US Coins

Reviewing coin-related laws, FTC tackling regulations in 2014

The Federal Trade Commission has just announced that during 2014 it will be reviewing two laws that happen to affect the coin industry, namely the Hobby Protection Act and the Telemarketing Sales Rule. This type of review usually involves soliciting comments from industry participants, including the general public.

Participants can recommend changes to the relevant laws, or oppose changes, in favor of keeping the law as is. The FTC then considers the comments and its own staff’s views, and decides whether or not to recommend changes.

Hobby Protection Act

The Hobby Protection Act, and its corresponding regulations, located at 15 United States Code §2101 et seq. and 16 Code of Federal Regulations §304.1 et seq., prohibit the manufacture and importation into the U.S. of “original numismatic items” not marked COPY according to size and location parameters set forth in the regulations.

It is enforceable through civil actions in federal district court by “any interested person” (15 U.S.C. §2102), through enforcement actions by the FTC (15 U.S.C. §2103), and “seizure and forfeiture” of nonconforming items by the U.S. Customs Service (15 U.S.C. §2104).

Over the years, it has become clear that the Hobby Protection Act needs clarification and amendment. Congress should address one gaping hole in the act, namely that it doesn’t penalize the sale of noncompliant coins, only their manufacture and importation, which often are managed by foreign (e.g. Chinese) entities that aren’t realistically subject to U.S. regulation.

The Collectible Coin Protection Act, passed by the U.S. House of Representatives last year and currently in the Senate, will cure that defect, and should be supported by the FTC for that purpose.

In addition, it would be helpful to clarify whether the act covers only copies of actual coins, or anything that might appear to be a coin, such as the 9/11-related issues that a 2005 court decision declared required the word COPY, even though they were original designs and not copies of any prior issue.

Telemarketing Sales Rule

As for the Telemarketing Sales Rule, found at 16 CFR §310.1 et seq., it has been amended several times since its initial adoption in 1996, but has failed to keep pace with either technology or the evolution of business methods in the past two decades.

“Telemarketing” is defined as any sales program involving more than one interstate telephone call. Lobbying by coin dealers and others persuaded the FTC to exclude from this definition telephone calls initiated by customers responding to nontargeted post cards, brochures and advertisements. However, for “investment opportunities,” defined as anything offered for sale, sold or traded based on express or implied representations about income, profit or appreciation, even such incoming calls by customers are covered.

The Telemarketing Sales Rule has spawned many state laws regulating telemarketers, and within this patchwork are inconsistencies and downright dumb laws that make it more difficult to sell coins than even the legislators intended.

For example, in one state dealers technically are required to provide telephone customers with a written disclosure relating to the precious metal content of coins before consummating the transaction, meaning a customer who calls in looking for a particular coin and knows its metal content has to wait until the dealer faxes or mails the disclosure before the sale can be completed.

In another state, dealers are regulated if their buy-sell spread is more than 25 percent, but (possibly) not if the spread is below that threshold.

Although in most cases I’d prefer to see less regulation than more, some tweaks might be necessary to provide greater consistency in regulating national dealers.

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