Secondhand Dealers and Pawnbrokers Bill

, on behalf of the Minister of Justice: I move, That the Secondhand Dealers and Pawnbrokers Bill be now read a second time. This bill radically reforms the legislation relating to both second-hand dealers and pawnbrokers. It is part of a package of measures being implemented by the Government to combat property crime.

When this Government was elected in 1999 it committed itself to cracking down on burglary. For too long burglary had not been treated as a serious crime. Since then, burglary cases have dropped from around 75,000 cases per year to around 60,000 cases per year. That is a significant improvement. Further, the resolution rate for burglary has also improved from just 11 percent in 1999 to 17 percent last year. That is a huge improvement, and we intend to do better. Those improvements reflect the support this Government has given to the police, through record police numbers, a record police budget of more than $1 billion a year, and an increased police focus on burglary as a serious crime. This bill follows the Government’s recent toughening up on DNA legislation, which means that DNA evidence can now be used to link suspects to burglaries and to improve further the resolution rate for those crimes.

This bill has two main objectives—first, to make it harder for criminals to dispose of stolen goods through second-hand dealers and pawnbrokers and, second, to make it easier for the police to recover stolen goods or solve property crimes. Both the Secondhand Dealers Act and the Pawnbrokers Act are hopelessly outdated laws. They do not reflect either the modern industries they are supposed to be regulating, or the sorts of goods that are of particular interest to burglars and, therefore, to the police. For example, the Secondhand Dealers Act still concerns itself with the disposal of fur coats and gramophones instead of computers, cellphones, DVD players, and the like. There have been few amendments to either Act since they originally came into force. Reform is now urgently needed.

There is currently no requirement for either second-hand dealers or pawnbrokers to verify the identity of their customers. Under the bill, both second-hand dealers and pawnbrokers will be required to verify the identity of people who sell or pledge goods to them—in most cases, by sighting an approved photo ID. That will make it harder for people who knowingly try to pass on stolen goods, and it will assist the police in tracing where the stolen goods ending up in dealerships have come from.

Under the bill, second-hand dealers and pawnbrokers will be required to comply with various record-keeping and labelling requirements in order to keep track of the origins of goods in their possession. The Law and Order Committee recommended a number of changes to those provisions, which will simplify the requirements related to record-keeping whilst ensuring that the information available to the police is of high quality.

With regard to retention requirements, the bill replaces the outdated list of furs, suits, and gramophones with a new and more generalised list of second-hand goods that must be retained for 14 days. That list includes items that are frequently targeted by burglars, such as compact discs, computers, cameras, and so on. The definitions are fairly generalised, in order to accommodate the future popularity of goods that might not yet be in common circulation. Retention of those goods for 14 days will give the police an opportunity to ascertain whether the goods have, in fact, been illegally acquired and passed on to dealers.

The bill provides for the licensing of second-hand dealers and pawnbrokers. One licence will now cover both second-hand dealing and pawnbroking. It also requires key individuals associated with second-hand dealing and pawnbroking businesses to be licensed in their own right. The select committee has recommended a number of changes to clause 6, which sets out who is to be regarded as engaging in the business of second-hand dealing, and who is not. Those changes improve the clarity of that clause. Compliance costs for second-hand dealers and pawnbrokers have been kept as low as they reasonably can be, while being mindful of the objectives of the legislation.

Although the reforms envisaged by this bill are primarily aimed at making it harder for criminals to dispose of stolen goods and easier for the police to solve property crimes, the bill’s provisions also have a consumer protection component, particularly in relation to the duties of pawnbrokers. Pawnbrokers will now be required to retain goods pledged to them for a 3-month minimum, unless they are redeemed before that date. After that, if a pledge is unclaimed they will be obliged to offer it for sale.

The bill specifies restrictions on how the pledge might initially be offered for sale. If the redemption price is not reached at that initial offering, the goods may then be sold by any means the pawnbroker chooses, as long as that is calculated to reach the best price. The committee recommended that the bill be amended to make it possible to offer the unredeemed pledge by Internet auction as well as public auction, at the initial offering. That recognises that the Internet auction is a common way of selling goods today, but still provides a way of selling that is transparent.

I also intend to move a Supplementary Order Paper during the Committee stage to allow pawnbrokers to purchase unredeemed pledges they have accepted—providing they do that only by way of an unconditional contract and only if both parties agree. That amendment will introduce some flexibility into the disposal of unredeemed goods, while not unduly placing at risk consumers’ interests in achieving a fair price for their goods.

Currently, promoters of markets and fairs are not required to keep records of who is selling second-hand goods at their fair or market. This bill places record-keeping requirements on such promoters, in order to assist the police. The requirements are not onerous. The committee recommended that similar provisions be introduced for Internet auctioneers. That reflects the increasing popularity of the Internet as a means of selling used goods, and is a major improvement to the bill.

In respect of enforcement, the police will be entitled to search registers, and to inspect any and all goods held by licensees for the purposes of second-hand dealing or pawnbroking. Those are powers the police are already able to exercise under the current law, but the improved information available to them—for example, verified identities of those who supply goods—will greatly improve the effectiveness of such inspections.

Penalties in the bill will be much higher than the existing penalties in the Secondhand Dealers Act or Pawnbrokers Act. The maximum financial penalty under the current Secondhand Dealers Act is just $200 and under the Pawnbrokers Act is just $100. Those penalties are far too low to provide any deterrent effect. The maximum penalty under this bill for unlicensed trading as a second-hand dealer or pawnbroker will be $20,000. Penalties for failure to comply with the obligations in relation to, for example, keeping a register, will now be punishable by fines of up to $10,000.

This bill represents an important reform that will bring second-hand dealing and pawnbroking into the 21st century. It will make it harder for burglars to dispose of stolen goods via such dealers, and it will make it easier for the police to track down criminals if they try to do that. It is another move by the Government in support of the police to crack down on burglary, and these efforts are already beginning to deliver. I thank the Law and Order Committee for the work it has done on this bill, and I commend the bill to the House.

I do not know whether it has escaped other members’ attention but it is very obvious to members on this side of the House that every Minister of the Government who has spoken on a bill this week has given some defence of the Government’s management of the law and order system in New Zealand. Every single one of them has ponied out the tired old myth that the crime rate is coming down in New Zealand. The fact is that violent crime is going up, and the chances of people being bashed, mugged, or attacked by someone on parole are the highest they have ever been in this country.

I would like to talk about the Secondhand Dealers and Pawnbrokers Bill. I must say that at the Law and Order Committee it was a most interesting bill on which to sit, not so much because of issues related to second-hand dealers but particularly because of issues associated with pawnbrokers. For those who have not had much experience with that subject, I can tell them it was fascinating to learn about the role that pawnbrokers have played in the history and development of the world. Indeed, Christopher Columbus’s exploration of the Americas was funded by the Spanish royal family pawning their Crown jewels. That raised sufficient to enable Columbus to go to the Americas and bring back great wealth and prosperity to the Spaniards.

It was also fascinating to hear about the sort of people who use pawnbroking services. We discovered that it is not necessarily poor people under significant financial pressure who use those services; it is often people who just need some assistance with their cash flow. We were told of people from a wide variety of social groups who, for example, would bring in some jewellery or watches to a pawnbroker for a very short period of time, in order to assist themselves with their cash flow. It is clear that pawnbroking is a service used by many people in the community.

Select committee members spent a lot of time in trying to assure themselves that the compliance costs that would burden second-hand dealers, pawnbrokers, and those running community craft markets and flea markets involving people who sold second-hand goods would not be significant. We are confident that the changes made should not be an excessive burden on people involved in those businesses.

The National Party would like recorded that it has an amendment in respect of clause 54, and I draw members’ attention to that clause in the reported-back bill. The provision requires primarily that pawnbrokers who have pledges they wish to redeem, should redeem those at auctions. Now, why do people go to auctions? They go to auctions because they expect to get a good deal—a cheap deal. So what we are doing in this clause is saying that the pawnbroker, in order to redeem a pledge, must take it to an auction, and even if the price is hopeless the pawnbroker still has to accept it—it has to be the price. If the pawnbroker gets no price, then the pawnbroker can look at other options. But if someone goes along to an auction expecting to get a cheap deal, gets a bid accepted, and gets the price of a cheap deal, then that is the residual price or value the pawnbroker gets to defray costs, and the person who owns the asset—the pledger—gets the net proceeds. We do not think that that is good for the people pledging their assets.

We think that many pawnbrokers actually want to act in the interests not only of themselves but also of the people who have pledged with them, because they want those people’s repeat business. We think there should be an option that says to pawnbrokers that if they reasonably believe they can get a better deal by putting those pledged assets for sale on shelves in their second-hand shops or at their pawnbroking businesses, then they should be able to do that. Auctions are great for cheap deals, but they are not necessarily great for getting the best net proceeds for people who have pledged their assets. So we have an amendment to introduce in respect of that provision, and we look forward to support from other parties for that amendment.

I say in conclusion that the National Party is happy to support this bill. We participated strongly on the select committee to get amendments to a number of what we thought were unworkable and burdensome provisions in this bill. I think those have been tidied up. We still have some concerns, but we think the bill goes a long way towards addressing what is an important concern. At the end of the day, the best way to prevent stolen goods from being sold through second-hand dealers, in pubs, or off the backs of lorries is for the community not to buy them. While that may be easy to say, I believe that it would be the best way to actually end those trades.

I rise to indicate that New Zealand First will continue to support the passage of this legislation, and to congratulate the Government. It is interesting that in the last two bills I have had to debate on behalf of New Zealand First, I have made it very clear to the Government that I totally opposed the legislation it brought to this House. I totally opposed the reason and the rationale for it, and I tried my best to articulate New Zealand First’s reasons why. I did articulate in the last debate that I thought we possibly did not need to have that last bill in the House. We could have been moving on with legislation the Government had that New Zealand First supported and was keen to see passed into law.

This is one such piece of legislation, and I will say, firstly, congratulations to the Government on dealing with this issue, and congratulations to the entire Law and Order Committee. It was something of a revelation. I think this legislation, the updating and amending of the legislation in so far as second-hand dealers and pawnbrokers are concerned, is something that has been at the forefront of the minds of police officers and criminal investigative staff for a very long time. The reasons are very clear. Second-hand shops are places where in the past—and hopefully we will soon be able to say it is in the past—stolen goods were most often fenced, got rid off, and moved on at profit to the underworld, the organised crime elements within our society. Indeed, I have had some very blunt and frank discussions with members of our police force on occasions, and if they had had their way, they would have had certain second-hand and pawnbrokers’ shops, particularly in the Christchurch area, shut down and put out of business a decade ago. In their minds, those people are nothing more than a front for organised crime.

Regrettably, those sorts of activities stigmatise and bring into disrepute people who are legitimate second-hand dealers and pawnbrokers, who do their very best to cooperate with the police to ensure that nothing illicit passes across their tables. It is an area fraught with difficulties in terms of law enforcement, and it is very timely that this issue is being brought to the Law and Order Committee and dealt with as promptly as it has been. When I say promptly, I see that the bill was introduced to the House on 5 June 2003, and here we are—maybe not so promptly—on 1 July 2004, finally working our way towards the third reading. I suggest we would be much further down the road if we had not had some of other rubbish legislation brought to the House and distracting us.

I will simply say that this legislation is good legislation. It has been worked through well. The issues have been well discussed and well canvassed. The select committee worked as a team under the chairmanship of Martin Gallagher and the deputy chairmanship of Marc Alexander, and I think the results are good. I note the Hon Tony Ryall’s intention to move an amendment to clause 54. I also note that the select committee unanimously put in a new clause that strikes out the original. I am still of the mind that that new, unanimously agreed clause is the right way to go, but I will listen to the debate and then indicate where New Zealand First will finally come down.

But I do think that a public auction conducted by a person who is not the pawnbroker, or the pawnbroker’s spouse or de facto partner, or an employee of that particular pawnbroker, is the sensible way to go. It removes conflict of interest, and that is the issue we discussed at some length and the officials tried to work through. But we are listening, and if there are more compelling arguments, who knows, we might be able to support them.

I guess at the end of the day—and the comment has been touched on—all of this is no use at all if the law enforcement agencies do not have the resources to deal with organised crime, burglaries, robberies, and those who get rid of, fence, or distribute stolen property. All this legislation amounts to nothing if we do not resource the police accordingly so that they can enforce it. I have huge reservations about whether our police will be able to actively enforce the law and tighten up on organised criminal elements who take advantage of second-hand dealerships, because they simply do not have the numbers. I have huge reservations because we still continue to see policemen and women, who are supposedly in the police force to carry out general duties and investigative work, being siphoned off and ring-fenced around traffic policing and quota ticketing. Those are my concerns.

Whilst we continue to see that sort of administration within the police force then, I am sorry, but we will continue to see organised crime flourish. I would much rather that this bill was supported by a commensurate all-out attack on organised crime, a move to criminalise membership of gangs and organised criminal elements and seriously put them out of business, thereby reducing the need for us to pay such close scrutiny to second-hand dealers and pawnbrokers, who, in the main, are legitimate, honest folk. New Zealand First will be supporting the second reading of this bill.

I rise to speak briefly on behalf of the ACT party. We support this legislation. It is good to see a tidy-up of old legislation with a new piece that is a mechanical, sensible, and practical. In this sort of consumer legislation, we do not have to put up with the usual old garbage that tries to go down the path of a balance of power between the consumer and the vendor, as we saw in the consumer credit legislation. The intent of the bill is to make it more difficult for criminals to dispose of stolen goods. The bill does balance the issues there, because, as Ron Mark said, the majority of second-hand dealers are honourable and honest people, but there are the car-boot sales in the parking lot.

The other issue that should be commended in this bill is that the ID requirements are not too onerous. For instance, the bill actually allows the second-hand dealer to confirm identification by personal knowledge. That is, if the client is already known to the dealer, that is enough to comply with the legislation. The dealer does not have to get the client to produce a photo ID every single time he or she buys goods.

There is a huge amount of “buyer beware” in this area of consumer transactions. I do not think that we should ever go down the path where we over-regulate and people do not take responsibility for their own actions. That said, we will never totally eradicate the people who say “I bought it off a guy in a pub.” or “It fell off the back of a truck.” But as I said, the ACT party supports this legislation, and we will be voting in favour of it.

I rise for United Future to offer our point of view on the Secondhand Dealers and Pawnbrokers Bill, and will not take too much of the House’s time in doing so. Most of my concerns have been set out in Supplementary Order Paper 236, and there are quite a few amendments there. What I would like to do is focus on a few minor areas that I think would make this bill a much better bill.

We consider clause 6(2A), for example, to be unnecessarily restrictive in arbitrarily setting 6 or more days, or $2,000 in value of traded goods, as the benchmarks for meeting the criterion of being a second-hand dealer. We think that is restrictive in this day and age, and see no reason why the amount should be quite as low as that. Moreover, clause 44A(2)(a) limits the resale value to a minimum of $40. That is the threshold for separate identification as a single article—that is, in cases where one is selling a CD collection, a set of bottles, or whatever. I think $40 is a little bit too low for that, so I have suggested in my Supplementary Order Paper that we actually look at $100 as being a much more reasonable amount. The sum of $40 really does not cover very much, and anybody who has gone to a garage sale with $40 does not usually come away with very much. If one does, it is not something one wants to keep for very long. It is usually a present for somebody else, or one might offload it for a $5 profit—but I am speaking as a capitalist at heart.

Clause 48B and the consequential clause 57(1)(aa) are not supported by United Future, as they impose restrictions on pawnbrokers conducting their activities in premises other than their normal place of business. It seems reasonable to me that if a person has had a business arrangement with a pawnbroker over a number of years, and that person becomes incapacitated, or there is some other reason why that person would like the pawnbroker to come to his or her place to conduct business, it seems unnecessarily restrictive, in the normal course of trade, to disallow that. I see that provision as going against the grain of good commerce. At the end of the day it is very good policy to allow pawnbrokers, or any other dealer—

💬 Hon Member: Car dealers are allowed to move around.

Well, car dealers are allowed to move around, but to go to the clients and conduct the business at their convenience is to provide a service, and, after all, that is part and parcel of what good old capitalism can do for this country.

United Future does not support clause 54 in its entirety as it places a restriction on freedom to trade on a best-practice basis. And that is exactly what I have been talking about: the customer should come first, as every good capitalist knows, and if securing the sale means going to the customer’s place of business to conduct business, then that is the way to do it. It is service, after all, that hospitality in this country prides itself on.

We will be supporting this bill all the way through the House. I would like to thank the members of the Law and Order Committee for working together very constructively. It is a good bill. It is a bill that is being pushed forward by Labour very reasonably, and it addresses a lot of the problems people have had with pawnbrokers and second-hand dealers. For the most part it is legislation that I think will stand up and will not need immediate amendment. So United Future will support it.

Bill read a second time.

Instruction to Committee