When a Tennessee pawnbroker buys gold or jewelry outright (no pawn loan), does the Scrap Jewelry Dealers Act also apply?

Subject

Opinion No. 12-101, Pawnbroker Compliance with Scrap Jewelry and Metal Dealers Act, October 31, 2012

Plain-English summary

Representative Dunn asked whether a licensed Tennessee pawnbroker who buys antique, used, or scrap jewelry or precious metals outright for resale (not as a pawn transaction where the customer can later redeem the item) must also comply with the Scrap Jewelry and Metal Dealers Act. The AG said yes.

Tennessee licenses pawnbrokers under the Tennessee Pawnbrokers Act of 1988 (Tenn. Code Ann. §§ 45-6-201 to -224). The Pawnbrokers Act lets a pawnbroker do two main things: (1) make loans secured by goods pledged as collateral (the classic pawn transaction under § 45-6-204(a)(1)), and (2) make "over-the-counter purchases of goods that the seller does not intend to buy back" (§ 45-6-204(a)(7)). Both activities are licensed by the county clerk under §§ 45-6-205 to -208.

The pivot is § 45-6-204(b), which says that except for pawn transactions defined in § 45-6-203(4)(A) (buy-sell agreements and traditional loan-of-money transactions), "no pawnbroker shall have the power as enumerated in this section without first complying with the law regulating the particular transactions involved." So when a pawnbroker steps outside the pawn-loan/buy-sell box, the other relevant statutes apply on top of the pawn license.

The defining feature of a pawn transaction is the customer's right to reacquire the property. If the customer is selling outright with no intention of buying back, that's not a pawn. It's a regular purchase. The Scrap Jewelry and Metal Dealers Act (Tenn. Code Ann. §§ 38-1-201 to -205) covers anyone "purchasing or otherwise dealing in antique, used or scrap jewelry and precious metals" for resale. By § 45-6-204(b), the pawnbroker must also comply with that statute.

The two statutory schemes also have different holding periods. § 45-6-204(a)(7) requires a pawnbroker to hold goods purchased over the counter for 20 business days before reselling. § 38-1-202(a) requires a scrap jewelry/precious metals dealer to hold antique, used, or scrap jewelry and precious metals for 30 days. The AG resolved the conflict by applying the specific-controls-general canon (Keough v. State): § 38-1-202(a) is specific to antique, used, or scrap jewelry and precious metals, while § 45-6-204(a)(7) is a general over-the-counter purchase rule. So the 30-day Scrap Jewelry Act holding period controls when the purchased items fall within both schemes.

The bigger picture: the two statutes work together. A pawn shop that takes in a gold chain as a pawn loan is operating under the Pawnbrokers Act. A pawn shop that buys a gold chain outright from a customer who isn't coming back has to comply with both the Pawnbrokers Act (for its license and over-the-counter purchase records) and the Scrap Jewelry and Metal Dealers Act (for the 30-day hold and recordkeeping).

Currency note

This opinion was issued in 2012. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Background and statutory framework

The Pawnbrokers Act

Tennessee Pawnbrokers Act of 1988 (Tenn. Code Ann. §§ 45-6-201 to -224) licenses pawnbrokers through the county clerk. § 45-6-209 requires daily transaction records to be delivered to local law enforcement within 48 hours. § 45-6-204(a)(1) authorizes pawn loans (with goods pledged as collateral). § 45-6-204(a)(7) authorizes outright over-the-counter purchases of goods the seller doesn't intend to buy back, with a 20-business-day holding period before resale.

§ 45-6-203(4)(A) defines a pawn or pawn transaction as either:

(i) a "Buy-sell" agreement where the pawnbroker holds the property at least 60 days giving the seller exclusive right to repurchase; OR

(ii) a "Loan of money" transaction with goods as security, redeemable on certain terms.

The common thread: the customer can reacquire the property.

§ 45-6-204(b) is the gating provision: except for pawn or buy-sell transactions, "no pawnbroker shall have the power as enumerated in this section without first complying with the law regulating the particular transactions involved."

The Scrap Jewelry and Metal Dealers Act

Tenn. Code Ann. §§ 38-1-201 to -205. § 38-1-201(a) covers anyone "purchasing or otherwise dealing in antique, used or scrap jewelry and precious metals, where the purchase is for resale in its original form or as changed by remounting, melting, reforming, remolding or recasting or for resale as scrap or in bulk." Such dealers register with the chief of police and sheriff of each city and county where they operate. §§ 38-1-202 to -203 set holding periods (30 days at § 38-1-202(a)) and recordkeeping requirements.

See also Tenn. Att'y Gen. Op. 12-98 (separate opinion on whether scrap jewelry dealers register with state Commerce or local police; answer: local).

Why the pawnbroker isn't exempt

§ 45-6-204(b) is the key. It says a pawnbroker's authority under § 45-6-204 (which includes over-the-counter purchases under (a)(7)) only exists when the pawnbroker complies with the laws governing those particular transactions. The Scrap Jewelry and Metal Dealers Act regulates outright purchases of antique, used, or scrap jewelry and precious metals for resale. So a pawnbroker doing that activity must also comply with the Scrap Jewelry and Metal Dealers Act, not just the Pawnbrokers Act.

How the holding-period conflict resolves

§ 45-6-204(a)(7) is the general rule for all over-the-counter pawnbroker purchases: 20 business days. § 38-1-202(a) is the specific rule for antique, used, or scrap jewelry and precious metals: 30 days. Keough v. State states the canon: a specific statute prevails over a general statute. So the 30-day rule applies to jewelry and precious metals; the 20-day rule applies to other categories of over-the-counter purchases.

The Pawnbrokers Act's own directive in § 45-6-204(b) reinforces this: a pawnbroker doing scrap jewelry/precious metals purchases must comply with all other applicable laws, including the 30-day hold.

What's NOT affected

Traditional pawn transactions under § 45-6-203(4)(A): pawn loans where the borrower can redeem the pledged goods, and buy-sell agreements where the seller has a 60-day exclusive right to repurchase. Those are pawn transactions under the Pawnbrokers Act only. The Scrap Jewelry and Metal Dealers Act doesn't apply to them.

Common questions

My pawn shop just took in a gold ring as a pawn loan. Does the 30-day Scrap Jewelry hold apply?
No. A pawn loan is a § 45-6-203(4)(A)(ii) pawn transaction. The Scrap Jewelry and Metal Dealers Act doesn't apply. The Pawnbrokers Act controls.

A walk-in just sold me a gold ring outright with no plan to buy it back. What now?
You must comply with both statutes. Register your jewelry-purchase business with the chief of police and sheriff under § 38-1-201(a) (if not already registered), keep the Scrap Jewelry and Metal Dealers Act records, and hold the ring for at least 30 days under § 38-1-202(a) before melting, remounting, or reselling it.

Does this opinion turn every pawn shop into a scrap jewelry dealer?
Only when the shop actually buys jewelry or precious metals outright for resale. A pawn shop that only does pawn loans doesn't fall under the Scrap Jewelry and Metal Dealers Act.

What if the goods aren't jewelry or precious metals (say, electronics or tools)?
The Pawnbrokers Act's 20-day over-the-counter holding rule (§ 45-6-204(a)(7)) applies. Other categories of goods may trigger other regulatory schemes (e.g., the Scrap Metal Dealers Act for non-precious metals). The general principle of § 45-6-204(b) is that a pawnbroker doing non-pawn business must comply with whatever other laws regulate that business.

Did the 2012 amendments to either statute change this analysis?
The opinion notes 2012 Tenn. Pub. Acts 969 (expanding Department of Commerce and Insurance authority over scrap metal dealers, effective July 1, 2012) and 2012 Tenn. Pub. Acts 675 (amending holding-period rules for scrap jewelry). The AG analyzes the law as in effect at the time of the opinion.

Citations

Statutes:

• Tenn. Code Ann. §§ 38-1-201 to -205 (Scrap Jewelry and Metal Dealers Act of 1980)
• Tenn. Code Ann. § 38-1-201(a) (scope and local registration)
• Tenn. Code Ann. § 38-1-202(a) (30-day holding period)
• Tenn. Code Ann. §§ 38-1-202 to -203 (record-keeping rules)
• Tenn. Code Ann. §§ 45-6-201 to -224 (Tennessee Pawnbrokers Act of 1988)
• Tenn. Code Ann. § 45-6-203(4)(A) (pawn transaction definitions, buy-sell and loan of money)
• Tenn. Code Ann. § 45-6-204 (pawnbroker authorities)
• Tenn. Code Ann. § 45-6-204(a)(1) (pawn loans)
• Tenn. Code Ann. § 45-6-204(a)(7) (over-the-counter purchases, 20-day hold)
• Tenn. Code Ann. § 45-6-204(b) (compliance with other applicable laws)
• Tenn. Code Ann. §§ 45-6-205 to -208 (licensing)
• Tenn. Code Ann. § 45-6-209 (daily transaction reporting)
• Tenn. Code Ann. § 45-6-210 (fees and interest)
• Tenn. Code Ann. §§ 45-6-209, -211, -213, -219, -221 (additional regulatory provisions)

Cases:

• Wlodarz v. State, 361 S.W.3d 490 (Tenn. 2012)
• Keough v. State, 356 S.W.3d 366 (Tenn. 2011)

Source

• Landing page: https://www.tn.gov/attorneygeneral/opinions.html
• Original PDF: https://www.tn.gov/content/dam/tn/attorneygeneral/documents/ops/2012/op12-101.pdf

Original opinion text

S T A T E O F T E N N E S S E E
OFFICE OF THE
ATTORNEY GENERAL
PO BOX 20207
NASHVILLE, TENNESSEE 37202

October 31, 2012

Opinion No. 12-101

Pawnbroker Compliance with Scrap Jewelry and Metal Dealers Act

QUESTION

If a pawnbroker licensed in the State of Tennessee purchases antique, used or scrap jewelry or precious metals for the purpose of resale, either in the original or an altered form, then is the pawnbroker acting as a scrap jewelry or metal dealer subject to regulation under Tenn. Code Ann. §§ 38-1-201 to -205?

OPINION

Yes.

ANALYSIS

Pawnbrokers conducting business in Tennessee are subject to licensure and regulation under the Tennessee Pawnbrokers Act of 1988, codified at Tenn. Code Ann. §§ 45-6-201 to -224 (hereinafter the "Pawnbrokers Act"). A pawnbroker must obtain a license from the county clerk in the county in which he or she is conducting business. Tenn. Code Ann. §§ 45-6-205 to -208. A pawnbroker also must maintain a detailed daily record of pawn transactions and deliver this record to the appropriate law enforcement agency within forty-eight hours following the day of the transactions. Tenn. Code Ann. § 45-6-209.

A licensed pawnbroker is authorized to engage in the business activities set forth in Tenn. Code Ann. § 45-6-204. In addition to making loans on the security of goods pledged as a pawn transaction under Tenn. Code Ann. § 45-6-204(a)(1), pawnbrokers also are authorized to make over the counter purchases of goods that the seller does not intend to buy back. Tenn. Code Ann. § 45-6-204(a)(7). Such goods could include antique, used or scrap jewelry and precious metals.

Scrap jewelry and metal dealers are subject to regulation under the Scrap Jewelry and Metal Dealers Act of 1980, codified at Tenn. Code Ann. §§ 38-1-201 to -205 (hereinafter the "Dealers Act"). The Dealers Act applies to "[a]ny person, firm, or corporation purchasing or otherwise dealing in antique, used or scrap jewelry and precious metals, where the purchase is for resale in its original form or as changed by remounting, melting, reforming, remolding or recasting or for resale as scrap or in bulk." Tenn. Code Ann. § 38-1-201(a). The Dealers Act is similar to the Pawnbrokers Act in that it contains defined holding periods as well as detailed record keeping and reporting requirements. Compare Tenn. Code Ann. §§ 38-1-202 to -203 with Tenn. Code Ann. §§ 45-6-209, -211, -213, -219 & -221.

The question posed is whether a licensed pawnbroker is subject to regulation under the Dealers Act if the pawnbroker purchases antique, used or scrap jewelry or precious metals for the purpose of resale, either in an original form or as altered. Tenn. Code Ann. § 45-6-204(b) of the Pawnbrokers Act provides that notwithstanding the provisions of this section setting forth the authority granted to licensed pawnbrokers "except for a pawn or pawn transaction authorized by Acts 1995, ch. 186 [now codified at Tenn. Code Ann. § 45-6-203(4)(A)], no pawnbroker shall have the power as enumerated in this section without first complying with the law regulating the particular transactions involved." (Emphasis added).

Tenn. Code Ann. § 45-6-203(4)(A) defines pawn or pawn transaction as either of the following:

(i) "Buy-sell" agreement means any agreement whereby a pawnbroker agrees to hold a property (pledged goods) for a specified period of time not to be less than sixty (60) days to allow the seller the exclusive right to repurchase the property. A buy-sell agreement is not a loan of money, but shall still meet all recording procedures to law enforcement officers as with a pawn transaction; or

(ii) "Loan of money" transaction means any loan on the security of pledged goods and being a written bailment of pledged goods as a security lien for the loan, for the cash advanced, interest and fees authorized by Acts 1995, ch. 186 [now codified at Tenn. Code Ann. § 45-6-210], redeemable on certain terms and with the implied power of sale on default.

Under the plain language of this definition, the distinguishing characteristic of a pawn or pawn transaction is that the debtor or seller has the legal right to reacquire possession or title of the property. A transaction where the seller has no such intent is not a pawn or pawn transaction and is, therefore, subject to any other laws and regulations that may govern the transaction pursuant to Tenn. Code Ann. § 45-6-204(b) of the Pawnbrokers Act. As such, a pawnbroker who acquires scrap jewelry or precious metals from a seller who does not intend to buy back the item must comply with the statutes governing the purchase and sale of scrap jewelry and precious metals set forth in the Dealers Act. See Wlodarz v. State, 361 S.W.3d 490, 496 (Tenn. 2012) (stating the general rule of statutory construction that, when a statute is clear in its purpose and intent, courts will apply its plain meaning without complicating the task).

The provisions of Tenn. Code Ann. § 45-6-204(a)(7) do not dictate a different result. That statute provides that a pawnbroker may "[m]ake over-the-counter purchases of goods that the seller does not intend to buy back" and that "[t]he pawnbroker shall hold the goods for a period of not less than twenty (20) business days before offering the merchandise for resale." The twenty-day holding period required in § 45-6-204(a)(7) is shorter than the thirty-day holding period required in Tenn. Code Ann. § 38-1-202(a) for antique, used or scrap jewelry and precious metals. However, Tenn. Code Ann. § 45-6-204(a)(7) addresses the broad category of all goods obtained for resale by a pawnbroker, whereas Tenn. Code Ann. § 38-1-202(a) is limited specifically to antique, used or scrap jewelry and precious metals. Thus the longer holding period required by the Dealers Act would apply to antique, used or scrap jewelry and precious metals obtained by a pawnbroker for resale, especially given the Pawnbroker Act's directive that in such cases a pawnbroker must comply with all other applicable laws. Tenn. Code Ann. § 45-6-204(b). See also Keough v. State, 356 S.W.3d 366, 371 (Tenn. 2011) (recognizing the generally accepted rule of statutory construction that a special or specific statute will prevail over a general provision in another statute).

ROBERT E. COOPER, JR.
Attorney General and Reporter

WILLIAM E. YOUNG
Solicitor General

RACHEL JRADE-RICE
Assistant Attorney General

Requested by:
Honorable Bill Dunn
State Representative
16th Legislative District
115 War Memorial Building
Nashville, TN 37243