Anthony Weiner (D-NY) has a bill that would require dealers in precious metals to provide information to potential customers prior to making a sale, including the melt value of the product in question and its market resale value. Weiner left no doubt that Goldline was a primary target of the legislation; others on the committee questioned whether the entire proceeding was politically motivated based on the programming Goldline uses for advertising.
The House Subcommittee on Commerce, Trade, and Consumer Protection under Chairman Bobby Rush was the venue for the hearing.
Ranking member Edward Whitfield (R-KY) said that certain fees and disclosures are already required of such companies; he noted that gold prices fluctuate; and that the federal government itself sells commemorative gold coins at well above melt value. He wondered why this industry should be singled out for resale value reporting. He then expressed his concern that Glenn Beck and other conservative commentators have been prominently mentioned in articles about the hearing. “Hopefully that’s not the reason we’re having these hearings.”
Weiner said it had nothing to do with politics, but that it was all about Goldline’s business practices. “It’s not about whether Glenn Beck is doing a disservice to his viewers by shilling for this product,” he said. He said the company’s marketing is designed to create fear among consumers, and misinform about the potential for its products to appreciate in value.
The first witness before the committee, Julius Bazan, invested $140K in December 2009 with Goldline, and said he was steered away from a bullion purchase in favor of the company’s line of coins. In May 2010, he wanted to cash out and invest elsewhere, and found the value of his investment was down to $83K. In fact, it dropped to that figure the day he made the purchase. He said it would take years of favorable changes in the gold market just to break even.
Scott Carter, Executive Vice President for Goldline International, testified that the company makes full disclosure to customers, and that it enjoys an A+ rating with the Better Business Bureau.
Carter told Whitfield that the company advertises widely, not just with Glenn Beck. It’s used 14 different television networks, and radio as well.
Carter told Weiner that the company does not consider itself to be an investment advisor, but Weiner took issue, saying that recommending that the products be held for a certain amount of time sounded like investment advice.
FTC’s Lois Greisman said that it does receive consumer complaints in this area, but not all that many, and that they comprise less than 1% of the total.
Following are brief synopses of testimony from witnesses on the second panel.
* Lois Greisman, Associate Director, Marketing Practices Division, Bureau of Consumer Protection, Federal Trade Commission: Legislation would address FTC concerns — disclose purchase price, fees, melt value and reasonable resale value. Would seek a few amendments to the bill as now written.
* Charles Bell, Programs Director, Consumers Union: We see consumers having problems with these companies. High pressure sales tactics and high mark-ups are one problem. Sales people present products as investment opportunities but are often not licensed as investment advisors. Complaints on this topic ebb and flow but they’ve been occurring for many years. Supports draft bill. People doing the selling know the value on the table; consumers likely do not.
* Scott Carter, Executive Vice President, Goldline International: Supports disclosure so that customers can make an informed decision, including risks and costs of the transaction. Competition and existing regulation are enough, and this bill is unnecessary and perhaps unworkable. Recommends that gold should be no more than 5%-20% of investment portfolio and should be held for at least 3-5 years.
* Howard Beales, Ph.D., Associate Professor, School of Business, The George Washington University: Disclosed that he’s both a former FTC executive and consultant to Goldline, and states that the views expressed are his own. FTC works to combat consumer fraud. Goldline is not the type of company that the FTC would investigate. Goldline’s informational pamphlet provides consumers with ample information, and its policy gives consumers the opportunity to research the market and change their mind immediately after purchase. Goldline is not a get-rich-quick fly-by-night company. Legislation is at best unnecessary and may cause confusion.