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All That Glitters….Consumer Rights And Gold Trading
On 14 February 2011, the UK’s Office of Fair Trading (the “OFT”) completed an investigation into companies which buy gold from consumers using the postal service (“Gold Companies”). A common feature of the practices of such companies was that the consumer sent their gold by post to a Gold Company. The Gold Company then sent a quotation to purchase the gold to the consumer, which the consumer had to reject within a restrictive timetable. If a rejection was not received within the deadline, the Gold Company melted down the consumer’s gold and paid the consumer in line with the quotation given. The OFT was concerned that:
- consumers were unfairly pressured into selling their gold;
- there was misleading price advertising and a lack of price transparency; and
- there was a lack of transparency on other matters, such as the insurance arrangements on sending and returning the gold and whether gemstones were purchased, returned or at risk of damage as part of the service.
Of the five Gold Companies investigated (CashMyGold, Cash4Gold, Postal Gold, CashYourGoldNow and Money4Gold), none admitted that their business practices were in breach of any law, but three Gold Companies gave undertakings to make changes to their practices including to:
- provide customers with either a quote or an option of receiving a quote or payment, clearly setting out each option and the risks associated and the terms and conditions of the transaction;
- provide customers with a reasonable period of time to consider the quote or payment and to return and reject the payment and that the company will not melt down the customer’s gold until they have either accepted the quote or (in the case of payment) until the reasonable periods have elapsed;
- provide clear and transparent information on whether gemstones are purchased and the risks associated with sending in the gems;
- provide clear information in writing as to the price per gram offered and the total price offered for the gold; and
- not to unfairly limit or exclude the legitimate rights of consumers to make an insurance claim for loss or damage to their goods.
The two remaining Gold Companies who were investigated have now ceased trading.
Lessons to be Learned
This investigation highlights that the OFT will strictly enforce the law in relation to consumer rights and it will actively investigate new business models which threaten to infringe such rights. Ireland’s National Consumer Agency would be likely to take a similar approach.