Until recently, the nation had no law that regulated only coin dealers and no other businesses.
The state of Minnesota changed all that as of Aug. 1, 2013.
For the first time, a law was passed that applies only to coin dealers, requiring dealers to register, put up a bond protecting Minnesota customers who buy from them, make mandatory disclosures, and refrain from misrepresentations concerning themselves and the coins they sell.
While perhaps not onerous in and of itself, the Minnesota law reflects a dangerous trend by states to legislate individually in areas that really require nationwide rules.
2014 registration deadline
The new law gives “bullion coin dealers” until July 1, 2014, to register with the Minnesota Commissioner of Commerce, and defines that term to include any dealer located in Minnesota or that does more than $5,000 in business annually with consumers in Minnesota.
Wholesalers, auction houses and garage sale organizers are exempt.
Registration includes criminal background checks, and effectively, any dealer employing someone convicted of a financial or fraud-based crime during the past 10 years will be denied registration.
The surety bond required for registration ranges from $25,000 to $200,000 depending on the dealer’s annual sales, a significant added cost of selling to Minnesota customers.
Violators can be charged with a misdemeanor and required to pay a fine of $10,000 per incident.
The criminal penalty applies only to doing business without registration. The $10,000 fines apply to any violations, such as failure to make the right disclosures.
The state anticipates offering an online database where consumers can verify whether or not a dealer is registered.
Presumably, consumers will be able to rescind any transactions undertaken with unregistered dealers.
The latter is probably a greater potential risk of nonregistration than the fines or possible criminal charges.
I can imagine an unregistered dealer someday being sued in a class action with respect to all its Minnesota sales.
Provisions in effect
Other parts of the law have already taken effect, including having to provide customers with specific written disclosures, including the content of the precious metals in any coins they sell, and delivering all coins within a specified period of time.
Those sections of the law relating to truthfulness in advertising and customer disclosures are not very much different from consumer protection laws in other states, and the Telemarketing Sales Rule.
The Minnesota Legislature was vague as to how certain terms borrowed from other laws would apply to coins.
For example, while it’s simple enough to understand the law’s prohibition of misrepresentations as to the “value,” “characteristics” or “earnings potential” of coins, what does it mean that a dealer can’t misrepresent the “efficacy” of coins?
There’s a back story here.
A Minneapolis newspaper has been reporting extensively on court cases involving dishonest coin dealers, and the attorney general apparently felt the need for special legislation.
Hopefully, this situation won’t repeat itself throughout the country.
Armen R. Vartian is
an attorney and author of
A Legal Guide to Buying and Selling Art and Collectibles. Contact him