As the price of gold has continued to rise, local and federal officials have been pushing forward with efforts to protect consumers from what they are calling predatory practices by some precious metals dealers.
The House of Representatives Wednesday passed legislation aimed at preventing companies that pay cash for gold jewelry from ripping off customers. At the same time, the Santa Monica, California City Attorney announced a court had placed Superior Gold in receivership after the city sued the company, which sells gold coins and bullion, largely through advertising on conservative talk radio and TV programs.
The so-called GOLD Act is an attempt to tackle what Rep. Anthony Weiner called "deceptive marketing, misleading return policies and low-ball payments."
The New York Democrat has specifically focused attention on the company Cash4Gold, which became well known after airing a commercial starring pitchmen Ed McMahon and MC Hammer during the 2009 Super Bowl. The company's ads promised consumers they could make a quick buck by selling their unwanted jewelry.
"Cash4Gold has used these bad economic times as a golden opportunity to fleece hard-working people in need of an extra dollar," Weiner said. "The passage of this bill is an important step towards giving consumers who want to sell their gold the protections they need."
The legislation, which passed the House by a vote of 324-81 but has not yet been taken up by the Senate, would impose fines on companies that melt down a consumer's gold before an offer is accepted and would mandate that companies make certain returned jewelry is insured with the mail delivery company at the same monetary value as the consumer originally insured it.
Chuck Bell, programs director of Consumers Union, credited the legislation for presenting "much fairer rules of the road for online cash-for-metals transactions."
Superior Gold Goes Into Receivership
Cash4Gold spokesman Evan Nierman said that consumer purchases of jewelry and precious metals are normally regulated by the individual states, and the proposed law would mark a break with precedent. "This new national bill appears to override the authority of the states, create additional federal regulation of the private sector and serve as the first federal law to explicitly regulate consumer return policies which also are typically handled at the state and local level," said Nierman.
Nierman said Cash4Gold had "worked side-by-side" with law enforcement and regulators in many states. He said Cash4Gold had also worked closely with Florida officials to craft legislation regulating gold-buying by mail, and that the Florida bill should be a model for a national bill.
"Nearly one million customers," said Nierman, "have found Cash4Gold to be a great option for anyone seeking a fast, secure, simple, convenient and discreet transaction."
In California, the announcement that Superior Gold was coming under a court-ordered receivership came several months after Santa Monica officials first disclosed an investigation into that company, as well as Goldline, another popular precious metals dealer.
In its lawsuit against Superior, Santa Monica officials have alleged the company took payments from customers but failed to provide the coins they had promised. The complaint also alleged that Superior induced customers, through false and misleading statements, to buy more expensive collectable or foreign coins instead of the basic gold bullion that customers typically want, and charged prices purported to be far higher than fair market value for the coins while concealing markups through false and deceptive pricing practices.
California Superior Court Judge Gerald Rosenberg signed a temporary restraining order this week prohibiting the company and its president, Bruce Sands, from "taking customer payments, advertising, or conducting any other business under a name other than Superior Gold Group." And it freezes assets the court says belong to the company and to Sands, including a Malibu home and a 2003 Lamborghini coupe.
ABC News has left messages for David Rosen, whom city officials identified as the attorney representing Sands, but has not received a return call.