US Coins

Firm reaches agreement with Texas AG office

The U.S. Money Reserve Inc. offered American Eagle tenth-ounce gold $5 bullion coins to customers “free of dealer markup,” and then, according to Texas officials, attempted to encourage consumers to buy more expensive Proof and commemorative gold coins. The firm has agreed to pay $5 million in restitution to customers to settle allegations of false and deceptive trade practices in an agreement with the Texas Attorney General’s office.

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The U.S. Money Reserve Inc., also known as U.S. Rare Coin and Bullion Reserve, has agreed to pay $5 million in restitution to customers to settle allegations of false and deceptive trade practices in an agreement with the Texas Attorney General’s office.

In the agreement, the firm acknowledged no wrongdoing, but agreed to change its sales practices. The order approving the voluntary compliance was filed Nov. 15 in Texas’ Travis County District Court, although the agreement between the firm and the state was reached Oct. 11.

The Austin-based firm stated on its website as of Nov. 22: “As one of the nation’s largest distributors of U.S. Gov’t Issued Gold Coins, the U.S. Money Reserve is committed to providing customers with Gold Coins that command the greatest potential for appreciating in future value. With the price of Gold rising more than 400% over the past decade, collectors everywhere are rushing to move their money into U.S. Gold Coins.”

The firm was established in 2001, according to the Better Business Bureau. In 2008, the Office of the Texas Attorney General informed U.S. Money Reserve that the office’s Consumer Protection Division was reviewing the firm’s sales practices.

Alleged deceptive practices

The Texas Attorney General’s Office had alleged that U.S. Rare Coin — a seller of U.S. gold, silver and platinum coins — marketed its coins to consumers in a deceptive manner. The state described the firm’s business practice in offering American Eagle tenth-ounce gold $5 bullion coins with “no dealer mark-up” to entice customers to call. Once consumers called, the firm would try to sell them more expensive Proof and commemorative coins. The state’s investigation centered on the firm’s efforts to market commemorative gold coins for substantially higher premiums than ordinary bullion coins.

The state claimed that the firm would use “truisms from the bullion gold market, such as the value of gold will go up when the value of the dollar goes down, to sell the gold modern commemorative coins and proof coins.”

The voluntary compliance order noted something well known to coin collectors, stating: “What is true for the bullion gold market is not necessarily true for the commemorative gold coin or proof gold coin markets. The value of commemorative and proof coins is based upon subjective factors such as age, rarity and condition.”

Consumers complained to the state that when they tried to sell coins back to the firm, the company offered them substantially less than the purchase price, even in a rapidly rising bullion market.

A voluntary compliance order

In the voluntary compliance order, U.S. Rare Coin and Bullion Reserve denied the allegations, but agreed that its representations would not suggest that the firm was affiliated with the U.S. government or the Mint, and would more clearly describe the risks involved in investing in precious metals and rare coins. Further, the firm agreed to not misrepresent the expected growth in value of a coin or its rarity, and would not use a bait-and-switch technique to try to entice people to buy more expensive coins by discouraging them from purchasing the advertised coins.

The firm agreed that it would not represent its salespersons as being qualified to advise consumers on coins as investments or tax implications resulting from the purchase or sale of coins, unless the salesperson is a certified financial planner. It also agreed to limits in contacting consumers over 65 years of age and limited its calling from between 9 a.m. and 9 p.m. in the time zone in which the call is answered.

Finally, the firm agreed to disclose the following information in all advertisements in such a manner as to be clearly understandable and readable to the normal consumer:

1. The markets for coins are unregulated.

2. Prices can rise or fall. Buying coins carries some risks.

3. The company is not affiliated with the U.S. Government and the U.S. Mint.

4. Past performance of the coin or the market cannot predict future performance.

The firm also agreed to disclose these four points in an audible voice at such a rate that the consumer can comprehend and understand during the verification portion of each call in which U.S. Rare Coin makes a sale.

Still selling gold

The firm had 30 days from Nov. 15 to comply with the order and has been ordered to make quarterly reports to the Office of the Texas Attorney General Consumer Protection and Public Health Division that describe the restitution paid.

As of Nov. 22, the firm’s website generally termed commemorative gold coins, “U.S. Congressional Gold Coins,” calling them “among the hottest and most collectible legal tender Gold Coins around.” It also continued to offer American Eagle tenth-ounce gold $5 bullion coins “free of dealer markup,” advertising them “at our current market cost.” The firm adds, “This extremely limited offer is subject to availability and may be withdrawn at any time.”

As of Nov. 22, the Better Business Bureau’s website stated that 41 complaints have been filed against the business and two serious complaints filed. Earlier this year, the BBB contacted the company about its print advertisement for the sale of American Eagle tenth-ounce gold $5 bullion coins in the Feb. 23, 2011, issue of the Cincinnati Enquirer and the Jan. 7, 2011, issue of the St. Louis Post. The BBB expressed concern about the possibility of consumers confusing the firm with the government, and the advertisement’s claims that experts predicted gold to reach $5,000 an ounce. The company had not responded the Better Business Bureau as of Nov. 22.

To inquire about eligibility for this restitution program, customers should contact U.S. Money Reserve at 800-867-6101. The amount of restitution depends upon the date of purchase of coins, with valid purchase dates ranging from May 1, 2005 to Dec. 31, 2010. ¦

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