By CHARLENE KOMAR STOREY
When Michael Mack gets in a shipment of ultra-high-end handbags, he doesn’t have to wonder about the best way to move the expensive merchandise. The same is true when a carton full of distinctive Tiffany blue boxes filled with gleaming jewelry arrives.
Mack simply tweets the news to his loyal customers, many of whom will rush in to add another Hermes, Chanel or Alexander McQueen to their collection of clutches and purses. Then he adds the new accessories to his Web page, www.max-pawn. The most luxurious items also — and, in some cases only — land at the Max Pawn and Jewelry Booth on bonanza.com.
Other kinds of Mack’s merchandise, such as musical instruments, bicycles and electronics, can be found on Craigslist. Everything from Rolexes to gift cards is listed on one of the two Max Pawn eBay stores: the general store and rare finds. Firearms are on Auction Arms.
Mack’s physical store in Las Vegas is a lot smaller than the outlets he’s owned in the past. He doesn’t need the kind of display or storage space that was a necessity before esales exploded, he says. Today, the bulk of his sales originate or are conducted entirely over the Internet.
Most pawnbrokers have taken advantage of eBay to extend their marketplace for many years. True, the rise of the auction site has allowed the sale of items that have been gathering dust. But more than that, it has let pawnbrokers take in items they would have had to turn away in the past, because they wouldn’t sell in their immediate area. It also means pawnbrokers can list parts or items for repair to a universe of do-it-yourselfers, making it possible to get something out of items that would otherwise be junked.
But as a while, pawnbrokers have been a bit slower to embrace the use of social media. Maybe it’s the name — what’s “social media” going to do for a business? Quite a lot, as it turns out.
Vital Across the Board
Not all pawnshops have found the kind of high-end niche that Mack has, but that doesn’t mean they’re not prospering in cyberspace.
La Familia Pawn, with 14 stores in Florida and five in Puerto Rico, has tweeting, email and Facebook programs set up, and has even cracked Groupon. And it’s not forcing itself on the market.
“Our customers were away ahead of us in using technology,” says Jennifer Whitcomb, social media coordinator for the chain.
Facebook has been the most successful for them, especially among Puerto Ricans, she says. “They really embraced it,” she said. Customers use Facebook to ask if a certain product is available, of if the store accepts a certain kind of merchandise in pawn.
Some pawnbrokers might be surprised at the social media audience, she adds: age is across the board. “It’s not just the young adults you’d expect.”As La Familia’s experience might indicate, if you think that minorities are less likely to use technology, you’d be wrong about that, too.
Take cellphones, for example. According to a study released in August 2010, African-Americans use the most voice minutes — on average more than 1,300 a month. Hispanics are the next most talkative group, chatting an average of 826 minutes a month. Even Asians/Pacific Islanders, with 692 average monthly minutes, talk more than Whites, who use roughly 647 voice minutes a month.
African-Americans and Hispanics also text — that is, use Smart Message Service — the most. Hispanics send and receive around 767 SMS messages a month while African-Americans send and receive around 780 — significantly more than Asians/Pacific Islanders (384 texts a month) and Whites (566 texts a month). The voice and text results are compiled from one year (April 2009-March 2010) of mobile usage data gathered by the The Nielsen Company, which analyzes the cellphone bills of more than 60,000 mobile subscribers each month in the United States.
A separate Nielsen survery conducted in December 2010 found that almost a third (31 percent) of all mobile phone users in the United States own smartphones, but their adoption is higher among specific minority groups.
Nielsen found that 27 percent of White mobile phone users in the U.S. currently own smartphones. But that rate was lower than the 45 percent of Hispanics, 45 percent of Asians/Pacific Islanders, and 33 percent of African-American mobile users polled who said they have a smartphone.
The adoption rates for smartphone ownership are also rising, especially among minority groups. Over the six months before the survey, 42 percent of White users who bought a mobile phone opted for a smartphone, while 60 percent of Asians/Pacific Islanders, 56 percent of Hispanics, and 44 of African-Americans made the same choice.
In all, according to CTIA, the wireless association, by December 2010 Americans were sending 187.7 billion texts each month — that’s 2.1 trillion annually. The group adds that 264.5 million data-capable devices, including 61.2 million smart phones or wireless-enabled PDAs and 12.95 million wireless-enabled laptops, notebooks or wireless broadband modems, were in the hands of consumers as of June 2010.
So what do you have to do to reach your market by text?At the recent Consumer Financial Services Association convention in Florida, Mike Cantrell, president of Solutions by Text, made two major points: you need to update your customer agreement to include a specific SMS policy, and you must always let your customers opt out at any time. Once you get the legal policy out of the way, then set up language templates, Cantrell says. “Begin by indicating the source — your company name — of the message first, the offer or primary info should come next, and the method of redemption of contact info completes the message. Always include an opt-out option.”
When developing your language templates, build around your business model. For instance, you might set up a welcome/thank you; a five-day reminder; a one-day reminder; extension request and re-marketing messages, Cantrell says.
Be sure to use technology to verify cell numbers. Automatically send your customers a text telling them, “For your convenience we provide courtesy reminders and other updates by text. The next step is to confirm your cell number. Confirmed numbers will receive an immediate text reply with authorization code.” Then the message will ask the customer to enter his or her cell number, followed by the authorization code included with the text message.
It short, it’s clear that the days when eBay would be the beginning and end of your online sales effort are over. It’s a big technological world out there, and pawnbrokers can benefit from it.
By ROBERT FRIMET, CAMS
It’s no surprise announcement that the gold buying business has swept the nation. As a pawnbroker, you’re certainly buying scrap gold.
But what about compliance?
Unknown to many, there is something called the U.S. Patriot Act (our old friend), and since 2006, laws have been in effect that require certain dealers in precious metals to be regulated under Chapter X, formerly CFR 103.140.
As a pawn shop, you didn’t fall under these guidelines in the past, and you still don’t. But if you’re also purchasing scrap gold — in other words, taking it in as a non-pawn-related transaction — the ruling is that you are required to comply.
What this means is that as a purchaser of precious metals, you may have expanded responsibilities. Before you decide to take a liquid bath in nitric acid, there are exemptions that may apply.
Under the regulation, if you purchased less than $50,000 in precious metals from the general public in the previous year, you wouldn’t have to comply with this ruling. If business was booming in 2010 and you did purchase in excess of $50,000 in precious metals and also sold those metals to a refiner or third party, you would be required to follow the regulation by June of 2011.
To get to the down and dirty, all precious metals including platinum, silver and palladium are covered under the regulation if the metal exceeds 500 parts per thousand, which equates to 50 percent pure.
That means that if all you did was purchase 10K gold all day long and no other karat, you wouldn’t be required to comply with the law as 10K is approx 39 percent pure, not 50 percent pure. However, if you bought a combination of metals that exceed 50 percent in purity, then you must comply.
If you hit that 50 percent mark, you need a full compliance program under Title 31 which means:
• Incorporating policies and procedures based on the risk associated with purchases from customers.
• Creating a risk assessment
• Specifying types of products offered
• Specifying what countries you deal with if out of the U.S.
• Detailing how you spot and handle risk
• Conducting ongoing training for staff
• Providing for an independent review (unlike Title 31, for MSBs, a person who is involved with the operation of the program may not be the reviewer.) An outside person such as a consultant, CPA or bookkeeper could conduct the review if they are familiar with such review processes.
The kicker is that if you do fall under this regulation, you would then comply with 26 and file the 8300 form, not a CTR, which would force you to comply with Title 31 and Title 26 (Title 31 for the program and Title 26 for the 8300.)
You may also file an 8300 under suspicious activity transactions or file a form 109 to protect you under the safe harbor rule.
If you are processing metal through a broker, are they offering you a program or did they even make you aware of these requirements? These are questions business owners should ask themselves when dealing with outside companies. If they don’t have a clue, chances are they’re not compliant either and that could flow over to cause your business heartburn.
Jim Colllachia of Hometown Cash Advance, with 24 locations in multiple states, was questioned about his compliance. “We are a large gold buyer and we really could not have gotten as successful as we are without using Retail Gold Brokers, as they set us up from beginning to end and addressed all our compliance needs, both state and federal,” he says.
If you are going to reap the benefits as a dealer in precious metals, you have to play nice in the sand box and follow the rules.
Robert Frimet is the president of RMF Consulting Group, Inc and is a Certified Anti Money Laundering Specialist. He has served the pawn, check cashing, payday, title, and other industries since 1991. Frimet offers compliance programs and independent reviews and federal/state examination audit assistance nationwide. He may be reached at (702) 596-8370 (PST), at Bob@checkconsultants.com or via www.checkconsultants.com
By RICHARD WEATHERINGTON
The federal courts have very defined limits on the claims they can hear, so when a complaint against a pawnshop is filed in federal court, it is not uncommon for the pawnshop to first make sure the complaint fits within those limits.
In August 2010, a woman whose first name was Marjorie, a resident of Massachusetts, went to a pawnshop to pawn a coin charm and a gold chain worth $7,800. She entered into a loan contract with the pawnshop. She said she only needed $500 to pay a utility bill and did not need a loan in excess of that; however, she claimed the pawnbroker indicated she could borrow up to $1,000.
Marjorie said that at a later point, she attempted to discover the payment amount in order to redeem her jewelry, but was told “not to worry about the payment at that present time because it was not due and to call back … .”
According to the pawn contract Marjorie had, the amount financed was $600 and the finance charge was $102, a 36 percent annual percentage rate, maturing on June 21. A second contract indicated another loan for $225, with a finance charge of $42, also a 36 percent annual percentage rate, maturing on July 17.
She claimed she called back and again was told there was no rush for the time to redeem her jewelry. Thereafter, Marjorie said she attempted to redeem her jewelry and was told that the pawned items had been melted down. She then filed a complaint in the United States District Court of Massachusetts, seeking damages.
Says No Plausible Claim
The pawnshop filed a Motion to Dismiss, claiming that the District Court lacked subject matter jurisdiction and that Marjorie had failed to state a plausible claim upon which relief could be granted.
The broker did not take issue with the underlying facts alleged by Marjorie regarding the loan transaction entered into with her; rather, the broker contended that these bare allegations didn’t confer federal jurisdiction, nor did they state a cognizable claim for relief.
The broker claimed that there was no diversity of citizenship in the action because both parties were citizens of Massachusetts, nor was there any federal claim alleged in Marjorie’s complaint sufficient to confer federal question jurisdiction. The pawnbroker focused on the fact that Marjorie did not allege that she repaid the funds that she received, nor did she allege that the pawnbroker violated the terms of their agreement.
The pawnbroker said that Marjorie’s bare assertion that she wanted her collateral returned, or that her collateral was destroyed, was not sufficient to set forth a TILA claim that would invoke the federal question jurisdiction of the District Court, or that would state a plausible claim for relief.
Calls Plea ‘Nonsensical’
Marjorie opposed the pawnbroker’s motion to dismiss. The court noted that Marjorie’s pleading was virtually nonsensical. The court said from what it could discern, that Marjorie repeated the allegations in her complaint, parroted the statements in the pawnshop’s support of its Motion to Dismiss outlining the background of the pawnshop’s pawnbroking business, and took issue in general with the pawnbroking scheme because it takes advantage of customers.
Marjorie did not, noted the court, address in any meaningful fashion the merits of the pawnshop’s arguments.
The District Court first noted that subject matter jurisdiction in Federal district courts may be exercised over civil actions arising under federal laws. Under the United States Code, district courts have original jurisdiction of all civil actions arising under the Constitution, laws or treaties of the United States, and over certain actions in which the parties are of diverse citizenship and the amount in controversy exceeds $75,000.
The court said that with respect to “federal question” jurisdiction, a claim arises under federal law if a federal cause of action emerges from the face of a well pleaded complaint. The well pleaded complaint rule restricts the exercise of federal question jurisdiction to instances in which a federal claim is made manifest within the four corners of the plaintiff’s complaint.
The court said that with respect to “diversity” jurisdiction, the amount in controversy must exceed $75,000. The framework, said the District Court, for determining whether an action satisfies the jurisdictional minimum was established by the Supreme Court in 1938. The amount specified by the plaintiff controls for jurisdictional purposes, as long as that amount is asserted in good faith.
A court may dismiss an action for insufficiency of the amount in controversy only when, “from the face of the pleadings, it is apparent, to a legal certainty, … that the plaintiff never was entitled to recover” a sum in excess of the jurisdictional minimum.
In addition, diversity must be complete: the citizenship of each plaintiff must be shown to be diverse from that of each defendant. Where the citizenship of plaintiff and the defendant are not diverse, there is no diversity jurisdiction and the plaintiff’s claims against the defendant must be dismissed.
Where subject matter jurisdiction is lacking, the District Court said it may proceed no further. In addition to the court’s inherent authority to dismiss for lack of jurisdiction on its own, the Federal Rules provide that a party may move to dismiss a case for lack of subject matter jurisdiction.
The party invoking the jurisdiction of a federal court has the burden of proving that jurisdiction exists. Amorphous or conclusory allegations that federal jurisdiction exists, noted the court, is not sufficient to survive a motion to dismiss.
Motions to Dismiss for Failure to State a Claim
To survive a motion to dismiss for failure to state a claim, a complaint must present “only enough facts to state a claim to relief that is plausible on its face.” The factual allegations must be enough to raise a right to relief above the speculative level.
To expand on this standard further, said the court, a claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.
In other words, the plausibility standard is not akin to a “probability requirement,” but it asks for more than a sheer possibility that a defendant has acted unlawfully.
Where a complaint pleads facts that are “merely consistent with” a defendant’s liability, said the court, it stops short of the line between possibility and plausibility of entitlement to relief. The United States Supreme Court in 2009 explained that “bare assertions … amounting to nothing more than a “formulaic recitation of the elements of a constitutional … claim,” for the purposes of ruling on a motion to dismiss, are not entitled to an assumption of truth.
Such allegations are not to be discounted because they are unrealistic or nonsensical, but rather because they do nothing more than state a legal conclusion even if that conclusion is cast in the form of a factual allegation.
In sum, for a complaint to survive a motion to dismiss, the non conclusory “factual content” and the reasonable inferences from that content, must be “plausibly suggestive” of a claim entitling a plaintiff to relief.
Appeals Court Standard
The District Court noted that the United States Court of Appeals for the Tenth Circuit articulated the plausibility standard.
In referring to the scope of the allegations in a complaint, the Tenth Circuit said that if they are so general that they encompass a wide swath of conduct, much of it innocent, then the plaintiffs have not nudged their claims across the line from conceivable to plausible. The allegations must be enough that, if assumed to be true, the plaintiff plausibly, not just speculatively, has a claim for relief.
On a spectrum, said the Tenth Circuit, the Supreme Court recently explained that the plausibility standard requires that the pleader show more than a sheer possibility of success, although it does not impose a probability requirement.
When faced with alternative explanations for the alleged misconduct, the court may exercise its judgment in determining whether plaintiff’s unsolicited conclusion is the most plausible or whether it is more likely that no misconduct occurred.
The District Court noted that Marjorie’s complaint failed to set forth any basis from which the court could find that there was subject matter jurisdiction, either under federal question jurisdiction or diversity jurisdiction.
First, said the court, with respect to diversity jurisdiction, Marjorie didn’t demonstrate that citizenship of the parties was completely diverse.
Moreover, even if diversity existed, the amount in controversy was $7,800 rather than the required $75,000. It could not reasonably be inferred that Marjorie’s actual or punitive damages exceeded $75,000; rather, from the face of the pleadings, the District Court said it found that it was clear to a legal certainty that the amount in controversy did not exceed $75,000.
Second, said the court, with respect to federal question jurisdiction, Marjorie’s complaint didn’t set forth any discernible federal cause of action upon which relief could be granted. Marjorie, said the court, simply unfolded the alleged underlying facts of the proposed pawnbroking transaction and claimed that she suffered the loss of her jewelry because the items had been melted down.
No TILA Violations Cited
TILA, said the District Court, is a federal law designed to promote the informed use of consumer credit and to protect consumers from dishonest credit transactions by requiring lenders to fully disclose all costs and key terms of the lending agreement used in lending documents.
In short, said the court, Marjorie had presented no bona fide basis for the subject matter jurisdiction of the District Court, and therefore failed to meet her burden. Accordingly, the District Court said it would allow the pawnshop’s Motion to Dismiss based on the lack of subject matter jurisdiction.