In testimony before a U.S. House of Representatives subcommittee, the Federal Trade Commission described how scam artists are “putting a new twist on an old scam” – touting coins and precious metals as low-risk, high-yield investments to hedge against the economic downturn and fears of a declining U.S. dollar. The Commission also unveiled three new consumer education pieces to equip consumers with the information they need to choose among the various types of precious metal investments.
According to the testimony before the Committee on Energy and Commerce Subcommittee on Commerce, Trade, and Consumer Protection, presented by Lois Greisman, Associate Director of the FTC’s Division of Marketing Practices, the FTC has longstanding enforcement experience with investment scams. Since the 1980s, the Commission has brought dozens of cases against fraudulent marketers that hawked gold or silver bullion, rare coins, precious and semi-precious metals, gemstones, oil and gas leases, and fine art as a safe alternative to traditional investments such as stocks and bonds. Over the past three decades, the FTC has brought 17 cases against companies that sold overpriced and/or misgraded historic coins for investment purposes. While the companies allegedly falsely marketed their coins as good, safe investments, in reality, these dealers sold them with significant mark-ups, often as high as three-times the prevailing market price.
The testimony notes that the FTC has identified three main types of recent complaints related to the sale of coins and precious metals – those involving deceptive sales pitches for investments in historic coins, reports of unscrupulous marketers pitching highly leveraged precious metal purchases with the promise that the investments are “safe” or “low-risk,” and those regarding “cash for gold” offers where marketers fail to provide consumers with a quote of the value of their precious metal and jewelry before melting it down.
The testimony also announced new consumer education materials, available on the FTC website and as link to this press release, to help provide consumers with the information they need before investing in coins or other precious metals. In particular, the three new brochures explain the differences among investing in gold stocks and funds, bullion, bullion coins, and historic coins. They also include a glossary of industry terms that consumers need to understand to ensure they can knowledgeably invest in precious metals and other coin investments.
Finally, according to the testimony, the FTC supports the goals of the Coin and Precious Metal Disclosure Act, currently being considered by Congress. The Act would address many of the consumer protection concerns the agency has identified by requiring coin and precious metals dealers to fully disclose not only the purchase price, but also all other fees associated with the sale of coins and precious metals, as well as the melt value and reasonable resale value of coins and precious metals. It also would require dealers to make these disclosures clearly and conspicuously before a sale is completed.
The testimony concluded that the FTC “remains committed to protecting consumers from frauds that take advantage of the economic downturn.”
The FTC vote approving the testimony and its inclusion in the formal record was 5-0.
Copies of the testimony are available from the FTC’s website at http://www.ftc.gov. The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, click: http://www.ftc.gov/ftc/complaint.shtm or call 1-877-382-4357. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to more than 1,700 civil and criminal law enforcement agencies in the U.S. and abroad. For free information on a variety of consumer topics, click http://ftc.gov/bcp/consumer.shtm.