No. The only time a pawn shop needs an FFL is if they take in guns or sell guns. If they do not deal in guns or accept guns as a hold, then they do not need an FFL.
Per the Federal and state laws, a Federal Firearms License is required for businesses that deal – buy and sell – firearms. Each time a pawn shop takes in a gun an FFL transfer is required. A pawn shop can do a background check before accepting a gun from a private party. They are also restricted from returning the gun to the private party if that person is not eligible to receive the gun under federal laws. As an FFL dealer, the pawn shop must also notify law enforcement if they accept a gun from a person who is not able to own a gun under the definition of the firearms act.
Like all licensed dealer businesses, pawn shops must follow the guidelines for the legal firearm transfer from the private party to the pawn shop and from the pawn shop to the private party even if the private party is not the same person.
What Type of FFL do Pawn Shops Use?
Pawn Shops that are a licensed firearm dealer use Type 2 FFL. A gun store or business would use a Type 1 FFL.
There are many categories of Federal Firearm License Types from the Bureau of Alcohol, Tobacco, and Firearms. They are divided into three categories, which include:
- Dealers – which may include an ammunition vendor, sellers of parts including lower receivers. It also includes collectors even those who collect long guns
Pawn Brokers fall into the dealer category but are separated from other types of United States gun dealers under Type 1 FFL and have their own FFL category – Type 2.
Can a Pawn Shop Offer Online Firearm Purchase Options?
Because the Type 1 and Type 2 FFLs are so similar, all of the abilities under the Type 1 FFL are available to pawn shops. The big difference is the ability to accept guns as collateral for loans. That option is reserved for Type 2 FFLs within the United States. Both are expected to be firearm experts and to understand the rules and regulations of running a legal firearms business under federal law and laws that are required by the state in which their business is located.
Why Do Pawn Shops Need an FFL?
If you read the Type 1 FFL and Type 2 FFL rules, you find they are identical. So, why is there a separate FFL for pawnbrokers? The reason is not spelled out by the Bureau of Alcohol, Tobacco, and Firearms. However, it becomes more apparent if you consider what a pawn broker does as it compares to another firearm dealer or FFL holder
If you own a gun, you can take it to a pawnbroker, and they will give you a collateral loan. You are using the gun as collateral for the loan. You have a certain amount of time to repay that loan and collect your collateral. A gun shop is not going to lend you money or offer you a collateral loan. They will simply buy your gun if they are interested in it.
Another part of what makes a pawnbroker different from a Type 1 FFL is that the pawnbroker may own the gun you used as collateral for your pawn loan if you default on the loan. A gun is different from a musical instrument. You don’t need a NICS background check to buy a guitar from a pawnbroker.
So, the reason why a pawnbroker needs a separate FFL is due to the differences in how they run their gun business.
Guns and Parts and Type 2 FFL
Pawn Shops can purchase gun parts or hold them as collateral for their loans. Those can include lower receivers, long guns, and antique guns, but not destructive devices.
Both Type 1 and Type 2 FFLs are not permitted to deal with destructive devices. That requires a separate FFL.
What is the Difference Between a Type 1 and Type 2 FFL?
The difference between a Type 1 FFL and a Type 2 FFL is that under a Type 2 FFL you can accept certain types of guns as collateral for a pawn loan.
You can think of a Type 2 FFL as an enhanced Type 1 FFL. A Type 2 FFL can do anything that a Type 1 FFL can do. There may be some restrictions at the state level, but otherwise, they are very similar. Some pawn shops also have firearm sales of brand new guns, and they may buy a gun as part of their firearm sales collection rather than hold them for collateral.
The difference between the two types of FFL is the ability to handle guns as part of the pawn loan process. You will still have to undergo a NICS background check and fill out all of the necessary paperwork required from firearms dealers. Your criminal history will come into play before the pawn shop can return your gun to you. If you do not pass the NICS background, your gun will not be returned to you. In addition, the pawn shop is required by law to report all transactions that involve a firearm to the local law enforcement agencies if you fail your background check. You will need a government-issued I.D.
How FastBound Can Help
FastBound helps all FFL license types including Type 2 pawn shops to process the required paperwork from the ATF quickly, accurately, and online.
FastBound is lawyer backed and designed to remain in compliance even as the rules and requirements change. FastBound allows you to electronically submit forms, store forms electronically, and also to conduct the transfer background check online and generally with results back in about a minute.
Because FastBound is set up to handle all FFL types – sporting goods stores, pawn shops, gun dealers, etc. – It fits nicely into the business models of type 1 and type 2 FFLs. FastBound works with local FFL holders and gives you access to the ATF Form library so that each required form is available to you in an online format.
The FastBound process makes it easier for businesses that hold Federal Firearms Licenses to function quickly and accurately.
The NICS Background process is important for pawn shops. Under Federal Law, pawn shops that are also gun shops must run a background check on private parties that want to use firearms as collateral for a pawn loan.
It is also important to understand that process because the pawn may accept the gun without a background check but then before the gun can be returned to the private party at the end of the loan, a background check must be performed. If that individual does not fit the rules for owning a gun, the gun cannot be returned to that party.
Generally, the party offering the gun as collateral will have the choice of undergoing the background check at the time, they offer the gun or when they come to pick it up after their loan is complete. FastBound makes that process simple and fast.
Fast, Accurate, and Electronic
FastBound is fast. It helps you fill out licensed firearm dealer forms. It will duplicate repeated data, such as the purchaser’s names so that you do not have to type all that data over and over.
FastBound is Accurate. It will highlight areas of the form that are not correct. Errors or omissions are one of the biggest reasons why FFL forms are denied. With FastBound, you gain more assurance that the forms are correct and that the data matches what the ATF is looking for – even with background forms.
FastBound is an e-Form library. All of the forms that an FFL business needs, like Form 4473, are available through the FastBound Library. The system walks you through purchases and sales of firearms and makes the transfer of each gun accurate, easy, and fast.
FastBound was designed to make the transfer of firearms easier. If you have ever filled out the FFL forms by hand, you know what a pain that is. Because FastBound is designed with legal experts on board, the forms easily meet the requirements of the ATF. The fast and accurate methodology of FastBound is a selling point for your buying community.
Best of all, you do not need to purchase specialized equipment to access the power of FastBound. It is an online platform that you can access through a PC or smart device. Plus, when it comes to storing all of the FFL forms in an e-Format, FastBound can help. It is designed to meet the exacting criteria of the ATF for electronic storage of all FFL forms. That means you no longer have to store paper forms for 20 years. You can save space and the hassle of caring for paper forms.
Learn more about the power of FastBound as it applies to your FFL business and the luxury of being able to create, submit, and store all of the FFL forms in e-Format.