For years now, a nagging question has been whether precious metals retailers that offer buybacks must register as pawnbrokers. Common sense would tell one that they are not for a couple of reasons, the most obvious being that national precious metals retailers are not pawnbrokers. Indeed, the obvious goal of the pawnbroker statute is to attack the problem of stolen jewelry being hawked to pawnbrokers.

But there are a couple of concerns, the most important of which is that precious metals dealers fall within the ambit of the statutory definitions of “precious metals dealers.” Let’s take Ohio as an example. Ohio’s pawnbroker statute is not referred to as a pawnbroker statute. In fact, its first section is entitled “Precious metal dealer definitions.” And the statutory definition is clearly broad enough to cover major precious metals retailers that offer and effectuate buybacks. Moreover, the statute contains a lengthy list of exemptions that do not apply to retailers. The closest exemption states: “Any purchase of coins, hallmark bars, registered ingots, and other items as numismatic objects, and not for their content of precious metals.” This exemption would certainly not apply to bullion buybacks.

Another exemption comes close to applying, but only if both the buyer and seller “by their respective avocations as collectors, speculators, or investors hold themselves out as having knowledge or skill particular to such articles… .” This exemption would not apply to most of our retail precious metals companies.

More than one violation of the statute is a felony. So why not just register to play it safe?  Because the record keeping and reporting requirements of the statute are impossible to comply with as a national precious metals retailer. For example,

      Every person licensed under this chapter shall keep and use books and forms            approved by the superintendent of financial institutions, which shall disclose, at          the time of each purchase, a full and accurate description including identifying            letters or marks thereon of the articles purchased, with the name, age, place of          residence, driver's or commercial driver's license number or other personal                identification, and a short physical description of the person of the seller. The              licensee also shall write in the book the name of the maker. The licensee shall            keep the books in numerical order at all times at the licensed location, open to            the inspection of the superintendent or chief of or head of the local police                    department, a police officer deputed by the chief or head of police, or the chief            executive officer of the political subdivision thereof. Upon demand of any of                these officials, the licensee shall produce and show an article thus listed and              described which is in the licensee's possession.

So, you see our point. This section clearly reveals the statute as being directed at pawnbrokers buying metals like jewelry from strangers walking off the street through their storefront. This impossibility to comply issue leaves us in a quandary and is the basis for our refraining from urging national precious metals dealers to register under these statutes.

For questions about statutes that may impact your business, contact Cosgrove Law Group.