases or reductions in the frequency of reporting obligations?

Does the regulation introduce a new area of regulation?

Does the regulation affect a large number of businesses?

1-5 No No No Yes

6 Fees No No No Yes

7 Register Requires additional information to be included on the register.

No No Yes

8 Prescribed category of evidence

No No No Yes

9 Recording transactions

Abolishes the obligation for traders with a computerised record keeping system to print out a hard copy of every transaction.

No No Yes

10 Identifying mark

No No No Yes

11 Pawn ticket No No No Yes

12 Lost pawn ticket

13 Period of loan No No No Yes

14 Redemption of goods

No No No Yes

15 Sale of unredeemed goods

No No No Yes

16-17 Enforcement

No No No Yes

The only additional administrative burden arises from the information requirements for the Register. The proposed Regulations seek to include more detailed information in the Register. However, this does not result in any significant changes to the amount of information requested from applicants that would result in applicants spending significant additional time providing information. This is because the change reflects only a minor variation in the type of information that is already being requested. Therefore, a SCM assessment of the proposed Regulations was not required on the basis of this change. The proposed Regulations also no longer require second-hand dealers and pawnbrokers with computerised record keeping systems to produce a printed and sequentially pre-numbered hard copy of all transactions on a daily basis. A preliminary estimate of the change in the administrative burden arising from no longer having this requirement indicates that it is likely to be material. In order to measure the administrative cost of regulation, a number of cost parameters need to be identified.

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These cost parameters give the basic SCM Formula: Administrative Cost = Price x Quantity = (tariff x time) x (population x frequency)

9.1 Cost Parameter Assumptions

The following cost parameter assumptions have been made: • Using the costing methodology outlined in section 4.6.1, the tariff with on-costs

of the trader is $55. • It is assumed that it takes five minutes for a trader to print, compile and number

the daily record of their transactions. • It is estimated that a population of 1,530 of the 6,120 second-hand dealers and

pawnbrokers operating in Victoria use a computerised record keeping system.21 • It is estimated that the frequency of the administrative activity occurs 300 days

per year. These assumptions will be tested in accordance with the interview methodology outlined in the Victorian Guide to Regulation. Therefore, the preliminary administrative burden reduction is estimated to be: ($55/hour x 5 minutes) x (1530 second-hand dealers and pawnbrokers affected22 x 300 business days23 ) = $2,103,750 in administrative burden reduction. Price x Quantity Administrative

Burden Reduction Internal tariff x time x Population x Frequency $55 x 0.08 hours = $4.40 x 1530 population x 300 reports

printed/year = 459 000 = $2,103,750

Given that the administrative burden reduction from no longer having this requirement is estimated as being material, Consumer Affairs Victoria intends to undertake a SCM assessment within three months of the regulations being implemented. To complete the SCM assessment Consumer Affairs Victoria needs to understand the time and financial savings to business resulting from removal of this requirement. Consequently, Consumer Affairs Victoria is interested in hearing feedback from second-hand dealers and pawnbrokers, who use a computerised record keeping system, on the following:

• How many days per week, on average, do you print out a daily record of transactions?

21 A recent survey conducted by Consumer Affairs Victoria found that 25 per cent of the survey participants used a computerised record keeping system or both a computerised record keeping system and a bound record book. 22 In the absence of evidence to the contrary, this assumes that there is 100 per cent compliance with this requirement. 23 It is assumed that second-hand dealers and pawnbrokers are open six days a week.

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• On average, how many pages long is your daily record of transactions? • How long does it take, on average, to prepare, print, number and file this

information? • What is the hourly wage rate of the person that usually performs this task?

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Appendix 1: Summary of 2007 Research Survey Results Record Keeping Systems Used Three-quarters of second-hand dealers and pawnbroker respondents use bound books to record their customer transactions. Almost 20% of respondents use computerised systems and a further 5.4% of respondents stated that they used a combination of manual and computerised record keeping systems. Almost 40% of second-hand dealers and pawnbrokers said they had no experience of computerised systems, which is why they maintained bound books of customer transactions. Other common reasons respondents provided for maintaining manual record keeping systems included:

• keeping a bound book was faster/more efficient – 14 respondents; • the system they had met their business needs –15 respondents; • their business was too small to justify a computerised system or the cost of

moving to a computerised system was too great – 15 respondents; • it was habit, they had always operated this way and did not want to change their

system – 13 respondents; and • they were required by legislation to keep books – 11 respondents.

Only three survey respondents indicated that they intended to computerise in the future. As expected, the categories of second-hand dealers and pawnbrokers who were more likely to use electronic or computerised record keeping systems comprised:

• larger business that employ more than ten people – 62.5% compared with 13.3% of small businesses which have one or two employees and 17.9% of those that employ up to five people;

• companies – 28.8% compared with 12.8% of sole traders and 13.2% of businesses with a partnership structure; and

• younger businesses that have been operating for less than ten years – 36.8% compared with only 9.4% of businesses that have been operating for ten to twenty years and 14.7% of those operating more than twenty years.

It appears any proposal to mandate electronic record keeping would impact significantly on the vast majority of second-hand dealers and pawnbrokers. In particular, smaller businesses who are the mainstay of this industry.

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Information Provided to Victoria Police Of the 25% of second-hand dealers and pawnbrokers who currently use computerised systems to record customer transactions, only around a third said they always (30.3%) or sometimes (6.1%) provided the Victoria Police with information electronically.24 Again, companies and businesses that have been operating for less than five years were more likely to provide this information electronically to Victoria Police. Internet Access The majority of respondents (87.5%) that use computerised record keeping systems reported that they had access to the internet and email.

24 Subsequent to decentralisation of Victoria Police, there is no longer a dedicated taskforce to monitor

compliance with the Act. Contact between second-hand dealers, in particular pawnbrokers and the Victoria Police generally occurs via local police stations. Anecdotal evidence suggests that information provided in relation to stolen goods is more likely to occur via an email to their local police inspector rather than uploading information directly onto a database.

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Appendix 2: Comparison of Proposed Regulations with 1997 Regulations

1997 REGULATIONS PROPOSED REGULATIONS COMMENTS

PART 1 – PRELIMINARY PART 1 – PRELIMINARY

1. Objectives 1. Objective One change - The objective to provide for the exemption of certain persons and goods from the application of the Act has been removed. The exemptions have been relocated in separate draft Second-Hand Dealers and Pawnbrokers (Exemption) Regulations 2008.

2. Commencement 2. Commencement Change of commencement date.

3. Authorising Provision 3. Authorising Provision Proposed Regulations are made under section 31 of the Act only.

4. Revocation 4. Revocation No Change.

5. Definition 5. Definition No Change.

PART 2 – EXEMPTIONS

6. Exemptions There are no exemptions in the proposed Regulations. The exemptions have been relocated in separate draft Second-Hand Dealers and Pawnbrokers (Exemption) Regulations 2008.

PART 3 – REGISTRATION PART 2 – REGISTRATION

7. Fees 6. Fees The proposed Regulations prescribe the following fees which were previously set out in the Act:

• application to vary or revoke conditions fee; • late payment or lodgement fee; • permission application fee; and • annual endorsement fee.

The fee levels in the proposed Regulations have been updated to reflect costs. Only the permission application fee has increased, the other six fees have decreased.

8. Register 7. Register The proposed Regulations include the following additional requirements: • registration conditions: • address and telephone number of each premises from which the person carries

on business; • if the person is a registered business:

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1997 REGULATIONS PROPOSED REGULATIONS COMMENTS − the name of each director; − the date of appointment of each director; − the date of cessation of appointment of each director.

• the address of an internet site maintained by the person for the purposes of carrying on a business as a second-hand dealer.

9. Prescribed categories of evidence as to identity – applicants for registration

The proposed Regulations do not include additional categories of evidence as to the identity for applicants of registration.

10. Display of sign The proposed Regulations do not require second-hand dealers and pawnbrokers to display a sign.

PART 4 – CONDUCT OF BUSINESS PART 3 – CONDUCT OF BUSINESS

11. Prescribed categories of evidence as to identity – persons selling or pawning goods

8. Prescribed categories of evidence as to identity – persons selling or pawning goods

No change.

12. Recording transactions 9. Recording transactions The proposed Regulations do not include a requirement for a second-hand dealer or pawnbroker who uses a computerised record-keeping system to produce, on a daily basis, a printed and sequentially pre-numbered hard copy of all transactions.

13. Identifying mark or number 10. Identifying mark or number No change to the requirement, however, a penalty for breach of the requirement has been introduced under the proposed Regulations (20 penalty units).

14. Pawn ticket 11. Pawn ticket and notice No change.

15. Lost pawn ticket 12. Lost pawn ticket No change.

16. Period of the loan 13. Period of the loan No change.

17. Redemption of goods 14. Redemption of goods No change.

18. Sale of unredeemed goods 15. Sale of unredeemed goods No change.

PART 5 – ENFORCEMENT PART 4 - ENFORCEMENT

20. Embargo notice 16. Embargo notice No change.

21. Infringement penalties 17. Infringement penalties No change.

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Appendix 3: Analysis of Proposed Fees The Problem The Act requires fees to be determined and applied for application and other processes required by the Act. If fees are not prescribed for the processes the following problems arise:

• it is likely to distort the process of applications for a second-hand dealer and pawnbroker registration and other processes in an inefficient way;

• Consumer Affairs Victoria will not receive any fees to cover the costs in carrying out the processes and the provisions of the Act provide that fees should be prescribed; and

• if Consumer Affairs Victoria carries out the application and other processes without charging fees, additional costs will fall on the public generally, principally taxpayers.

Objectives The desired outcome is to facilitate efficient administration of the Act by providing for a significant user contribution to the cost of administration. In accordance with the Act, charges are to be applied by prescribing fees. The objectives of prescribing fees are to:

• recover the costs of administering the Act and provide Consumer Affairs Victoria with sufficient resources to administer the Act; and

• equitably distribute the costs incurred by Consumer Affairs Victoria in carrying out the administrative procedures of the Act.

Policy Considerations The Victorian Guide to Regulation and the Department of Treasury and Finance’s Cost Recovery Guidelines (the Guidelines) outline the primary policy instruments for the setting of fees and charges. The latter document identifies regulatory fees and user-charges as different approaches to fee setting. Regulatory Fees Typically, regulatory fees involve the granting of an access right to engage in a desired activity. Access is usually in the form of a permit or registration (such as for second-hand dealers and pawnbrokers) enabling Government to regulate activity as an instrument of

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government policy. Government agencies are required to index regulatory fees payable to the public account unless the Treasurer has approved an exemption. User-Charges User-charges are a separate category of fees. All user-pay type fees should be set to recover the full cost of the service provided, unless there are explicit policy reasons for not doing so or reasons for the public good (i.e. where the agency providing the service has a monopoly over the market or where there are consumption externalities associated with the provision). Charges should be considered for application to all products and services provided by budget-dependent agencies such as Consumer Affairs Victoria, except where government policy dictates otherwise, or where such charges are impractical or inefficient. No such policy exists for administration of the Act. Government Cost Recovery Policy As stated in the Victorian Guide to Regulation and reiterated in the Guidelines, general government policy is that regulatory fees and user charges should be set on a full cost recovery basis because it ensures that both efficiency and equity objectives are met. Full cost represents the value of the resources used or consumed in the provision of an output or activity. Proposed Fee Types There are seven fee types. Currently, three are prescribed in the 1997 Regulations:

• the fee to accompany an application for registration (11 fee units); • the fee to accompany a statement (3 fee units); and • the fee for a copy of, or an extract from the register ($5).

The other four fees are detailed in the Act:

• the fee to vary or revoke any condition (15 fee units); • the fee for a permission application (15 fee units); • the fee for late payment or lodgement that requires annual registration (2 fee

units); and • the fee for annual endorsement (40 fee units).

It is proposed to include the fees detailed in the Act in the proposed Regulations in order to have a complete set of fees in the proposed Regulations. The legislative backing for the proposed fee types follows.

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Application for Registration Fee Section 7(2) of the Act provides that an application for registration as a second-hand dealer must be:

(a) in writing in or to the effect of the form approved by the Authority and must be verified by statutory declaration; and

(b) accompanied by evidence as to the identity of– (i) the applicant; or (ii) if the applicant is a body corporate, the directors of the applicant–

by means of a birth certificate, passport (if the passport is current or expired for not more than 2 years), driver licence or any other document in one of the prescribed categories; and

(c) accompanied by the prescribed fee. Application to Vary or Revoke Conditions Fee Section 8B of the Act provides that the Business Licensing Authority may impose conditions that must be complied with before it registers, or endorses the registration of, an applicant. At any time on the application of any person or of its own motion, the Business Licensing Authority may vary or revoke any conditions previously imposed. Section 8B(3) provides that an application to vary or revoke, other than an application by the Director or the Chief Commissioner of Police, must be accompanied by the prescribed fee or, if no fee is prescribed, 15 fee units. Currently, the fee is not prescribed. Permission Application Fee Section 10A of the Act provides that a person who would otherwise be ineligible to be registered because of section 6(2) may apply to the Authority for permission to be registered; and whose registration would otherwise be cancelled by section 10(2) may apply to the Authority for permission to continue to be registered. Section 10A(3) of the Act requires that an application for permission must be:

(a) in a form approved by the Authority; and (b) accompanied by the prescribed fee or, if no fee is prescribed, 15 fee units.

Currently, the fee is not prescribed. Annual Registration Fee Section 11 of the Act requires:

(1) A person registered under this Part must pay to the Authority the prescribed annual registration fee on the anniversary of the date that person was first registered under this Part.

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(2) An annual registration fee may be paid at any time in the 6 weeks before it falls due.

(3) The payment must be accompanied by a statement in respect of the year up to the date the payment is made that is in a form approved by the Authority and that is signed by the person registered under this Part.

(4) The statement must contain any information and be accompanied by any documents required by the Authority.

Late Payment or Lodgement Fee Section 11A of the Act provides that if a person fails to comply with section 11 or 11AA, the Authority must give the person a written notice stating that unless the person complies with that section and also pays to the Authority the late payment or lodgment fee by the date specified in the notice, the person's registration or endorsement, as the case may be, will be cancelled. The date specified in the notice must be at least 14 days after the date on which the notice is given to the person. If the person has not complied with section 11 or 11AA and paid the late payment or lodgment fee by the date specified in the notice, the registration or endorsement, as the case may be, is automatically cancelled. The fee for late payment or lodgment is the prescribed fee or, if no fee is prescribed, 2 fee units. Currently, the fee is not prescribed. Annual Endorsement Fee Section 9 provides for registration as a second-hand dealer. Where a second-hand dealer also trades as a pawnbroker the person must be endorsed under section 9AA. Section 11AA of the Act provides that a person whose registration is endorsed must pay to the Authority the prescribed annual endorsement fee or, if no fee is prescribed, an annual endorsement fee of 40 fee units. Currently, the fee is not prescribed. The annual endorsement fee must be paid on the same date as the annual registration fee payable under section 11(1). An annual endorsement fee may be paid at any time in the 6 weeks before it falls due. Endorsement is provided by the authority under section 9AA where the authority is satisfied that an applicant to carry on business as a pawnbroker—

(a) is not ineligible under section 6 for an endorsement of the registration; and

(b) has complied with any conditions imposed under section 8B(1)(a); and

(c) has paid the initial endorsement fee to the Authority.

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Copy of Register Fee Section 13 of the Act requires the Registrar to maintain a register to be kept of all persons registered under the Act containing particulars of endorsements, if any, under this Part and the prescribed particulars. The register may be inspected at the office of the Authority by any person during ordinary office hours without charge. A person may obtain: a copy of the register; a copy of an entry in the register; or a copy of a page in the register; on payment of the fee prescribed for that type of copy. Costing Methodology The Guidelines outline two broad methodologies for determining the appropriate cost base - the ‘fully distributed cost’ method and ‘incremental cost’ method. The fully distributed cost method is described as “the most comprehensive costing approach, and allocates all costs (including direct, indirect and capital cost components) to the output, and is typically used where cost-recovered activities account for a large proportion of an agency’s activities”. The incremental cost method recognises that it may be inappropriate to attempt to recover overhead and capital costs if these would be incurred anyway, even if a particular activity were not undertaken. The fully distributed cost method was adopted for determining the fee levels outlined in this Regulatory Impact Statement. The Guidelines outline that this methodology should be used where cost-recovery activities account for a large proportion of an agency’s activities. Operating business licensing schemes is not incidental to Consumer Affairs Victoria’s activities but is in fact a core consumer protection function. On this basis, the fully distributed cost method was adopted. Cost Types According to the Guidelines, direct costs are those “that can be readily and unequivocally traced to a product or activity because they are incurred exclusively for that particular product/service”. On the other hand, indirect costs are not incurred exclusively for a particular product or activity. Fixed costs are unaffected by product or service delivery levels. Variable costs are directly related to the levels of production and service delivery. For the purpose of determining the full costs incurred by Consumer Affairs Victoria in administering the second-hand dealers and pawnbrokers regulatory scheme, Consumer Affairs Victoria’s costs have been categorised as follows:

• Variable Direct Costs – These costs represent the salary costs (including on-costs25) associated with processing a particular type of application.

25 The 20 per cent on-costs figure was provided by Finance, Department of Justice. This amount was used because it is the figure used by the Department of Justice for official budget costings and all other funding proposals.

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• Fixed Direct Costs (Salary & Operating) – These costs represent the ongoing costs of the different branches of Consumer Affairs Victoria in administering the second-hand dealers and pawnbrokers regulatory scheme, such as compliance and enforcement costs and policy costs. These costs are considered fixed.26 The costs have been split into salary and operating costs. The fixed direct salary costs come from costing the time staff in a particular branch work on issues to do with regulation of second-hand dealers and pawnbrokers. Given the proportion of a branch’s total FTE that works on second-hand dealers and pawnbrokers, the fixed direct operating costs reflect the proportion of the branch’s total operating costs that can be attributed to the regulation of second-hand dealers and pawnbrokers.

• Indirect Costs – These costs represent the corporate services costs, such as salary of the Director of Consumer Affairs Victoria, financial services and human resources.

The following hourly rates were used for the salary costs:

• VPS Grade 2 - $25.00; • VPS Grade 4 - $37.95; and • BLA Member (VPS Executive Officer Level 3)- $87.11.

The hourly rates were calculated by using the midpoint of the VPS salary grade range in 2006-07 plus 20 per cent on-costs27, divided by the number of weeks in the year (52) and the number of working hours in a week (38). Variable Direct Costs To determine the variable direct costs for each fee, a step-by-step identification of the tasks undertaken by Consumer Affairs Victoria to process an application for which a fee is proposed to be set is required. Each task is assigned a time in minutes, a VPS salary grade of the person(s) undertaking the task and the resulting cost of each task. These costs are totaled giving an overall variable direct cost of processing one application. Application for Registration The variable direct cost of processing an application for registration is $103.75. An application for registration, on average, takes 134 minutes to consider and provide a response. The process involves:

• receiving the application, entering the information into a database and sending an acknowledgement letter (43 minutes);

26 Compliance and enforcement costs could be considered variable costs, as an increase in the number of participants in the industry would increase the level of compliance and enforcement activity required. However, the size of the industry has remained stable over past years. Although there are new entrants (as indicated by the number of applications for registration), these new entrants are offset by businesses exiting the industry. On this basis, compliance and enforcement costs have been assumed to be fixed. 27 The 20 per cent on-costs figure was provided by Finance, Department of Justice. It is the recommended figure for use in official budget costings and all other funding proposals by the Department of Justice.

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• conducting the eligibility checks (15 minutes); • conducting external checks with CrimTrac and Dun and Bradstreet to check for

any disqualifying offences (14 minutes and $48.20 external charges28); • conducting a number of internal checks (10 minutes); • assessing the application and following up with applicant where further

information is required (31 minutes); • making a decision on the eligibility of the applicant (5 minutes); and • recording the decision and informing the applicant of decision (16 minutes).

The process involves the time of officers at the VPS Grade 2 and 4 level with a small amount of a Business Licensing Authority Member’s time. Application to Vary or Revoke Conditions The variable direct cost of processing an application to vary or revoke conditions is $28.82. On average, an application to vary or revoke any conditions takes 64 minutes to consider and provide a response. The process involves:


• checking the evidence (15 minutes); • assessing the application (5 minutes); • making a decision on the eligibility of the applicant (5 minutes); and • recording the decision and informing the applicant of decision (16 minutes).

The process involves the time of officers at the VPS Grade 2 and 4 levels. Permission Application The variable direct cost of processing a permission application is $652.47. By its nature, the tasks involved in processing a permission application require a high level of scrutiny. Therefore, it is a time and resource intensive process that takes, on average, 821 minutes. The process involves:


• conducting the eligibility checks (15 minutes); • conducting external checks with CrimTrac, Dun and Bradstreet and Court records

to check for any disqualifying offences (43 minutes and $48.20 external charges29);

• conducting a number of internal checks (46 minutes);

28 The external charges have been included in the variable direct costs of processing an application for registration. 29 The external charges have been included in the variable direct costs of processing a permission application.

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• assessing the application and following up with the applicant where further information is required (342 minutes);

• making a decision on the eligibility of the applicant (225 minutes); and • recording the decision and informing the applicant of decision (105 minutes).

The process involves the time of officers at the VPS Grade 2, 3 and 4 levels with a significant time resource required from a Business Licensing Authority Member (180 minutes at a cost of $261.34). Annual Registration The variable direct cost of processing an annual registration is $20.16. It is a straightforward and simple administrative process that takes, on average, 40 minutes to consider and provide a response. The process involves:

• receiving the annual statement, entering the information into a database and sending an acknowledgement letter (10 minutes);

• checking the statement (10 minutes); • conducting one external check with Dun and Bradstreet (5 minutes and $3.50

external charges30); • conducting a number of internal checks (10 minutes); and • approving the annual statement and sending an acknowledgement letter (5

minutes). The process involves the time of officers at the VPS Grade 2 level. Late Payment or Lodgement The variable direct cost of processing a late payment or lodgement is $10.42. On average, a late payment or lodgement takes 25 minutes to process. It involves:

• checking records for failure to lodge (5 minutes); • generating a failure to lodge letter (10 minutes); and • checking compliance with final date (10 minute).

The process involves the time of officers at the VPS Grade 2 level. Annual Endorsement There is no variable direct cost in processing an annual endorsement. Following a review of the tasks required to process an annual endorsement and the normal registration processes (application for registration and annual registration) it is considered that the tasks involved in the endorsement function have been subsumed by those required as part of the normal registration process for second-hand dealers.

30 The external charges have been included in the variable direct costs of processing an annual registration.

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Copy of the Register The variable direct cost of processing a request to receive a copy of the register is $5.68. On average, it takes 12 minutes to process this kind of request. It involves time of officers at the VPS Grade 2 and 5 levels to undertake the following tasks:

• receiving application (5 minutes) • determination by the Registrar (2 minutes); • generate copy of the register (2 minutes); and • generate cover letter and send out (3 minutes).

Summary of Variable Direct Costs The individual variable direct costs involved in processing each of the proposed fee types are summarised in the Table 6. The Table outlines the expected number of applications31, the variable direct cost per application, the total variable direct cost for each fee type32 and the proportion of total variable direct costs each fee type accounts for. Table 6: Variable Direct Costs (Consumer Affairs Victoria)

Fee type Expected

Number of Applications

Variable Direct Cost

per Application

Total Variable

Direct Cost for Each Fee

Type

Proportion of Total Variable

Direct Cost

Application for Registration 496 $103.75 $51,462.01 29.07% Application to Vary or Revoke 1 $28.82 $28.82 0.02% Permission Application 10 $652.47 $6,524.72 3.69% Annual Registration 5613 $20.16 $113,182.62 63.93% Late Payment or Lodgement 561 $10.42 $5,842.95 3.30% Annual Endorsement 150 $0.00 $0.00 0.00% Copy of Register 1 $5.68 $5.68 0.00% Total Variable Direct Costs for All Fee Types $177,046.80

Based on the expected number of applications, the variable direct costs of Consumer Affairs Victoria in processing the different applications for which a fee is proposed to be charged is $177,046 per annum. Fixed Direct Costs Consumer Affairs Victoria incurs a number of ongoing costs in administering the second-hand dealers and pawnbrokers regulatory scheme. This includes:

• compliance and enforcement costs; • dispute resolution costs;

31 This is an annual estimate based on the existing numbers of applications. 32 This equals the variable direct cost per application multiplied by the total number of applications expected annually.

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• enquiries costs (call centre and shop front costs); and • policy costs.

Guidance on what costs should be accounted for and recovered are set out in the Department of Treasury and Finance’s Cost Recovery Guidelines (the Guidelines). As identified in the Purpose and Structure section of the Guidelines, they do not provide definitive advice on what should and should not be included. Rather, they establish a central framework and guidance on how to undertake sound analysis on what should and should not be included. The Guidelines identify that costs that are not integral to the regulatory scheme should not be recovered. However, the Guidelines are not at all definitive on what type of costs should be excluded. The Guidelines identify that certain costs may be more appropriately funded from general taxation. For example, the review of regulatory functions, advising Parliament and financial reporting. The Consumer Policy Branch of Consumer Affairs Victoria undertakes a range of day-to-day activities in relation to second-hand dealers and pawnbrokers. For example, providing advice to other parts of Consumer Affairs Victoria, such as the Compliance and Enforcement Branch, reviewing education and information material and drafting correspondence about the regulatory regime. As with many of the other business licensing regimes, the second-hand dealers and pawnbrokers regulatory scheme is based around a particular business model. An integral part of Consumer Policy Branch’s role is to ensure that the regulatory scheme is up-to-date with current business practices and is as effective and efficient as possible. The Guidelines are not definitive on what policy costs should be recovered. Having undertaken several fees Regulatory Impact Statement’s in recent years, Consumer Affairs Victoria has reviewed this issue a number of times and has arrived at the position that substantive and comprehensive policy reviews considering new areas of regulation are of a more general public benefit and should therefore be funded from general taxation. However, more limited and focused policy work on existing regulatory schemes, such as development of these proposed Regulations, should be recovered. This work is more of the nature of maintenance of the current regulatory scheme. It involves ensuring it is up to date with the current business practices and is still effective and efficient (both for consumers and for businesses). The benefits of this activity specifically relate to the regulated entity and its consumers. Therefore, these costs should be recovered through the fees and consequently Consumer Affairs Victoria’s activity in this area has been included in this Regulatory Impact Statement. The fixed direct costs are summarised in Table 7. The Table identifies the costs of the different branches of Consumer Affairs Victoria in administering the second-hand dealers and pawnbrokers regulatory scheme. The costs have been split into salary and operating costs. The fixed direct salary costs come from costing the time staff in a particular branch work on issues to do with regulation of second-hand dealers and pawnbrokers. Given the

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proportion of a branch’s total FTE that works on second-hand dealers and pawnbrokers, the fixed direct operating costs reflect the proportion of the branch’s total operating costs that can be attributed to the regulation of second-hand dealers and pawnbrokers.33 Table 7: Fixed Direct Costs (Consumer Affairs Victoria)

Branch Fixed Direct Salary Costs

Fixed Direct Operating Costs

Total Fixed Direct Costs

Compliance & Enforcement $16,456.56 $912.15 $17,368.71 Dispute Resolution $3,141.60 $179.52 $3,321.12 Victorian Consumer & Business Centre $24,696.60 $0.00 $24,696.60 Enquiries $0.00 $169.29 $169.29 Consumer Policy $8,957.70 $368.70 $9,326.40 TOTAL $53,252.46 $1,629.66 $54,882.12

The total fixed direct costs of administering the second-hand dealers and pawnbrokers regulatory scheme is $54,882 per annum. Indirect Costs In addition to the ongoing costs outlined in the section above, Consumer Affairs Victoria also incurs corporate services costs. These costs include the salary and operating costs of the Director of Consumer Affairs Victoria and the Corporate Resources Branch. It has been assumed that Corporate Resources costs, which includes financial services and human resource costs, is 10 per cent of the total fixed direct costs ($5,488.21) and the Director’s Office’s costs are 5 per cent of the total fixed direct costs ($2,744.11). Therefore, the total indirect cost of administering the second-hand dealers and pawnbrokers regulatory scheme is $8,232.32. Fee Level Options Parliament has decided through the Act that fees for actions under the Act should be prescribed. In this context, this Regulatory Impact Statement accepts the principle that fees for administration of the Act should be prescribed and does not explore other strategic alternatives to the fees schema. For example, in some Australian jurisdictions second-hand dealers and pawnbrokers are required to register every three years. While this option would present a cost saving to second-hand dealers and pawnbrokers and Consumer Affairs Victoria, the requirement to register annually is set in the Act. Therefore, this is not a feasible option in this context and has not been explored in the Regulatory Impact Statement.

33 For the Enquiries Branch, the costs reflect the number of calls Enquiries take on second-hand dealer and pawnbroker issues multiplied by the cost per call rate which takes into account salary and other operating costs.

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However, there remain alternatives for how, and how much of, the costs of administering the second-hand dealers and pawnbrokers regulatory scheme (total $240,161) should be recovered. The following five options were considered:

• Option 1 – This was the base case where no fees would be charged. • Option 2 – The current fee levels would be charged. • Option 3 – The full costs of the scheme would be recovered with the fixed direct

and indirect costs recovered proportionately through all fee types34. • Option 4 – The full costs of the scheme would be recovered with the fixed direct

and indirect costs recovered through the annual registration fee only. • Option 5 – The variable direct costs of the scheme only are recovered.

Table 8 outlines the fee levels under each of the above options and the shortfall in costs recovered under each option.

34 Under this option, the fixed direct and indirect costs are allocated to each of the fee types according to the “proportion of total variable direct costs” for each fee type outlined in Table 7.

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Table 8: Options for Fee Levels

Base Case Current Fees Full Cost Recovery Options Direct Cost Recovery Option

Option 1 Option 2 Option 3 Option 4 Option 5

Fee type Expected

Number of Applications

No Fees Current Fees

Fixed Direct & Indirect

Costs Allocated to

All Fees

Fixed Direct & Indirect

Costs allocated to

Annual Registration

Fee

Fees reflect Variable

Direct Costs only

Application for registration 496 $0.00 $121.22 $140.74 $103.75 $103.75 Application to vary or revoke 1 $0.00 $165.30 $39.10 $28.82 $28.82 Application for permission 10 $0.00 $165.30 $885.07 $652.47 $652.47 Annual statement 5613 $0.00 $33.06 $27.35 $31.41 $20.16 Late payment or lodgment 561 $0.00 $22.04 $14.13 $10.42 $10.42 Annual endorsement 150 $0.00 $440.80 $0.00 $0.00 $0.00 Certified copy of register 1 $0.00 $5.00 $7.70 $5.68 $5.68

Expected Revenue $0.00 $325,998.64 $240,161.23 $240,161.23 $177,046.80 Expected Cost $240,161.23 $240,161.23 $240,161.23 $240,161.23 $240,161.23 Shortfall in costs recovered -$240,161.23 $85,837.41 $0.00 $0.00 -$63,114.44

Assessment of Fee Level Options Option 1 is the base case where no fees would be charged. Under this option, none of the costs of administering the scheme would be recovered, leaving a shortfall of $240,161 which would need to be funded by Consumer Affairs Victoria out of general taxpaying revenue. This option is inconsistent with the intentions of the Act and Government cost recovery policy. Under Option 2, the current fee levels would be charged. With this option, there would be cross-subsidisation between the fees types and a total over-recovery of costs of $85,837. This is inconsistent with the Government’s cost recovery policy. Under Options 3 and 4, the full costs of administering the second-hand dealers and pawnbrokers regulatory scheme would be recovered. This aligns with the Government’s cost recovery policy. Option 3 proposed to allocate the ongoing (fixed direct and indirect) costs of the scheme (e.g. compliance and enforcement costs, policy costs, etc.) to all the fees, whereas Option 4 proposed to allocate the ongoing costs of the scheme to the annual registration fee only. Option 3 provides for full recovery of cost where ongoing costs are allocated across all fees, and Option 4 provides for full cost recovery where ongoing costs are allocated only to the annual licence fee.

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Option 5 would recover the variable direct costs of processing the different types of applications. Under this option, there would be an under-recovery of costs of $63,114, which is inconsistent with the Government’s cost recovery policy. As one of the primary objectives is “to recover the costs of efficiently administering the proposed Regulations through cost-reflective and equitable fees”, Option 4 is the preferred option. Under this option, all of the costs of administering the regulations would be recovered and in comparison with Option 3 (which also recovers all of the costs) the fees would be more equitable. Option 3 would require the ongoing costs of administering the proposed Regulations to be allocated across all fees. This is not considered reasonable. Primarily, because under this option an unsuccessful applicant for registration would be required to contribute towards the ongoing costs of a scheme (as the application fee is non-refundable), which it would not be a part of. Further, other than the annual registration fee, which all registrants are required to pay each year, the other fees are applicant-driven. By allocating all of the ongoing costs to the annual registration fee, it ensures that all participants in the registration scheme contribute to the ongoing costs of administering the proposed Regulations. Therefore, Option 4 is the preferred option and the proposed fees are based on this option. Proposed Fee Levels The proposed fees are as follows:

(1) For the purposes of section 7(2)(c) of the Act, the fee that must accompany an application for registration as a second-hand dealer is 9 fee units.

(2) For the purposes of section 8B(3) of the Act, the fee for an application by a person to vary or revoke any conditions imposed on registration is 3 fee units;

(3) For the purposes of section 10A(3)(b) of the Act, the fee to accompany a permission application is 59 fee units;

(4) For the purposes of section 11 of the Act, the annual registration fee is 3 fee units.

(5) For the purposes of section 11AA of the Act, the proposed fee for an annual endorsement is nil fee units.

(6) For the purposes of section 11A(4) of the Act, the proposed fee for late payment or lodgement is 1 fee unit;

(7) For the purposes of section 13(3) of the Act, the proposed fee for a copy of the register is $5.

Table 9 provides a summary of the existing fee unit levels compared with the proposed fee unit levels, outlining the expected annual revenue for each fee under the proposed Regulations.

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Table 9: Comparison of Current and Proposed Fees



Expected Annual Revenue

Application for registration 11 9 $49,193

Application to vary or revoke conditions 15 3 $33

Permission application 15 59 $6,501

Annual registration 3 3 $185,565

Late payment or lodgment 2 1 $6,182

Annual endorsement 40 0 $0

Copy of register $5 $5 $5

Total Revenue $247,48135

Fees in Other Australian Jurisdictions Following is a summary of the fees charged in other Australian jurisdictions to be a licensed/registered second-hand dealer and/or pawnbroker. Queensland In Queensland, the following fees are charged to be a licensed second-hand dealer and/or pawnbroker under the Second-Hand Dealers and Pawnbrokers Regulation 2004 (Qld):

• Application for a dealer’s licence $480.00 • Application for a dealer’s licence for 3 years $1 090.00 • Application for a collector’s licence $51.30 • Application for renewal of a dealer’s licence $305.00 • Application for a 3 year renewal of a dealer’s licence $915.00 • Application for renewal of a collector’s licence $51.30 • Application for a pawnbroker’s licence $480.00 • Application for a pawnbroker’s licence for 3 years $1 090.00 • Application for renewal of a pawnbroker’s licence $305.00 • Application for a 3 year renewal of a pawnbroker’s licence $915.00 • Application to change the place endorsed on a licence $29.30 (SHD) $29.80 (PB) • Application for a replacement licence $27.10 (SHD) $29.80 (PB) $27.10 • Inspection of the register of licences $29.30 (SHD) $27.10 (PB) $27.10

New South Wales

35 Converting the costs to whole fee units, results in approximately $7,000 being over-recovered due to rounding.

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In New South Wales, the following fees are charged to be a licensed second-hand dealer and/or pawnbroker under the Pawnbrokers and Second-Hand Dealers Regulation 2003 (NSW):

• Application fee for granting of licence $413 (includes processing component $150 and fixed component $263)

• Application fee for renewal of licence $298 (includes processing component $35 and fixed component $263)

• Application fee for restoration of licence $333 (includes processing component $70 and fixed component $263)

• Application fee for replacement of licence $24 (includes processing component $24 and fixed component $0)

• Application fee for extract of register (per entry) $14 (includes processing component $0 and fixed component $14)

Western Australia In Western Australia, the following fees apply for the issue of licences:

• Pawnbroker’s licence only 1 year $341 • Pawnbroker’s licence only 2 years $574 • Pawnbroker’s licence only 3 years $806 • Second-hand dealer’s licence only (computer option) 1 year $341 • Second-hand dealer’s licence only (computer option) 2 years $574 • Second-hand dealer’s licence only (computer option) 3 years $806 • Second-hand dealer’s licence only (facsimile option) 1 year $437 • Second-hand dealer’s licence only (facsimile option) 2 years $809 • Second-hand dealer’s licence only (facsimile option) 3 years $1,179 • Pawnbroker’s licence and second-hand dealer’s licence 1 year $387 • Pawnbroker’s licence and second-hand dealer’s licence 2 years $621 • Pawnbroker’s licence and second-hand dealer’s licence 3 years $853

The following fees apply for the renewal of licences:

• Pawnbroker’s licence only 1 year $252 • Pawnbroker’s licence only 2 years $488 • Pawnbroker’s licence only 3 years $724 • Second-hand dealer’s licence only (computer option) 1 year $252 • Second-hand dealer’s licence only (computer option) 2 years $488 • Second-hand dealer’s licence only (computer option) 3 years $724 • Second-hand dealer’s licence only (facsimile option) 1 year $403 • Second-hand dealer’s licence only (facsimile option) 2 years $773 • Second-hand dealer’s licence only (facsimile option) 3 years $1,142 • Pawnbroker’s licence and second-hand dealer’s licence 1 year $269 • Pawnbroker’s licence and second-hand dealer’s licence 2 years $523 • Pawnbroker’s licence and second-hand dealer’s licence 3 years $760

The fee for each inspection of the register kept is $10.

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South Australia There is no registration system for second-hand dealers and pawnbrokers in South Australia. However, penalties apply for not advising the Commissioner of Police. Tasmania There is no registration system for second-hand dealers and pawnbrokers in Tasmania. However, penalties apply for not advising the Commissioner of Police.

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Appendix 4: Second-Hand Dealers and Pawnbroker Controls in Other Australian Jurisdictions

LEGISLATION COVERAGE EXEMPTIONS CONDUCT OF BUSINESS

New South Wales

Pawnbrokers and Second-Hand Dealers Act 1996 Pawnbrokers and Second-Hand Dealers Regulations 2003

All persons who deal in secondhand goods. All pawnbrokers.

Second-hand market conducted for charitable purposes. Licensed dealers in second-hand vehicles are exempted from certain provisions of the Act.

Second-hand dealers: − Must keep records for prescribed goods. − Records not required for goods temporarily returned for

repair/maintenance. − Reduced recording requirements apply if goods imported into

Australia. − The required records must be made as soon as possible after the

goods are bought/received. − In general, prescribed goods must be held for 10 days after receipt. − Auctioneers must keep certain records. − If transaction is by way of phone/fax etc. seller not required to

produce prescribed identification. Pawnbrokers: − Must keep prescribed records. − Unredeemed goods must be sold as soon as practicable.

South Australia Second-Hand Dealers and Pawnbrokers Act 1996 Second-hand Dealers and Pawnbrokers Regulations 1998

All persons who deal in second-hand goods All pawnbrokers

Second-hand market conducted for charitable purposes. Licensed dealers in second-hand vehicles are exempted from certain provisions of the Act.

Second-hand dealers: − Must keep records for prescribed goods. − Records not required for goods temporarily returned for

repair/maintenance. − Reduced recording requirements apply if goods imported into

Australia. − The required records must be made as soon as possible after the

goods are bought/received. − In general, prescribed goods must be held for 10 days after receipt. − Auctioneers must keep certain records. − If transaction is by way of phone/fax etc. seller not required to

produce prescribed identification. Pawnbrokers: − Must keep prescribed records.

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LEGISLATION COVERAGE EXEMPTIONS CONDUCT OF BUSINESS − Unredeemed goods must be sold as soon as practicable.

Australian Capital Territory Second-hand Dealers and Collector Act 1906 Second-hand Dealers and Collectors Regulation Pawnbrokers Act 1984 Pawnbrokers Regulation 1994

Persons who deal in certain second-hand goods, including metal, clothes, boots, furniture, tools, jewellery, drapery. All pawnbrokers.

Advances or loans made by bankers, brokers, etc. or licensed auctioneers in the ordinary course of mercantile or banking transactions if the interest on any such loans or advances does not exceed the rate of 14% p.a.

Second-hand dealers: − Must keep prescribed records. − Must hold certain goods for 5 days after receipt. Pawnbrokers: − Must keep prescribed records. − Unredeemed goods on which $10 or more was lent, must be sold at

public auction.

Western Australia

Pawnbrokers and Second-hand Dealers Act 1994 Pawnbrokers and Second-hand Dealers Regulations 1996

Dealers in all second-hand goods, except such things as, books, scrap metal, clothes, furniture, household soft furnishings, household decorative goods, kitchenware and collectables. All pawnbrokers (financial bodies receiving goods under “buy back” contracts are not pawnbrokers).

Licensed auctioneers. Licensed firearms dealers. Licensed motor vehicle dealers.

Second-hand dealers: − Must keep records for prescribed goods. − Not mandatory to keep computer records. − In general, must hold certain goods for 14 days after receipt. − Certain requirements to obtain identification are not required if goods

are purchased outside Western Australia or at an auction. Pawnbrokers: − Must keep prescribed records. − Required to keep computer records. − Unredeemed goods must be sold as soon as practicable. − Must notify pawner of surplus of the proceeds of the sale.

Northern Territory

Consumer Affairs and Fair Trading Act Consumer Affairs and Fair Trading (Pawnbrokers and Second-hand Dealers) Regulations

All persons who deal in secondhand goods which are not exempt. Exempt goods include such items as books, scrap metal, clothing and furniture. All pawnbrokers (financial bodies receiving goods under “buy back” contracts are not pawnbrokers).

An auctioneer within the meaning of the Auctioneer Act. A dealer within the meaning of the Firearms Act. A motor vehicle dealer. A registered corporation, a bank or a financial institution. Trade-ins/disposal of goods pursuant to the Uncollected Goods Act. Selling of second-hand parts for

Second-hand dealers: − Must keep records for prescribed goods. − Must keep certified photograph of employees. − Employees must wear a name badge. − Records not required for goods temporarily returned for

repair/maintenance. − Must retain goods for 14 days. Pawnbrokers: − Must keep prescribed records. − Unredeemed goods must be sold as soon as practicable. − Must keep certified photograph of employees. − Employees must wear a name badge.

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LEGISLATION COVERAGE EXEMPTIONS CONDUCT OF BUSINESS motor vehicles. − Minimum redemption period of 1 month.

− Unredeemed goods must be sold as soon as practicable so as to receive the best market price reasonably obtainable.

− Must notify pawner of surplus of the proceeds of sale.

Tasmania

Second-hand Dealers and Pawnbrokers Act 1994

All second-hand dealers. All pawnbrokers.

Licensed auctioneers or real estate agents.

Second-hand dealers: − Must keep prescribed records. − In general, goods must be retained for 7 days after receipt. Pawnbrokers: − Must keep prescribed records. − Redemption period is 6 months. − Forfeited goods to be sold at auction unless under prescribed value.

Queensland

Second-hand Dealers and Collector Act 1984 Second-hand Dealers and Collectors Regulation 1994 Pawnbrokers Act 1984 Pawnbrokers Regulation 1994

Dealers or collectors in all second-hand goods, except such things as, books, stamps, goods refunded or exchanged, used video cassettes and tyres. All pawnbrokers.

Advances made by bankers, brokers, etc. in the ordinary course of business, on the security of anything taken as a pawn. Charities. Licensed auctioneers. Licensed motor dealers/motor salespersons. Licensed weapons dealers. Local governments. Person who acquires ownership of new goods and then lets or hires them. Registered banking or life insurance company, trustee company, friendly society or building society.

Second-hand dealers: − Must keep prescribed records. − Must hold certain goods for 7 days after receipt. Pawnbrokers: − Must keep prescribed records. − Unredeemed goods over $40 must be sold at public auction.

Second-hand Dealers and Pawnbrokers Regulations 2008 · PDF file4.10 Pawn Ticket and Notice...

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Transcript of Second-hand Dealers and Pawnbrokers Regulations 2008 · PDF file4.10 Pawn Ticket and Notice...