California Pawnbroker Bond: A Comprehensive Guide
This guide provides information for insurance agents to help their customers obtain a California Pawnbroker bond.
At a Glance:
- Lowest Cost: $100 per year or $10 per month, based on the applicant’s credit
- Bond Amount: $20,000
- Who Needs it: All pawnbrokers operating in California
- Purpose: To protect the public from financial harm if the pawnbroker dealer violates the terms of their license
- Who Regulates Pawnbrokers in California: The California DOJ Secondhand Dealer and Pawnbroker Unit
Background
California Financial Code 21300 requires all pawnbrokers operating in the state to obtain a license from their local law enforcement agency before conducting business. The California legislature enacted the licensing requirement to ensure that pawnbrokers engage in ethical business practices. To provide financial security for the enforcement of the licensing law, pawnbrokers must purchase and maintain a $20,000 surety bond to be eligible for licensure.
Additionally, pawnbrokers who do not have at least $100,000 in readily available liquid assets or do not wish to submit a financial statement must also purchase a $100,000 surety bond to be eligible for licensure (more on this later).
What is the Purpose of the California Pawnbroker Bond?
California requires pawnbrokers to purchase a surety bond as part of the application process to obtain a pawnbroker license. The bond ensures that the public will be protected from financial harm if the broker fails to comply with the regulations set forth in the California Financial Code 21303. Specifically, the bond protects the public in the event the broker engages in any acts of fraud or mishandles a customer’s collateral. In short, the bond is a type of insurance that protects the public if the pawnbroker violates the terms of their license.
How Can an Insurance Agent Obtain a California Pawnbroker Surety Bond?
BondExchange makes obtaining a California Pawnbroker surety bond easy. Simply login to your account and use our keyword search to find the “Pawnbroker” bond in our database. Don’t have a login? Gain access now and let us help you satisfy your customers’ needs. Our friendly underwriting staff is available by phone (800) 438-1162, email or chat from 7:30 AM to 7:00 PM EST to assist you.
At BondExchange, our 40 years of experience, leading technology, and access to markets ensures that we have the knowledge and resources to provide your clients with fast and friendly service whether obtaining quotes or issuing bonds.
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Is a Credit Check Required for the California Pawnbroker Bond?
Surety companies will run a credit check on the applicant to determine eligibility and pricing for the California Pawnbroker bond. Applicants with excellent credit and work experience can expect to receive the best rates. Applicants with poor credit may be declined by some surety companies or pay higher rates. The credit check is a “soft hit”, meaning that the credit check will not affect the applicant’s credit.
How Much Does the California Pawnbroker Bond Cost?
The California Pawnbroker bond can cost anywhere between $200 to $1,000 per year or $20 to $100 per month. Insurance companies determine the rate based on a number of factors including your customer’s credit score and experience. The chart below generally offers a quick reference for the approximate bond cost for the $20,000 bond requirement and the $100,000 bond requirement.
$20,000 Pawnbroker Bond Cost
| Credit Score | Bond Cost (1 year) | Bond Cost (1 month) |
|---|---|---|
| 625+ | $200 | $20 |
| 600 – 624 | $520 | $52 |
| 575 – 599 | $600 | $60 |
| 500 – 574 | $1,000 | $100 |
$100,000 Pawnbroker Bond Cost
| Credit Score | Bond Cost (1 year) | Bond Cost (1 month) |
|---|---|---|
| 625+ | $1,000 | $100 |
| 600 – 624 | $2,600 | $260 |
| 575 – 599 | $3,000 | $300 |
| 500 – 574 | $5,000 | $500 |
*The credit score ranges do not include other factors that may result in a change to the annual premium offered to your customers, including but not limited to, years of experience and underlying credit factors contained within the business owner’s credit report.
Who is Required to Purchase the Bond?
California requires all pawnbrokers to purchase a $20,000 surety bond as a prerequisite to obtaining a pawnbroker license. To paraphrase California Financial Code 21000, a pawnbroker is a person who issues loans to individuals that leave their property, as collateral, for the broker to sell on condition that the customer may repurchase the property within a fixed period of time.
California Financial Code 21304 requires pawnbrokers to file a financial statement with their local law enforcement agency which verifies that the pawnbroker has at least $100,000 in liquid assets readily available for use. If a pawnbroker does not meet this requirement or does not wish to submit a financial statement, the pawnbroker must also purchase a $100,000 surety bond to be eligible for licensure.
BondExchange now offers monthly pay-as-you-go subscriptions for surety bonds. Your customers are able to purchase their bonds on a monthly basis and cancel them anytime. Learn more here.
How Do California Pawnbrokers Obtain a License?
Pawnbrokers in California must navigate several steps to secure a pawnbroker license. Below are the general guidelines, but applicants should contact their local law enforcement agency or refer to the Department of Justice’s licensing instructions for details on the process.
License Period – All California Pawnbroker Licenses are valid for two years from the date of issuance and must be renewed before the expiration date.
Step 1 – Contact Your Local Law Enforcement Agency
In order to obtain a license, pawnbrokers must first contact their local law enforcement agency. The agency will walk them through the application process, provide them with all required forms, and answer any questions they may have accordingly. All license applications will, at a minimum, require the following items:
-
- The broker’s full name and business name
- A record of all criminal convictions
- A full set of the broker’s fingerprints
- A copy of the broker’s drivers license or ID
Pawnbrokers must submit a $300 application fee payable by check or money order, and all applicants are also subject to a background check. Once reviewed by the law enforcement agency, approved applicants should be notified within 30 days of submitting the application.
Step 2 – Purchase a Surety Bond
Pawnbrokers operating in California are required to purchase and maintain a $20,000 surety bond. If a pawnbroker does not have $100,000 readily available in liquid assets or does not want to submit a financial statement, they must also purchase a $100,000 surety bond.
How do California Pawnbrokers Renew Their Licenses?
Pawnbrokers should contact their local law enforcement agency to obtain a renewal application before their license expires. All California Pawnbroker Licenses are valid for two years from the date of issuance and must be renewed before the expiration date.
What are the Insurance Requirements for California Pawnbrokers?
California does not require pawnbrokers to purchase any form of liability insurance before obtaining a license. However, brokers may need to obtain insurance as a prerequisite to obtaining a local business license. Pawnbrokers must purchase and maintain a $20,000 surety bond. Pawnbrokers must also purchase a $100,000 surety bond if they do not have $100,000 readily available in liquid assets or do not wish to submit a financial statement.
How Do California Pawnbrokers File Their Bonds?
Pawnbrokers should submit their completed bond forms, including the power of attorney, to their local law enforcement agency.
The surety bond requires signatures from both the surety company that issues the bond and from the broker. The surety company should include the following information on the bond form:
- Legal name, city, and state of the entity/individual(s) buying the bond
- Surety company’s name and state of incorporation
- Bond amount and premium amount
- Date the bond is signed and goes into effect
What Can California Pawnbrokers do to Avoid Claims Made Against Their Bonds?
To avoid claims against their bonds, pawnbrokers in California must ensure that they:
- Do not engage in any acts of fraud
- Do not breach contracts made with consumers
- Do not mishandle a customer’s collateral
What Other Insurance Products Can Agents Offer Pawnbrokers in California?
California does not require pawnbrokers to purchase liability insurance before obtaining a license. However, most reputable businesses will purchase this insurance anyway. Bonds are our only business at BondExchange, so we do not issue any other types of insurance, but our agents often utilize brokers for this specific line of business. A list of brokers in this space can be found here.
How Can Insurance Agents Prospect for California Pawnbroker Customers?
California unfortunately does not provide a public database of active pawnbrokers in the state. However, we suggest contacting the DOJ Secondhand Dealer and Pawnbroker Unit for a list of licensed pawnbrokers. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.
