    [House Hearing, 111 Congress]
    [From the U.S. Government Publishing Office]

             H.R. 6149, THE COIN AND PRECIOUS METAL DISCLOSURE ACT

    =======================================================================

                                    HEARING

                                   BEFORE THE

                        SUBCOMMITTEE ON COMMERCE, TRADE,

                            AND CONSUMER PROTECTION

                                     OF THE

                        COMMITTEE ON ENERGY AND COMMERCE

                            HOUSE OF REPRESENTATIVES

                         ONE HUNDRED ELEVENTH CONGRESS

                                 SECOND SESSION

                                   __________

                               SEPTEMBER 23, 2010

                                   __________

                               Serial No. 111-160

          Printed for the use of the Committee on Energy and Commerce

                            energycommerce.house.gov

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                        COMMITTEE ON ENERGY AND COMMERCE

                     HENRY A. WAXMAN, California, Chairman
    JOHN D. DINGELL, Michigan            JOE BARTON, Texas
      Chairman Emeritus                    Ranking Member
    EDWARD J. MARKEY, Massachusetts      RALPH M. HALL, Texas
    RICK BOUCHER, Virginia               FRED UPTON, Michigan
    FRANK PALLONE, Jr., New Jersey       CLIFF STEARNS, Florida
    BART GORDON, Tennessee               NATHAN DEAL, Georgia
    BOBBY L. RUSH, Illinois              ED WHITFIELD, Kentucky
    ANNA G. ESHOO, California            JOHN SHIMKUS, Illinois
    BART STUPAK, Michigan                JOHN B. SHADEGG, Arizona
    ELIOT L. ENGEL, New York             ROY BLUNT, Missouri
    GENE GREEN, Texas                    STEVE BUYER, Indiana
    DIANA DeGETTE, Colorado              GEORGE RADANOVICH, California
      Vice Chairman                      JOSEPH R. PITTS, Pennsylvania
    LOIS CAPPS, California               MARY BONO MACK, California
    MICHAEL F. DOYLE, Pennsylvania       GREG WALDEN, Oregon
    JANE HARMAN, California              LEE TERRY, Nebraska
    TOM ALLEN, Maine                     MIKE ROGERS, Michigan
    JANICE D. SCHAKOWSKY, Illinois       SUE WILKINS MYRICK, North Carolina
    CHARLES A. GONZALEZ, Texas           JOHN SULLIVAN, Oklahoma
    JAY INSLEE, Washington               TIM MURPHY, Pennsylvania
    TAMMY BALDWIN, Wisconsin             MICHAEL C. BURGESS, Texas
    MIKE ROSS, Arkansas                  MARSHA BLACKBURN, Tennessee
    ANTHONY D. WEINER, New York          PHIL GINGREY, Georgia
    JIM MATHESON, Utah                   STEVE SCALISE, Louisiana
    G.K. BUTTERFIELD, North Carolina
    CHARLIE MELANCON, Louisiana
    JOHN BARROW, Georgia
    BARON P. HILL, Indiana
    DORIS O. MATSUI, California
    DONNA M. CHRISTENSEN, Virgin
        Islands
    KATHY CASTOR, Florida
    JOHN P. SARBANES, Maryland
    CHRISTOPHER S. MURPHY, Connecticut
    ZACHARY T. SPACE, Ohio
    JERRY McNERNEY, California
    BETTY SUTTON, Ohio
    BRUCE L. BRALEY, Iowa
    PETER WELCH, Vermont
            Subcommittee on Commerce, Trade, and Consumer Protection

                            BOBBY L. RUSH, Illinois
                                      Chairman
    JANICE D. SCHAKOWSKY, Illinois       CLIFF STEARNS, Florida
        Vice Chair                            Ranking Member
    JOHN SARBANES, Maryland              RALPH M. HALL, Texas
    BETTY SUTTON, Ohio                   ED WHITFIELD, Kentucky
    FRANK PALLONE, Jr., New Jersey       GEORGE RADANOVICH, California
    BART GORDON, Tennessee               JOSEPH R. PITTS, Pennsylvania
    BART STUPAK, Michigan                MARY BONO MACK, California
    GENE GREEN, Texas                    LEE TERRY, Nebraska
    CHARLES A. GONZALEZ, Texas           MIKE ROGERS, Michigan
    ANTHONY D. WEINER, New York          SUE WILKINS MYRICK, North Carolina
    JIM MATHESON, Utah                   MICHAEL C. BURGESS, Texas
    G.K. BUTTERFIELD, North Carolina
    JOHN BARROW, Georgia
    DORIS O. MATSUI, California
    KATHY CASTOR, Florida
    ZACHARY T. SPACE, Ohio
    BRUCE L. BRALEY, Iowa
    DIANA DeGETTE, Colorado
    JOHN D. DINGELL, Michigan (ex
        officio)

                                 C O N T E N T S

                                  ----------
                                                                       Page
    Hon. Bobby L. Rush, a Representative in Congress from the State
      of Illinois, opening statement.................................     1
    Hon. Ed Whitfield, a Representative in Congress from the
      Commonwealth of Kentucky, opening statement....................     2
        Prepared statement...........................................     4
    Hon. Anthony D. Weiner, a Representative in Congress from the
      State of New York, opening statement...........................     6
    Hon. Steve Scalise, a Representative in Congress from the State
      of Louisiana, opening statement................................     7
    Hon. Henry A. Waxman, a Representative in Congress from the State
      of California, opening statement...............................     8
    Hon. Joe Barton, a Representative in Congress from the State of
      Texas, prepared statement......................................    90
    Hon. Phil Gingrey, a Representative in Congress from the State of
      Georgia, prepared statement....................................    93

                                   Witnesses

    Julius A. Bazan, Private Citizen, Lynbrook, New York.............     9
        Prepared statement...........................................    11
    Lois Greisman, Associate Director, Marketing Practices Division,
      Bureau of Consumer Protection, Federal Trade Commission........    17
        Prepared statement...........................................    20
        Answers to submitted questions...............................   112
    Charles Bell, Programs Director, Consumers Union.................    30
        Prepared statement...........................................    33
    Scott Carter, Executive Vice President, Goldline International...    42
        Prepared statement...........................................    44
        Answers to submitted questions...............................   117
    Howard Beales, Ph.D., Associate Professor, The George Washington
      University School of Business..................................    56
        Prepared statement...........................................    59
        Answers to submitted questions...............................   123

                               Submitted Material

    Letter of July 20, 2010, from Messrs. Rush and Weiner to Goldline
      International, Inc.............................................    97
        Response from Goldline International, Inc....................   100
    Letter of September 21, 2010, from the National Consumers League
      to the Subcommittee............................................   107
    Letter of September 23, 2010, from the Professional Numismatists
      Guild, Inc. to the Subcommittee................................   109
    Letter of September 21, 2010, from the American Numismatic
      Association to the Subcommittee................................   111

             H.R. 6149, THE COIN AND PRECIOUS METAL DISCLOSURE ACT

                                  ----------

                          THURSDAY, SEPTEMBER 23, 2010

                  House of Representatives,
               Subcommittee on Commerce, Trade,
                               and Consumer Protection,
                              Committee on Energy and Commerce,
                                                        Washington, DC.
        The Subcommittee met, pursuant to call, at 2:07 p.m., in
    Room 2322 of the Rayburn House Office Building, Hon. Bobby L.
    Rush [Chairman of the Subcommittee] presiding.
        Members present: Representatives Rush, Schakowsky,
    Sarbanes, Weiner, Barrow, Waxman (ex officio), Whitfield, Terry
    and Scalise.
        Staff present: Timothy Robinson, Counsel; Michelle Ash,
    Chief Counsel; Michael Ostheimer, Counsel; Will Wallace,
    Special Assistant; Elizabeth Letter, Press Assistant; Kevin
    Kohl, Minority Professional Staff Member; Brian McCullough,
    Minority Senior Professional Staff Member, CTCP; and Shannon
    Weinberg, Minority Counsel, CTCP.

     OPENING STATEMENT OF HON. BOBBY L. RUSH, A REPRESENTATIVE IN
                  CONGRESS FROM THE STATE OF ILLINOIS

        Mr. Rush. The Subcommittee on Commerce, Trade, and Consumer
    Protection will now come to order. I want to extend my
    greetings to all who have gathered here.
        The subcommittee is holding today's hearing on a bill, H.R.
    6149, the Coin and Precious Metal Disclosure Act. The bill,
    which was introduced by Mr. Weiner of New York, will cover the
    sale of gold bullion, collectable coins made from other
    precious metals, and certain coins for investment purposes.
        H.R. 6149 requires dealers prior to selling these items to
    make clear and conspicuous disclosures in writing and orally of
    all fees that consumers could incur in association with the
    sale of these covered items. The required disclosures would
    extend to the purchase price the melt value of the covered
    items and the reasonable resale price of the covered items to
    other dealers. Many of us have seen at least one of the
    television advertisements placed by Goldline International and
    others that tell consumers to strongly consider purchasing
    precious coins in order to preserve or protect the value of
    consumers' investments in precious metals. One of the risks
    that these advertisements and commercials cite repeatedly and
    consistently is that the U.S. government could potentially
    confiscate gold bullion. This is just one example, but I think
    is one of which many of you can relate.
        These advertisements and the reported sale practices of
    these dealers concerned Congressman Weiner and myself enough
    that we sent a letter to Goldline asking the company to respond
    to a number of questions. Today the CEO of Goldline is with us
    as one of our six witnesses, and we are very appreciative of
    our witnesses. In our letter, we asked Goldline to reveal more
    to us about, one, the company's sales staff training; two,
    sales staff compensation, commission and incentive structures;
    three, the average differential in value between the sale
    prices of gold bullion, gold coins and how much Goldline would
    pay to purchase those items back from consumers. We also asked
    Goldline to tell us the following: whether it encourages its
    sales staff through training or in sales discussions to refer
    to government confiscation of gold when they speak to
    consumers, whether sales staff receive different commission
    percentages for selling bullion than for selling collectable
    coins, and what is that difference. Finally, we asked Goldline
    to tell us whether Goldline is required to be licensed or is
    qualified in any jurisdiction to act as an investment advisor.
        And Mr. Carter, I want to please extend my thanks to you,
    and please thank your president and CEO for his prompt response
    to us in a letter, that I might add is gold embossed, that was
    dated August 12, 2010. That letter was useful to me and my
    staff as it better defined some of the terms and words that
    Goldline uses in his existing disclosures to consumers, and I
    would like to request unanimous consent for the entry of both
    letters, both mine and Mr. Weiner's letter to Goldline, and
    Goldline's response into the hearing record.
        [The information appears at the conclusion of the hearing.]
        Mr. Rush. I would also like to take this opportunity to
    request another unanimous consent, and that is for the entry of
    four more documents into the hearing record. One is a letter
    addressed to me from the National Consumers League dated
    September 21, 2010, supporting H.R. 6149. The second is a
    statement for the record on behalf of the Industry Council for
    Tangible Assets dated today, September 23, 2010. There is an
    additional letter from the Professional Numismatists Guild
    dated September 20, 2010, and finally, a letter from the
    American Numismatic Association dated September 21, 2010,
    addressed to myself and to Ranking Member Whitfield. Hearing no
    objection, these unanimous consent requests will be granted.
        [The information appears at the conclusion of the hearing.]
        Mr. Rush. I am very thankful to all of the witnesses for
    agreeing to share their valuable time with us in the interest
    of examining this bill and to making this bill a better bill.
        With that, I yield back the balance of my time and now I
    recognize the ranking member of the subcommittee, Mr.
    Whitfield, for 5 minutes for the purposes of an opening
    statement.

      OPENING STATEMENT OF HON. ED WHITFIELD, A REPRESENTATIVE IN
               CONGRESS FROM THE COMMONWEALTH OF KENTUCKY

        Mr. Whitfield. Well, thank you, Mr. Chairman, and today we
    do have a hearing on H.R. 6149, the Coin and Precious Metal
    Disclosure Act.
        I might say that after reviewing information about the gold
    industry, we know that under current law certain fees and price
    disclosures are already required by the federal telemarketing
    sales rule. Now, this legislation would require many new
    conspicuous disclosures including fees, markups and reasonable
    resale and the melt value of the metal. I am particularly
    interested in hearing testimony on why reasonable resale and
    melt value information would benefit a customer and whether
    they are reasonable for a seller to disclose. Prices for many
    items including gold can fluctuate greatly day to day, and it
    would be problematic if legislation required an estimate that
    could mislead a consumer.
        Moreover, it is not clear to me why the coin and precious
    metals sellers in the private sector should be singled out to
    disclose a resale value when it is not required of the federal
    government. For example, my staff went out today and purchased
    this from the United States Mint. It is Native American $1
    coins. There are 25 of them in here. The cost of the roll is
    $35. But the melt value of the roll turns out to be in the
    markup of the gold compared to the melt value, there is a 2,393
    percent markup on this from the federal government, and on this
    collective set of quarters that comes from the U.S. Mint, the
    retail value of this is $32.95 and yet the melt value of this
    is only $19.20. So even the U.S. government is going a
    tremendous job of marking up the price of their products as
    well.
        One other aspect of this that does bother me a little bit
    is, I have read a number of articles in the news media about
    this hearing, and it is disheartening to see that certain
    political commentators are mentioned frequently in these
    articles. Glenn Beck's favorite gold company is getting called
    up to Capitol Hill for a grilling. Democrats on Capitol Hill
    have targeted a big advertising sponsor of Glenn Beck and other
    popular rightwing commentators. Congress will hold hearings
    Thursday about the practices of Goldline, the precious metal
    dealer, that is broadcast and advertises on popular
    conservative political personalities such as Glenn Beck, Mike
    Huckabee and Fred Thompson.
        Now, hopefully that is not the reason we are having these
    hearings, but it is disheartening to see that kind of news
    coverage on it that a hearing might be held simply because
    someone is advertising on a conservative talk show host
    program.
        But we do have some experts here today. We have people with
    Goldline. We have the FTC. We have some consumers who have been
    harmed by some of their purchases. So it is important that we
    have this hearing. We know that the Federal Trade Commission
    already does have expansive jurisdiction to tackle many
    consumer protection problems and they have their priorities,
    and I don't really believe that this is one of their priorities
    but I may be wrong.
        Anyway, we look forward to the testimony of all the
    witnesses today, and I want to thank the chairman again for
    holding this hearing and giving us an opportunity to explore
    this issue.
        [The prepared statement of Mr. Whitfield follows:]

        [GRAPHIC] [TIFF OMITTED] 78137A.001

        [GRAPHIC] [TIFF OMITTED] 78137A.002

        Mr. Rush. The Chair now recognizes the author of the
    legislation, Mr. Weiner of New York, for 2 minutes for the
    purpose of opening statement.

     OPENING STATEMENT OF HON. ANTHONY D. WEINER, A REPRESENTATIVE
                 IN CONGRESS FROM THE STATE OF NEW YORK

        Mr. Weiner. Thank you, Mr. Chairman. I appreciate the
    opportunity to hold this hearing.
        You know, we are here talking about a classic consumer
    issue that affects those people in the middle class and those
    struggling to make it. This is exactly what this committee was
    empowered to deal with, and I am glad that we are taking up
    this important issue.
        The television gold industry is an industry that is led by
    one particular company that has built up an industry on fear,
    lies and rip-offs. Fear of the impending collapse of our
    economy is virtually a staple of every single statement from
    the executives of Goldline and other companies that sell these
    products. They get people scared about their future. Then they
    quickly transition to a lie, that if you buy certain types of
    coins it is a good hedge against the downturn in the economy.
    Mr. Whitfield just held up some coins that he can freely buy,
    no scarcity whatsoever, as many as he wants. Yet the only value
    to the coins that are being sold is their scarcity. If not
    that, then the small amount of gold that is in that coin, and
    that leads us to the rip-off. Once people have been convinced
    by their fear and the lies to purchase these products, they are
    profoundly ripped off. They are products that it would take
    years if not a generation, if ever, to make any money back on
    almost irrespective of how high the marketplace rose.
        They are finding themselves being sold a product that is
    supposed to hedge against the collapse of the dollar when in
    fact you would have to see years of continuing increases in
    gold prices in order to be able to make up your losses. I
    didn't make up this data. This is freely accessible to people.
    They can go take a look. The exact same products that are being
    sold by Goldline are being sold for a fraction of the price on
    the open market.
        But let me tell you what this hearing is not about. It is
    not about whether you should buy gold. Some people say yes,
    some people say no. It is not about whether or not Glenn Beck
    is doing a disservice to his viewers for shilling for this
    company. That is his problem. That is Fox News's problem. They
    made a right decision by telling him he had to end his
    contractual obligation and be a spokesman for this company.
    This is, what is the right and wrong way for consumers to do it
    and should they be protected. Should middle-class Americans who
    are being exploited every single day by this company and this
    industry be stopped and protected by legislation, and that is
    what I hope we get to today.
        Mr. Rush. The Chair recognizes the gentleman from
    Louisiana, Mr. Scalise, for 2 minutes.

     OPENING STATEMENT OF HON. STEVE SCALISE, A REPRESENTATIVE IN
                  CONGRESS FROM THE STATE OF LOUISIANA

        Mr. Scalise. Thank you, Mr. Chairman. I look forward to
    today's hearing and hearing from the witnesses, but it just
    seems rather odd that when we are sitting here and the country
    is asking Congress to be focusing on creating jobs, when
    unemployment is almost 10 percent, and you can see here from
    when President Obama took office to today we are almost
    hovering at 10 percent unemployment, the American people want
    us to be focusing on jobs. They want us to be focusing on
    controlling spending.
        And so when you look at what is happening and why people
    across the country are so concerned about the direction of our
    country, a lot of people are going out and looking for other
    things to do. They are sitting on their money. They don't want
    to invest in the things that government has control over, so
    people have been buying gold. Now, you can see right here, this
    is a chart of the 5-year gold average over the last few years.
    When President Obama took office, you can see a trajectory
    going up. Now, I don't think there is any TV host that had
    anything to do with controlling the price of gold yet people
    are buying gold because they are scared to death about the
    spending that is going on in Washington. If you look at
    Moody's, the rating agency, Moody's is talking about
    downgrading the United States's debt rating. This is serious
    business, and it is because of the out-of-control spending in
    Washington. It is because of these policies like a government
    takeover of health care by the liberals running this Congress
    that people are so scared to death about what is happening in
    the country that they are buying gold. And so what is the
    answer of the liberals running Congress? It is to go beat up on
    the people selling gold instead of fixing the problems that are
    happening in our country, instead of addressing the problems
    with creating jobs, addressing the problems with out-of-control
    spending.
        And so if you look at what is going on and why we are at a
    point now where we are looking at this legislation, it doesn't
    do anything to solve some problem that is out there. The FTC
    can address a problem. It has to do with politics. In fact,
    here is a letter from a sitting Member of Congress. It is
    nobody in this room. But it is a sitting Member of Congress who
    wrote a letter trying to raise money off of this issue,
    specifically mentioning the author of this bill in an attempt
    to raise money for campaign purposes. So yeah, there is
    politics going on here, but if we really were focused on things
    the American people want us to be focused on, we would be so
    concerned why so many people are buying gold since the day
    President Obama took office. It is because of the out-of-
    control spending and because of all these government takeovers
    and all the problems that are leading to higher unemployment.
        We ought to be focused on creating jobs. We ought to
    control the spending in Washington, not beating up on the
    people selling gold to people who want to buy it.
        Thanks, and I yield back.
        Mr. Rush. The Chair now recognizes the chair of the full
    committee, Mr. Waxman, for 5 minutes for the purposes of
    opening statement.

    OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN
                 CONGRESS FROM THE STATE OF CALIFORNIA

        Mr. Waxman. Thank you very much, Mr. Chairman.
        I am interested in the hearing today. I want to find out
    what people who are experts in consumer protection think about
    this bill, whether it is needed. We do have a Federal Trade
    Commission and I am glad they are going to be testifying.
        I do think that there is a very important role to protect
    consumers from unfair practices, but I must say after hearing
    Mr. Scalise's comment, the only politics I have heard injected
    is all the political statements he just made. If people want to
    buy gold for whatever reason, that is their business, but to
    insist they are buying gold because liberals have control of
    Congress, that seems to me a little farfetched. People can
    decide they want to have a greater diversity in their
    portfolio. They can decide to buy gold as a hedge against
    inflation. People can have an interest in investing in gold for
    whatever reason. That is their right. And in fact while other
    investments have declined in value, the price of gold has
    nearly doubled in the past 3 years. I don't think that is
    because Barack Obama is President of the United States unless
    that is the sales pitch that is made. I am not aware of it.
        I also don't think it is appropriate to hold a hearing
    because this is a substance that is being advertised on Glenn
    Beck or Rachael Maddow or anybody else. The question is, are
    consumers being informed of the information that they are
    entitled to make the best judgment, and then quite frankly
    after people have their information, they may not still make
    the best judgment. A lot of people make mistakes. They don't
    read the information that is given to them. They don't pay
    attention to the whole other aspects that might be involved in
    investing decisions. But government can't tell people what to
    do. That is up to them.
        So I am interested in what comes out of this hearing. I
    know we did have a bill that we passed out of the committee and
    I think out of the House dealing with whether purchasers of
    precious metals could melt down or destroy a consumer's jewelry
    or gold before receiving an affirmative acceptance of an offer
    to purchase the jewelry for a specific price. But this is a
    different issue. This is a question of how much we need to
    inform consumers and whether there is a problem sufficient for
    us to change federal law to do that.
        I thank you for the hearing, and it should be an
    interesting one, and I expect we will learn a lot. I yield back
    my time.
        Mr. Rush. The Chair thanks the chairman.
        The Chair now recognizes the gentleman from Nebraska, Mr.
    Terry, for 2 minutes.
        Mr. Terry. Thank you, Mr. Chairman, but I am going to waive
    so I will have more time for questions. Thank you.
        Mr. Rush. The Chair now recognizes the gentleman from
    Maryland, Mr. Sarbanes, for 2 minutes.
        Mr. Sarbanes. Thank you, Mr. Chairman. I don't need 2
    minutes.
        I just want to thank Congressman Weiner for bringing
    attention to this issue and echo what Chairman Waxman said,
    which is it is just a matter of making sure people have good
    information at their fingertips and then they can make sound
    judgments, and the problem here is that oftentimes the
    information is far away from the reality of the situation.
        And so we are looking forward to the testimony. We are
    looking forward to moving forward on this piece of legislation,
    and I yield back. Thank you.
        Mr. Rush. The Chair thanks the gentleman. The Chair thanks
    all the members for their opening statements.
        Now we want to recognize our witness for the first panel,
    and I want to introduce him. He is a private citizen. His name
    is Dr. Julius A. Bazan. He lives in Lynbrook, New York, and he
    is going to testify regarding his experiences with this product
    and with this company. And so Dr. Bazan, it is important for
    you to know that this subcommittee has a standing practice that
    we will swear in all the witnesses, so would you please stand
    and raise your right hand?
        [Witness sworn.]
        Mr. Rush. I want to thank you to much for taking time out
    from your busy schedule to be a participant in this hearing,
    and you are recognized for 5 minutes for the purposes of your
    opening statement.

     TESTIMONY OF DR. JULIUS A. BAZAN, PRIVATE CITIZEN, LYNBROOK,
                                NEW YORK

        Dr. Bazan. Thank you very much.
        I would like to say I have a little bit of difficulty, if
    you would gentlemen would speak up so I can hear you.
        As was mentioned, you know, I am originally from
    Czechoslovakia. I have been in the United States for 31 years,
    and I have been living in Lynbrook in New York and have been
    practicing neurology for 25 years.
        I am also an investor and I have been investing in the
    stock market in mutual funds, even commodities and options, for
    about 20 years. However, after 9/11 I lost about 60 percent of
    my investments, maybe probably more. So I decided about 8 years
    ago to get out of the market. I was just having my account in
    Ameritrade, and I was thinking what to do with my money. At
    that time it was clear that the dollar was declining, the value
    was losing, and I was thinking about what kind of investment I
    would be able to make.
        Around the same time, you know, you listen to the news
    about gold and you listen to these advertisements and all
    different spokesman that you mentioned and you are exposed to
    these bombardments every day, especially I remember Goldline
    because I didn't know anything about gold but whatever they
    were saying was making sense to me because, you know, gold was
    holding its value and actually was increasing in value, so I
    said if I invest in gold, maybe I can maintain the value of my
    dollar, you know, going forward.
        So I decided I would like to invest in gold but I didn't
    know what company to choose. However, at that time Goldline was
    advertising on a daily basis and you were basically bombarded.
    There was no other company which I could find to invest in
    gold. So eventually I decided to contact Goldline by phone
    number and I decided to open an account. Then eventually I was
    able to transfer the money and I was contacted by one of the
    salesmen from Goldline, and we decided, you know, how to invest
    the money. Initially I was thinking to purchase the bullion but
    I was told that bullion is not a good value to invest in
    because in the 1930s the government confiscated the gold and
    set the prices of the bullion and that would not be a good
    investment. On the other hand, I was told that coins have much
    better sell value, they are increasing in price and that will
    be an excellent investment for me because I can preserve my
    capital.
        So not knowing anything about it, I eventually decided I
    will invest in gold coins as the representative suggested, and
    at that time I didn't know actually that his decision to sell
    me coins was based on commissions. It looked like if I was to
    purchase bullion, he would be getting about 5 percent of
    commission. However, if I bought coins he would get 35 percent
    of the commission. So anyhow, I bought the gold and I was
    waiting for about 6 months. I got the promise that it is very
    likely that gold price will reach $3,000 in one year. However,
    after 6 months I didn't see the price of gold move too much. It
    stayed around $1,100. So I decided, because I found another
    investment opportunity, that I will liquidate my holdings in
    gold.
        To my shock, when I called the representative, he mentioned
    that there is something called spread, which I didn't know too
    much about, which now I understand is the difference between
    selling and buying the price of the gold. And he told me, I had
    my initial investment which was $140,000. He said that my
    investment now is worth only $83,000. So essentially it meant
    that that the day I purchased this gold, my value, he took
    about $60,000 in profit and left me holding a bag, $83,000. So
    I essentially felt robbed. It felt like legalized robbery. And
    so in any case, I decided to sell gold at that time, and that
    is my story.
        [The prepared statement of Dr. Bazan follows:]
        [GRAPHIC] [TIFF OMITTED] 78137A.003

        Mr. Rush. Thank you so much. We sympathize and are
    sympathetic to you for your loss of your dollars and your
    substantial loss to your individual retirement account, which I
    understand you lost as a result of your investment. Again, you
    have the sympathies of both myself and the other members of
    this subcommittee.
        I have a few questions that I want to ask you, and I have 5
    minutes in which to ask these questions. How many transactions
    did you conduct with Goldline?
        Dr. Bazan. This was just one purchase but I bought multiple
    different coins, but the bulk of it was in premium gold eagle.
    I believe they call it golden proof eagle, which at that time I
    was sold for $3,300 and I understand that the melt price of
    that coin was only $1,000 when I bought it. And on the market
    price, I think it was hiked up by about 30 percent or 35
    percent. I was charged for one coin $3,300 while the melt price
    was only $1,000.
        Mr. Rush. So am I to assume that you only spoke with one
    salesperson?
        Dr. Bazan. Only one salesman, yes.
        Mr. Rush. Were you ever informed of fees that would incur
    in association with your transaction?
        Dr. Bazan. No, absolutely not, no discussions of any fees
    or any commissions or anything else.
        Mr. Rush. Okay. Before contacting Goldline in July 2010,
    when you wanted to sell your investment, did you hear or see
    any disclosures about how much Goldline was marking up the
    proof American eagle coins you agreed to purchase?
        Dr. Bazan. No.
        Mr. Rush. Or how much the spread was on those coins?
        Dr. Bazan. I had no information about prices of coins at
    that time.
        Mr. Rush. After purchasing the coins, did you receive any
    disclosures?
        Dr. Bazan. No.
        Mr. Rush. Thank you.
        I will now yield the ranking member 5 minutes for the
    purposes of questioning the witness.
        Mr. Whitfield. Is it Dr. Bazan or----
        Dr. Bazan. Bazan, yes.
        Mr. Whitfield. Well, Dr. Bazan, thank you very much for
    taking time to be with us today, and I also would like to offer
    my apologies for the loss of your investment. I do want you to
    know, I have lost a lot of money in investments as well and
    that is something that we all deal with.
        I believe I heard the chairman ask you if you had received
    any sort of disclosure when you purchased this gold, and I may
    be wrong, but it is my understanding that before this company
    will actually sell gold product to a purchaser, that they send
    this out, which is called an account and storage agreement, and
    on the back it says ``client acknowledges that he or she has
    read and understands all of the terms and conditions of the
    account and storage agreement and shall be bound by them.'' And
    I was just reading through here, and I know that the very first
    thing it says here is that ``this is speculative, unregulated
    and volatile and that prices may rise or fall.'' And then it
    says ``profit can only be made if prices rise over the
    investment period in an amount sufficient to overcome the
    spread as set forth in paragraph 13.'' Did you receive this at
    all before you purchased----
        Dr. Bazan. I don't know if it was in this form, but of
    course you mentioned the storage fees. You know, I was aware of
    the storage fees. I mean, my question was about the purchase
    fees and those prices I didn't know nothing about.
        Mr. Whitfield. You didn't know anything about the purchase
    fees?
        Dr. Bazan. Nothing about the price but I know about the
    storage fees.
        Mr. Whitfield. Okay. And how long did you actually keep the
    gold?
        Dr. Bazan. The gold, I bought it sometime in December of
    2009 and kept it until May of 2010, 6 months.
        Mr. Whitfield. Six months. Well, I noticed that in another
    one of their documents, it does specifically say, it says, ``If
    you are purchasing coins, bullion or rare currency for
    investment purposes, they should be considered a long-term
    investment. We believe that rare coins and currency should be
    held for at least 3 to 5 years and preferably 5 to 10 years to
    maximize any potential for gain.'' Did you see that in any of
    these documents or did you consider that?
        Dr. Bazan. I don't think I read it. However, you know, I
    was aware of the risk I am taking. However, I was under the
    impression that when I am buying these coins I am buying them
    at the market price. So of course I naturally assumed if the
    price of the gold will go down, I will lose my money. However,
    I didn't expect at the time of the purchase to lose $60,000 the
    minute I purchased that gold.
        Mr. Whitfield. Yes. Well, you know, I just read this
    legislation, and I haven't read it thoroughly and I don't know
    what the actual definition is for a precious metal dealer, but
    once I want to go back to the U.S. Mint, because you can go to
    the U.S. Mint today and you can buy a 2010 American buffalo 1-
    ounce gold proof coin, 1 ounce, and that is $1,560. Well, the
    actual price of gold today is around $1,290 per troy ounce, so
    buying this from the federal government, you walk out the door
    and you have already lost approximately $300. And so if this
    legislation is actually going to be going after private
    dealers, then I am just wondering are we being discriminatory
    if we don't do something about what the U.S. government is
    doing.
        Dr. Bazan. Well, you know, that price was $1,000. He sold
    me that 1 ounce for $3,300. There is a big difference between
    the price.
        Mr. Whitfield. One ounce for how much?
        Dr. Bazan. This one coin is 1 ounce. I paid $3,300 for it.
        Mr. Whitfield. Were you aware of the price of gold on that
    day in the market, 1 troy ounce of gold?
        Dr. Bazan. Yeah, I know those prices of $1,200. I was told
    that that was a numismatic value of that coin, that it was an
    additional $2,000 worth of numismatic value on that coin.
        Mr. Whitfield. So even though you knew the price of the
    gold for that day, it was your understanding that the value of
    the coin was what you paid for it? I mean, is that what you are
    saying?
        Dr. Bazan. Well, I assumed that the $3,300 was the price of
    that coin on the market, so if I go to redeem it I understand I
    will lose some money and I would not be able to recover $3,300,
    but I didn't expect that I will lose $2,000 on that coin.
        Mr. Whitfield. Well, like I said, we do appreciate your
    being here today and being willing to talk about this issue. I
    might say, and of course, I may be totally wrong because I am
    in a rural area of this country but I haven't had any
    constituent write to me about this issue. Now, that doesn't
    mean that there are not a lot of people maybe in the same boat
    you are, but thank you for being with us and we look forward to
    the other testimony.
        Dr. Bazan. Thank you very much.
        Mr. Rush. The Chair recognizes Mr. Weiner for 5 minutes for
    the purposes of questioning.
        Mr. Weiner. Thank you, Mr. Chairman.
        Just to pick up on what Mr. Whitfield said, Dr. Bazan, you
    are a perfect witness because you are not alone. The same exact
    experience led to 50 Better Business Bureau complaints,
    $170,000 consent order signed by this company in Missouri
    because they are ripping off Missouri constituents, 28 FTC
    complaints. They are under investigation by the L.A. district
    attorney, the Santa Monica District attorney. There is a class
    action lawsuit against them in South Carolina. ABC News just
    this morning reported that three of their high-ranking current
    employees were banished from selling securities of their
    fraudulent activities.
        But you are perfect for another reason. I talked about the
    fear, the lies, the rip-off. Your case speaks to all three. You
    called because you were fearful and you were probably led to be
    fearful maybe by a document like this that Goldline puts in all
    of its pitch packets. It is a scary looking executive order
    saying that gold can be seized at any time. Gold bullion, don't
    get into gold bullion because it can be seized. Now, they don't
    explain to you that this executive order hasn't been enforced
    since the 1970s. It was only seized then because it was the
    currency backer for the dollar, which it no longer is, and they
    don't explain to you well, if you want to really get
    frightened, they can seize your coins as well. And then you are
    told oh, no, it is a better value not to be in bullion, which
    you called for, but for these coins.
        Let me explain to Mr. Whitfield and the rest of the
    committee how these coins operate. Numismatic coins have their
    value derived from two things. One is the amount of gold in it.
    If you are really scared about the economy and you want to buy
    gold, that is the little element that you care about. There is
    another element, though, in fairness. It is the scarcity. Mr.
    Whitfield demonstrated the scarcity of these products by
    calling up the Mint and buying some. There is no scarcity. If
    tomorrow the dollar goes into rapid inflation, maybe it will,
    maybe it won't, you will have those coins. Good luck buying a
    loaf of bread with those coins, because if you went on eBay
    today, you will find that those coins are readily available for
    nowhere near the price is being sold at, which brings us to the
    rip-off, and this is the part I want Mr. Whitfield and Mr.
    Scalise to understand. This gentleman thought when he spent
    $3,000, he got $3,000 worth of gold. Is that a preposterous
    assumption? Is he a naif? Is he naive? No, it is a reasonable
    assumption. I am buying gold, here is my $3,000, give me $3,000
    worth of gold. He gave them $140,000. That moment he lost about
    $80,000. That second, he was ripped off.
        This is not about whether or not you should buy gold, Mr.
    Scalise. It is not about whether or not you can buy a coin, Mr.
    Whitfield. You have to understand, these people are being told
    to buy these coins for investment purposes. If you want to buy
    a nice van Gogh because it is very scarce and you think it will
    still be valuable in generations to come, more power to you.
    But no one is saying that in these ads. None of these salesmen
    are saying that. They are saying it is a hedge against a
    downturn in the economy; they will have value. And to say that
    the disclosure says that there is a 30 percent spread value,
    well, you know, Dr. Bazan, that what that means for consumers
    is a 54 percent markup. It is a clever use of language, but
    that is really what it is.
        Look, it is fair to say we should get a few extra dollars
    because we are storing it or we should get a few extra dollars
    because we have these high-quality salesmen like the ones who
    were investigated by the FCC. But it is simply wrong to leave
    our constituents, middle-class people struggling to make it who
    are getting the bejesus scared out of them based on these lies,
    who are then taken from a bullion investment and put into a
    coin investment based on the out-and-out near fraud of saying
    that those things are going to retain value better and then
    taking the exact same product and saying we are going to
    provide triple and quadruple what this is available for
    elsewhere. This is why we need improved laws. And I say to my
    friend, Mr. Whitfield, yes, you can open this thing and say 30
    percent, it is right here, does that make it less of a rip-off?
    Does it make it less of a rip-off? Does it mean that consumers
    shouldn't be protected? Dr. Bazan, who is an articulate, smart
    guy, was it so naive of him to believe that if I invest
    $100,000 in gold I am going to have $100,000 in gold?
        These coins, this firm, this industry is an orchestrated
    effort first to scare people, then to lie to them--the coins
    are a better deal--and then to rip them off on those coins.
    That is what happened to this gentleman. That is what happened
    to all these people that I just listed and that is why we need
    improved disclosure.
        And I say to Mr. Whitfield, you concluded, ``I haven't
    heard a lot of complaints.'' Well, here is something you might
    be interested to know. If you complain to Goldline and they
    agree to settle with you, do you know you have to sign an
    agreement saying you won't file a complaint with the Better
    Business Bureau, you won't file a complaint with Congress, you
    won't call Congressman Whitfield? What kind of reputable
    company does that? So not only you are only going to try to
    settle this with you, your complaint, if you don't talk about
    it. Well, I am glad you are here to talk about it and so I am.
        Dr. Bazan. Thank you.
        Mr. Rush. The Chair wants to announce that there is a vote
    that occurs on the Floor. There are five votes remaining, and
    there are less than 5 minutes to get to the Floor. So this
    subcommittee will have to recess for approximately 40 minutes
    until we conclude voting on the series of votes that are now
    occurring on the House Floor. So please accept our apologies
    for the recess but we have to get to the Floor in order to vote
    on these important matters on the Floor.
        So the subcommittee now stands in recess until 10 minutes
    after the last votes.
        [Recess.]
        Mr. Rush. The subcommittee will come to order again.
        The Chair now recognizes Mr. Scalise for 5 minutes for the
    purposes of questioning the witness.
        Mr. Scalise. Thank you, Mr. Chairman.
        Is it Mr. Bazan?
        Dr. Bazan. Yes.
        Mr. Scalise. What was the motivator to make you want to buy
    gold? I think you were kind of talking about that earlier, but
    can you give----
        Dr. Bazan. The main thing was to hedge against inflation.
    Of course, we knew that the dollar was losing its value and
    investment was going down so the only way I believed to protect
    myself was to invest in gold to hedge against inflation.
        Mr. Scalise. And the value of the dollar obviously
    dropping, when did all this really start? When did your
    interest in buying gold come about?
        Dr. Bazan. I mean, at that time there was a lot of talk
    about gold and, you know, indeed the price of gold was going
    up. That was the only investment which sounded reasonable. I
    didn't want to trade too much so I put it in gold and keep it
    there and see what happens.
        Mr. Scalise. And obviously with the price, and I know I
    have shown the chart earlier with the price of gold, there are
    dramatic increases. I am not sure exactly when----
        Dr. Bazan. The problem, the minute I bought the gold, they
    charged me 35 percent on my commission so I invested 140 and at
    that moment I had only $83,000 so that means that I will have
    to wait years before I can recover my losses. I was hoping that
    I am buying it at market price and I was deceived. There was no
    discussion about price of gold, and I was almost forced to buy
    coins instead of bullion because I was told that government
    will confiscate the bullion or they fix the price and it may be
    useful, and the coins are the only way to go because they will
    always increase in price and government cannot touch them,
    which is a lie.
        Mr. Scalise. Right, but ultimately you could have brought--
    --
        Dr. Bazan. Say again?
        Mr. Scalise. Ultimately you did have the option to buy
    either one?
        Dr. Bazan. And I bought all the coins, which was suggested
    by the representative.
        Mr. Scalise. And then how long did you hold it for?
        Dr. Bazan. For 6 months.
        Mr. Scalise. Six months. All right. Thanks.
        Yield back.
        Mr. Rush. The Chair doesn't see any other members from this
    side.
        Mr. Bazan, we certainly appreciate you taking time out from
    your schedule to be with us.
        Dr. Bazan. Say again, please.
        Mr. Rush. I said we certainly appreciate you taking the
    time out from your busy schedule to be here with us, and again,
    you have our sympathy and our sincere regrets for your
    experiences, and we intend to continue to take a serious look
    at this issue and try to resolve this issue so that we can
    bring your situation and similar situations experienced by
    other Americans to a screeching halt, so again, thank you so
    very much, and we wish that you will continue to be the kind of
    citizen that you would be a courageous citizen. Thank you so
    very, very much.
        Dr. Bazan. Thank you.
        Mr. Rush. The Chair would ask the second panel now, would
    you please take a seat at the witness table.
        I want to welcome all those who are the witness desk, those
    who comprise the second panel for this subcommittee hearing,
    and before we begin, I want to introduce each and every one of
    the members of the second panel. Seated to my left is Ms. Lois
    Greisman. Ms. Greisman is Associate Director of the Marketing
    Practices Division for the Bureau of Consumer Protection for
    the Federal Trade Commission. Next to Ms. Greisman is Mr.
    Charles Bell, who is the Program Director for Consumers Union.
    And seated next to Mr. Bell is Mr. Scott Carter. He is the
    Executive Vice President of Goldline International. And seated
    next to Mr. Carter is Mr. Howard Beales. Dr. Beales is
    Associate Professor at the George Washington University School
    of Business.
        Again, I want to thank each and every one of you for
    participating in this hearing and sacrificing your time for
    this committee and this Congress.
        It is the practice of this subcommittee to swear in
    witnesses, so I would ask that each of you stand and raise your
    right hand and answer this question.
        [Witnesses sworn.]
        Mr. Rush. Please let the record reflect that the witnesses
    have all answered in the affirmative.
        And now each one of you will be recognized for 5 minutes
    for the purposes of an opening statement. Ms. Greisman, we will
    recognize you for 5 minutes.

       TESTIMONY OF LOIS GREISMAN, ASSOCIATE DIRECTOR, MARKETING
      PRACTICES DIVISION, BUREAU OF CONSUMER PROTECTION, FEDERAL
     TRADE COMMISSION; CHARLES BELL, PROGRAMS DIRECTOR, CONSUMERS
        UNION; SCOTT CARTER, EXECUTIVE VICE PRESIDENT, GOLDLINE
     INTERNATIONAL; AND HOWARD BEALES, PH.D., ASSOCIATE PROFESSOR,
          THE GEORGE WASHINGTON UNIVERSITY SCHOOL OF BUSINESS

                       TESTIMONY OF LOIS GREISMAN

        Ms. Greisman. Thank you, Chairman Rush, Ranking Member
    Whitfield and member of the committee. I am Lois Greisman,
    Associate Director in the Bureau of Consumer Protection at the
    Federal Trade Commission. I appreciate the opportunity to
    testify before you today about consumer protection issues
    arising from the sale of coins and precious metals as
    investments.
        As you know, the Federal Trade Commission's written
    testimony has been provided. My own statement and any responses
    to questions you may have solely represent my own views.
        With the downturn of the American economy, the Commission
    has committed substantial resources to shut down scams that
    harm financially distressed consumers with a particular focus
    on job and business opportunity scams, foreclosure rescue
    scams, scams preying upon the economic stimulus package and
    scams targeting those seeking health insurance. With the
    economic downturn, we also see scams focusing more directly on
    investment opportunities as people seek low-risk, high-yield
    investments and not surprisingly, coins and precious metals
    often are promoted as such good, safe investments.
        We are well aware of consumer complaints involving precious
    metals and coins of investment and are looking closely into
    some of the issues raised, and as always, we are consulting
    with our colleagues at the State and federal level and in
    particular the SEC and the CFTC. While I cannot address whether
    we are or are not looking at any particular area or entity, I
    do want to highlight some of the problems we have seen thus far
    and then turn to the new consumer educational materials we are
    issuing today.
        Now, although the written testimony notes that the volume
    of complaints received by the Commission is quite low both for
    coins and precious metal, there are three main categories of
    complaints. First, complaints that some dealers use high-
    pressure sales tactics to persuade consumers to purchase
    collectible or historic coins rather than bullion coins and
    that they always may misrepresent the value of those
    collectible coin investments. Second, there are complaints that
    some unscrupulous marketers urge fast investment in a
    particular metal before the price skyrockets. In fact,
    consumers end up entering into risky and high-leveraged
    investments. Finally, as you are well aware from prior
    testimony on the Guarantee of a Legitimate Deal Act, we have
    seen complaints about companies that purchase consumers'
    jewelry and family heirlooms for their melt value but fail to
    provide a price quote before actually melting those items.
        Now, the Commission takes investment fraud very seriously.
    The fact that we have not brought any law enforcement action in
    recent years is not to be taken as an absence of concern in the
    area of precious metals and coins. To the contrary, the
    revamped consumer educational materials, and I believe each
    office has been provided them, entitled ``Investing in Gold:
    What is the Rush'', highlights the Commission's concern with
    ensuring that consumers understand the differences among
    investments in gold coins, bullion coins and collectible or
    historic coins. In fact, the consumer educational materials
    consist of three discrete brochures.
        As each of these brochures makes clear, these kinds of
    investments require a level of sophistication that one can
    acquire only by serious research. You have to know what you are
    buying and whether you were buying it as a collectible item or
    for the value of the precious metal itself. We hope these
    brochures will provide a solid starting point for consumers.
        Finally, I do want to touch upon the Coin and Precious
    Metal Disclosure Act. This Act would address many of the
    consumer protection concerns that we have mentioned by
    requiring coin and precious metal dealers to disclose not only
    the purchase price but also other fees associated with the sale
    of the coins and precious metals as well as the melt value and
    reasonable resale value for coins and precious metals.
    Critically, I know that our revised consumer educational
    materials do suggest that the consumer ask for information on
    the melt value of a coin before making any purchase.
        Now, as the testimony notes, we do have some concerns with
    respect to the proposed definition of the term ``reasonable
    resale value'' in section 1 of the bill and we would be pleased
    to continue to work with staff to address those concerns. Also,
    as noted in the testimony, we do not support the exemption of
    section 6 because it would exclude from the bill's coverage
    certain collectible coins that have been the subject of
    consumer complaint.
        With that, I thank you very much for the opportunity to
    address the subcommittee. I look forward to working with you
    and to answering your questions. Thank you.
        [The prepared statement of Ms. Greisman follows:]
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        [GRAPHIC] [TIFF OMITTED] 78137A.013

        Mr. Rush. Thank you very much.
        Mr. Bell, you are recognized for 5 minutes.

                       TESTIMONY OF CHARLES BELL

        Mr. Bell. Chairman Rush, members of the committee, thank
    you so much for the invitation to testify here today on ways to
    protect consumers who purchase gold coins and metal bullion. We
    commend you for holding this hearing to focus attention on ways
    to protect consumers and encourage a safer marketplace.
        As you know, Consumers Union is the independent, nonprofit
    publisher of Consumer Reports and Consumer Reports Money
    Advisor. We work to empower consumers by informing and
    educating them about the top consumer issues of the way, and we
    also as part of our work report on scams and fraud both to
    alert consumers and also advocate for public policy measures
    for greater protection.
        As I summarize in our testimony, over the last several
    years we have seen numerous news reports and complaints
    received by regulators and law enforcement agencies indicating
    that consumers are experiencing significant problems in
    transactions related to gold coins and metal bullion and we
    think that those problems are indeed worthy of attention by
    your subcommittee.
        Many of the problems that we have seen come to public light
    are related to high-pressure sales tactics that entice
    consumers to buy coins that have high markups, that turn out to
    have much less resale value that the consumer initially
    expected.
        Consumers are also at risk because sellers of gold coins
    and bullion may not be licensed or regulated either by the
    Securities and Exchange Commission or the Commodities Futures
    Trading Commission, and sales representatives may not be
    licensed as investment advisors, even though they present their
    products as an investment and may be perceived by the consumer
    as a financial advisor. So we are concerned that coin and
    bullion sellers are subject to relatively limited public
    oversight, and that state consumer protection authorities may
    only be able to offer limited help for consumers who feel they
    have been defrauded.
        Through our publications, Consumers Union has urged
    consumers to be cautious in buying gold coins, and to be
    particularly wary of high-pressure sales tactics over the
    phone. We emphatically agree with the Federal Trade Commission
    that this is an area where consumers need to do extensive
    homework before making a purchase decision. We generally advise
    consumers who are interested in investing in gold as a portion
    of their portfolio not to buy physical gold, but instead to
    purchase shares in an exchange-traded fund that purchases gold
    for clients and holds it in a bank, because of the much lower
    trading fees and annual expenses.
        By contrast, companies selling gold coins may mark them up
    by significant margins of 20-30 percent or significantly more
    such that it will take many months or years for consumers to
    even break even.
        We then summarize issues and concerns that have been raised
    by a number of companies in the marketplace. We have seen
    complaints on this issue over the years ebb and flow but we
    believe that for a significant number of customers there has
    been an ongoing problem for many years, and while the number of
    complaints that was noted may seem small as a portion of
    business transacted by the industry, it is generally accepted
    in most customers relations work that for each official
    complaint that is lodged with a company or government
    authorities, there are a significant number of other consumers
    who experience similar problems but did not complain, and this
    is especially so in things like financial scams where the
    consumer or investor may be very embarrassed and they may hope
    that the situation will get better with the passage of time and
    they may be very reluctant to talk about it.
        So we also believe that in the stories that have come to
    public light, we often see a significant financial loss
    experienced by the customer and bitter disappointment expressed
    by people who felt that there was significant upside to the
    investments, did not understand the structure of what they were
    putting their money down for, so we think that there is a
    significant potential for misunderstanding about the value of
    the coins they are purchasing and the fees and services related
    to transactions.
        We are also concerned that the prospective purchase of gold
    coins and bullion may be an impulsive decision for some
    consumers who may be responding to well-placed TV or Internet
    ads as was noted earlier today. This does not excuse consumers
    for looking out for their economic interest but it does raise
    the possibility that large number of customers in times of high
    gold prices and/or economic distress may be enticed through
    slick advertisements to quickly agree to Internet or telephone
    offers without carefully considering their options. And so for
    those customers, we think they need to be aware that there is a
    high cost to national television advertising and companies that
    use that business model may use very aggressive sales practices
    to try to upgrade them to products that are more lucrative or
    remunerative for the sales advisor that is selling that product
    that is earning a high commission.
        So with that in mind, we believe that the draft bill that
    is being considered here today would be very much in the public
    interest of consumers to have much more prominent, conspicuous
    disclosures in the sale of coins and precious metal bullion.
    These disclosures, in our opinion, should include the item's
    purchase price, melt value and reasonable resale price as well
    as any fees that the customer will incur if the purchase is
    completed. We strongly favor provisions to make those
    disclosures orally to consumers if the sales are being
    solicited by telephone and to ensure that the FTC and State
    attorneys general have appropriate authority to investigate
    deceptive practices.
        We believe that the people who are selling these products
    have a very good idea of what they are worth and they have
    access to information through numerous trade groups and
    industry sources that regularly compute the value of these
    coins and the person that generally may not have that
    information is the less experienced and less sophisticated
    consumer.
        So we think that we have an opportunity to craft a bill
    here that would be very much in the consumer and public
    interest. The stories we have seen do not inspire confidence
    that consumers are getting the information that they need, and
    we hope this bill will give them that information. And other
    organizations in the consumer protection community such as the
    National Consumers League we expect will strongly support this
    legislation. Thank you.
        [The prepared statement of Mr. Bell follows:]
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        Mr. Rush. The Chair thanks the witness.
        And now the Chair recognizes Mr. Carter for 5 minutes for
    the purposes of an opening statement.

                       TESTIMONY OF SCOTT CARTER

        Mr. Carter. Mr. Chairman and members of the committee, I am
    Scott Carter, Executive Vice President of Goldline
    International. Thank you for this opportunity to discuss
    Goldline's role as an industry leader in the precious metals
    and rare coins markets.
        Goldline has long supported the comprehensive disclosure of
    information for an individual to make an informed decision
    about acquiring precious metals and rare coins. Indeed,
    Goldline believes its disclosures represent the best practices
    in an industry of more than 5,000 precious metals and rare coin
    dealers. These disclosures include clear examples and
    explanations of the risks and costs associated with acquiring
    precious metals, information which we provide throughout the
    sales process.
        In the highly competitive precious metals industry, there
    are numerous sources available to compare prices and policies.
    This intensive competition coupled with existing regulation
    protects individuals when choosing if and where they acquire
    precious metals. We believe that H.R. 6149 does not improve the
    information currently required under regulations and imposes
    requirements that cannot be met by the industry. As presently
    written, the proposed legislation appears unworkable and may
    actually result in inaccurate information being conveyed to the
    consumer.
        Goldline has been offering precious metals to individuals
    since 1960 and has grown to more than 300,000 full-time
    employees. Over the years Goldline has assisted thousands of
    people to acquire and liquidate precious metals and rare coins.
    We are proud to be rated A+ from the Better Business Bureau.
        Goldline provides each of our clients with a risk
    disclosure booklet, Coin Facts for Investors and Collectors to
    Consider. Coin Facts is written in a large, easy-to-read font
    and contains important information regarding the acquisition of
    precious metals. In Coin Facts, Goldline explains its pricing
    policies in extensive detail and provides a mathematical
    example to ensure its clients understand how this pricing
    works. Goldline also provides important information about its
    sales staff and commission structure in Coin Facts.
        Also, even though gold prices have increased every year in
    the past 10 years, like any asset, precious metals can rise and
    fall in value. Accordingly, Coin Facts clearly spells out the
    risks of owning precious metals for a potential client. For
    example, we recommend that coins and bullion are appropriate
    for no more than 5 to 20 percent of a portfolio and we believe
    that assets should be held for at least 3 to 5 years,
    preferably 5 to 10 years. Goldline's marketing and risk
    disclosure materials encourage prospective to conduct their due
    diligence before they acquire any product. Additionally,
    Goldline discloses its pricing, fees and risks involved in
    acquiring precious metals and rare coins in its account and
    storage agreement which all clients must read and sign before
    they finalize their purchases.
        The entire sales process beginning with an individual's
    initial inquiry to Goldline and culminating with an expiration
    of the applicable cancellation and refund period often occurs
    in a span of days or weeks. During this time, Goldline clients
    can easily conduct their own due diligence to compare products,
    prices and policies among the thousands of competing precious
    metals dealers.
        In addition to providing comprehensive information to
    Goldline customers about the risks and costs of acquiring
    precious metals, Goldline has an internal compliance program to
    ensure best practices among its sales staff. This compliance
    program was reviewed by lawyers and former senior regulators
    with expertise in consumer protection, telemarketing,
    numismatics and regulatory compliance. Goldline's policies are
    administered by a full-time compliance department with regular
    input and assistance from outside counsel. Among other things,
    Goldline's compliance program trains the sales staff about the
    requirements of the FTC's telemarketing sales rule, Do Not Call
    obligations, state telemarketing requirements including seller
    identification and disclosures, and the importance of adhering
    to Goldline's compliance rules and code of contact.
        Mr. Chairman, in my written testimony I discuss our
    concerns about H.R. 6149 in greater detail. Today I
    specifically would like to note that the requirement in the
    bill that sellers disclose the reasonable resale value of a
    product would create an insurmountable burden on precious
    metals dealers and likely would mislead consumers.
        Mr. Chairman and members of the committee, thank you, and I
    would be happy to answer any questions from the committee.
        [The prepared statement of Mr. Carter follows:]
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        Mr. Rush. The Chair thanks the gentleman and now recognizes
    Dr. Beales for 5 minutes for the purposes of an opening
    statement.

                       TESTIMONY OF HOWARD BEALES

        Mr. Beales. Thank you, Mr. Chairman. My name is Howard
    Beales. I teach at the business school at George Washington
    University and I have long experience at the FTC. I directed
    the Bureau of Consumer Protection from 2001 through 2004 when
    we created the national Do Not Call Registry, one of the most
    popular government consumer protection measures ever
    undertaken. Both inside and outside the agency, I have studied
    the FTC's approach to consumer protection issues for over 30
    years.
        Thank you for asking me today to discuss these important
    issues. Although I have consulted with Goldline on issues
    relating to their marketing practices under the FTC Act, the
    views I express in this testimony are my own.
        The cornerstone of the FTC's consumer protection mission is
    its fraud program through which the Commission has returned
    hundreds of millions of dollars to defrauded consumers. As the
    FTC has detailed, the agency has a long history of activity
    against deceptive investment claims. Common themes in these
    cases are false claims that high returns are virtually certain
    in a short period of time. The cases involving commodities also
    feature misrepresentations, usually expressed, of the
    relationship between the selling price and the market value of
    the item combined with grossly inflated prices.
        Such claims are a far cry from Goldline's practices.
    Instead, Goldline's marketing and sales practices include
    extensive disclosures, encouraging consumers to carefully
    consider their purchases.
        First, Goldline's advertising relies on consumers calling
    the company to get additional information. Typically, customers
    call with initial questions and call back several times over a
    period of days before making a purchase. Thus, consumers have
    both time and the opportunity to check out competing sellers
    and other sources of information. The fact that a sale
    typically takes several calls suggests that consumers are
    exercising the kind of due consideration that should be given
    to a purchase that is typically in the range of $15,000 to
    $20,000 for first-time buyers.
        Goldline provides potential customers with a clear, well-
    written disclosure document, Coin Facts, explaining the market
    and the company's practices in detail. In my experience,
    Goldline's pamphlet is a vast improvement over the disclosure
    documents that typically accompany other investment
    opportunities. In addition, all first-time buyers of Goldline's
    higher-margin products have an unconditional cancellation
    period of at least seven days, providing significant time for
    any consumer to consider their potential purchase, compare
    prices and offerings, and access relevant information from
    readily available sources. Of course, even sophisticated
    consumers can be misled. Goldline, however, is very different
    from the type of company typically found engaging in deceptive
    investment promotions. A substantial fraction of its sales are
    repeat purchases, which only occurs when customers are
    satisfied with what they receive. Goldline also has an A+
    rating from the Better Business Bureau.
        Second, Goldline's advertising and sales material do not
    guarantee or promise a profit or a specific return. In contract
    to the quick profit claims that are the hallmark of past cases,
    Goldline advises consumers that rare coins and currency should
    be held for at least 3 to 5 years but preferably 5 to 10 years.
    Goldline makes no representation that it is selling at
    wholesale or at the lowest price. Instead, Goldline provides
    straightforward disclosures of its spreads. It also provides a
    very clear example of how this differential would affect a
    consumer's purchase of a coin from Goldline and how much that
    coin would have to increase in value for the consumer to earn a
    profit. Rather than illustrating a best-case scenario, the
    example is based on Goldline's maximum spread where the
    necessary appreciation is greatest.
        Third, Goldline's advertising and sales practices are
    filled with sound caution. It advises consumers to balance
    their portfolio and place no more than 5 to 20 percent in
    precious metals. In short, Goldline is the antithesis of the
    get rich quick seller making gross misrepresentations so common
    in past FTC cases.
        Under H.R. 6149, the bill would essentially require
    disclosures to reveal the seller's markup on the product. In
    other markets, we rely on competition to police seller markups.
    In retailing, for example, it is not disclosures of the market
    at full service department stores that keep markups slow; it is
    the competition from other department stores and other
    retailers such as Walmart. What matters to consumers is the
    cost of the transaction, not the seller's markup. As long as
    information about prices at competing sellers is readily
    available to consumers who are interested and it certainly is
    in the coin and precious metal market, there is no reason to
    disclose the seller's markup.
        Although providing consumers with more information almost
    always sounds appealing, it can in fact create consumer
    confusion. For example, the FTC's Bureau of Economics conducted
    an experimental study of the effect of disclosing the yield
    spread premium in mortgage transactions, which is essentially
    part of a broker's compensation. When the disclosure was
    included, consumers apparently focused on the disclosure rather
    than the overall cost of the transaction. As a result, they
    were less able to identify the low-cost mortgage.
        The reasonable resale value disclosure may create similar
    problems. Like the yield spread premium, it risks focusing
    consumer attention on an aspect of the transaction that is not
    relevant to the overall cost. Confusion seems particularly
    likely when the resale value is disclosed along with the melt
    value. The melt value is simply irrelevant because it will
    always be reflected in the reasonable resale value of any
    product whose value is tied to spot prices.
        Moreover, in a market where prices change constantly,
    consumers may misunderstand what the reasonable resale value
    disclosure means. If consumers understand the disclosure as a
    claim that they can actually expect to resell the item at the
    disclosed price, they may be seriously misled. The risk of this
    misinterpretation is increased because consumers will almost
    inevitably assume that they are being provided with this
    information because it should be important in their decision.
        The Federal Trade Commission has an important role as a
    referee in policing the market economy. Like other products and
    services, the best protection remains the common law principles
    that the Commission enforces. Goldline's practices are entirely
    consistent with these principles. The proposed legislation is
    at best unnecessary and it may in fact create consumer
    confusion.
        Thank you again for the opportunity to testify today and I
    look forward to your questions.
        [The prepared statement of Mr. Beales follows:]
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        Mr. Rush. The Chair thanks the witnesses, and the Chair
    recognizes himself now for 5 minutes for the purposes of
    questioning the witnesses.
        Ms. Greisman, the FTC has brought cases of these companies
    that sold overpriced or misgraded historic coins for investment
    purposes. Do you concur with that, that the FTC has brought
    cases against companies that have sold overpriced or misgraded
    historic coins for investment purposes? Is that a fact?
        Ms. Greisman. That is correct. In fact, there have been 17
    such cases dealing with what we allege to be fraud in
    connection with coins.
        Mr. Rush. Since 2005, the FTC has received approximately
    850 complaints relating to coins and precious metals. In Mr.
    Carter's testimony, he stated that there have been relatively
    few complaints about Goldline submitted to the FTC or to the
    Better Business Bureau. Do you believe that a number of
    complaints received by FTC or the Better Business Bureau
    accurately reflect the number of consumers who purchase coins
    or precious metals for investments who are misled or feel as
    though they were misled?
        Ms. Greisman. No, sir, I do not. I mean, as Mr. Bell
    pointed out, the percentage of consumers who complain, and we
    know this from consumer research that we have done, is a small
    percentage relative to those who may have suffered injury.
        Mr. Rush. Do consumers who overpay for such investments
    sometimes not learn that they have overpaid until they try
    sometimes years later to sell their investments?
        Ms. Greisman. We have seen that.
        Mr. Rush. And even though, there are some who might not
    realize that they have overpaid. Is that correct?
        Ms. Greisman. That is correct, sir. There are lots of
    reasons consumers may or may not choose to complain.
        Mr. Rush. Can you think of any other reason that investors
    in coins or precious metals might not complain to the FTC or
    the Better Business Bureau?
        Ms. Greisman. There can be any number of reasons, Chairman.
    I mean, certainly consumers tend to complain most immediately
    to the company from which they purchased whatever good or
    service it was, and whether or not they seek out the Better
    Business Bureau or the Federal Trade Commission or a State
    attorney general's office depends on many factors.
        Mr. Rush. Mr. Carter, when a customer complains directly to
    Goldline alleging that the company made a misrepresentation
    about the products it sold, what are your steps that you take
    to resolve the matter? What are your guidelines?
        Mr. Carter. Mr. Chairman, we take every complaint
    seriously, as it was stated. Forty percent of our business is
    reorders so it is very important for us to have a quality
    customer service process. The initial step we take is to assign
    the client that has a complaint to a special manager, a liaison
    whose sole role is to take care of the client and resolve the
    issue. We review the account. We ensure that our processes with
    regard to disclosures and account agreements being signed and
    information has been taken care of and all applicable processes
    have been done correctly by the company. In addition to that,
    we many times are working with the client to come to a solution
    that is amenable to them so that we can resolve the issue and
    we do that with great care, and I am proud to say that most of
    our complaints are resolved and most of our issues with regard
    to customers are handled effectively by the company.
        Mr. Rush. And the 40 percent that you mentioned, is that 40
    percent of the total value or 40 percent of the customers?
        Mr. Carter. No. What I am saying is that our transactions,
    when you look at our number of repeat transactions in our
    customers, 40 percent of our current customers represent
    reorder sales. So not only have they bought the first time as
    an initial sale but they actually reorder with the company. So
    it is very important for us to ensure that they are happy, that
    they understand their product, because they will buy multiple
    times over multiple years.
        Mr. Rush. My time is about up, but I have one final
    question. Do any of Goldline's sales staff hold or have they
    ever held, to your knowledge, a license to offer investment
    advice?
        Mr. Carter. Congressman, our sales staff are not investment
    advisors. They may or may not have licenses in the past. We are
    not aware of that. It is not a requirement for the role that
    they play. They are not providing financial advice. And in our
    disclosures, we encourage the customer to seek out their
    financial advisor to get that information.
        Mr. Rush. My time is concluded. The Chair recognizes now
    Mr. Whitfield for 5 minutes.
        Mr. Whitfield. Thank you.
        Ms. Greisman, how many consumer complaints were filed with
    the FTC against Goldline last year?
        Ms. Greisman. I don't have the precise number. It is not a
    large number, and as the chairman indicated, in total since
    2005 the FTC has received roughly 850 complaints regarding
    precious metals and gold coins.
        Mr. Whitfield. And do you know out of that how many relate
    to Goldline?
        Ms. Greisman. I don't know the precise number.
        Mr. Whitfield. How many complaints were filed with the FTC
    totally last year?
        Ms. Greisman. As indicated in the testimony, the short
    answer is well over a million, I think 1.3 million. The
    percentage of complaints in this precise area is less than 1
    percent of the total number of complaints received.
        Mr. Whitfield. Okay. Now, with the authority that the FTC
    has today under the telemarketing sales rule or some other
    rule, have you all issued any judgment against Goldline or any
    enforcement mechanism or any other action against them?
        Ms. Greisman. Congressman, I am not at liberty to disclose
    whether or not the FTC is or is not investigating any
    particular company.
        Mr. Whitfield. Well, I am not asking if you are
    investigating. I am asking have you rendered any decision
    against them or made any enforcement action against them?
        Ms. Greisman. The agency has not taken any action against
    Goldline.
        Mr. Whitfield. Thank you. Thank you.
        Mr. Bell, can you tell us how many complaints the Consumers
    Union has received concerning Goldline as a company?
        Mr. Bell. We are not a complaint handling organization so
    our organization has not specifically received any to my
    knowledge. We do have a customer relations staff but I don't
    believe that we have gotten any across the transom. But we are
    aware that there are enforcement actions that have been brought
    by the district attorney in Santa Monica against Goldline and
    another company, Superior Gold Group, and so for us, I think we
    are more broadly concerned about what is happening across the
    entire marketplace, and for us, the 850 complaints received by
    the FTC about a number of companies is a relevant number.
        Mr. Whitfield. How does the volume of complaints for this
    industry compare to that of, let us say, the diamond industry,
    fine arts or antiques industries?
        Mr. Bell. You know, I couldn't give you that information. I
    haven't researched the other industries. I would just say based
    on my experience of working in consumer advocacy for 20 years,
    I see a number of danger signals here just in the nature of the
    complaints that are being filed with authorities in part
    because they echo concerns we have seen with many other types
    of sales practices over the telephone where unsophisticated
    customers enter into transactions that they are later
    disappointed in, and in this case they could be losing
    thousands or tens of thousands of dollars.
        Mr. Whitfield. Dr. Beales, you state that the
    advertisements and disclosures that Goldline makes that you
    have reviewed all appear to provide the consumer with the
    requisite information they need to comply with the law. Is
    there anything you would have them change or additional
    disclosures that you think they should make?
        Mr. Beales. I think the disclosures in their advertising do
    a good job. What I think does an even better job is the Coin
    Facts pamphlet that, as I said in my statement, is I think one
    of the clearest pieces of disclosure about the risks associated
    with investments that I have seen.
        Mr. Whitfield. Mr. Carter, in my opening statement I
    referred to a number of newspaper articles that indicate that
    some people think this hearing is being held because you
    advertise with conservative TV personalities, radio
    personalities like Glenn Beck and others, Huckabee, Fred
    Thompson and others. Do you advertise with all sorts of
    networks or do you just focus in on these conservative talk
    show hosts?
        Mr. Carter. Well, Congressman, we advertise on a broad
    range of networks. At the present time we advertise on 14
    different TV networks including CNN, CNBC, History
    International. One of our largest channels for leads is the
    Internet. We also advertise on radio. So we are a broad-based
    marketer and we have broad-based advertising.
        Mr. Whitfield. Someone earlier today referred to three of
    your current employees that had been either convicted or had
    been involved in some sort of fraudulent activity. What were
    they talking about?
        Mr. Carter. We were made aware of that earlier this week by
    the press. These individuals, what I would say is that Goldline
    conducts background checks in accordance with California's
    hiring practices law. These employees are in good standing at
    the company. The event that was referred to is over a decade
    old, was prior to Goldline, but as of right now these employees
    are in good standing and they comply with our compliance
    policies and they went through our background check at point of
    hire.
        Mr. Whitfield. And other question. Ms. Greisman, has the
    FTC taken any formal position on this particular legislation?
        Ms. Greisman. Yes, sir. The Commission's testimony supports
    the legislation.
        Mr. Whitfield. So you have endorsed the legislation except
    for the reasonable resale issue and the exemption issue, those
    two?
        Ms. Greisman. That is correct.
        Mr. Whitfield. Thank you, Mr. Chairman.
        Mr. Rush. The Chair now recognizes the gentleman from New
    York, Mr. Weiner, for 5 minutes.
        Mr. Weiner. Thank you, Mr. Chairman.
        Mr. Carter, welcome. Do you recognize this document,
    executive order of the President, all persons required to
    deliver on or before May 1, 1933, all gold coin, gold bullion
    and gold certificates? Do you recognize this?
        Mr. Carter. Yes.
        Mr. Weiner. Is this included in your packet of information
    that you send to your customers?
        Mr. Carter. Yes, it is.
        Mr. Weiner. Can you tell us why?
        Mr. Carter. Because customers when determining what
    products they want to buy consider many features and benefits,
    and one of those features and benefits that they consider is
    the prospect of confiscation, and this was an order, as we all
    know, that was completed in 1933, and in the marketplace today,
    these are uncertain economic times. The prospect of discussions
    in the marketplace of the gold standard are----
        Mr. Weiner. If I can interrupt, so there is a fear that
    this may happen again?
        Mr. Carter. There is one component that in uncertain
    economic times----
        Mr. Weiner. There is a fear that this might get--you might
    have this type of thing happen again?
        Mr. Carter. Yes.
        Mr. Weiner. Now, can I ask you, do you include anywhere in
    the material that this was overturned the following year?
        Mr. Carter. Congressman, I don't know.
        Mr. Weiner. The answer is, you don't. Do you include
    anywhere in the material that the reason that that seizure took
    place had to do with the fact that then our currency was backed
    by dollars and it was an effort to stabilize our currency?
        Mr. Carter. Yes, I understand that.
        Mr. Weiner. No, no, I'm saying do you let your--you have
    already said that you agree that this is because some of your
    customers have a fear and that you reflect that fear in this
    document but in a way that I think you will agree is incomplete
    because it doesn't say it was repealed, it doesn't put it in
    any kind of context. But let me ask you this. You then use this
    document in the pitching that your staff makes and you freely
    stipulate in your documents here that your sales people get a
    higher commission rate for selling numismatic coins than they
    do for bullion. Is that right? You freely say that in this
    document. Do you somehow make this argument because you believe
    in your heart--and I know that you are the host of a show
    called ``The American Advisor''--do you believe there is any
    chance today that gold bullion would be seized by the
    government? Do you think it is a reasonable fear?
        Mr. Carter. Yes, I do, Congressman.
        Mr. Weiner. Okay. Do you believe then, why would it not be
    a reasonable fear that they seize coins?
        Mr. Carter. Well, the executive order as it was----
        Mr. Weiner. So this is 1934. I am talking about 2010.
        Mr. Carter. In 2010, Congressman, our commission
    salespeople and our training is that if the executive order
    were reenacted as it was in 1933, that coins with collector
    value were excluded from confiscation because their value----
        Mr. Weiner. I understand. Just to summarize, Mr. Carter,
    you take something that was in 1933 that was repealed in 1934
    and then you extrapolate what would happen, fear, the fear that
    it could happen in 2010. You use language in your testimony and
    in Coin Facts, language like duration of investment, that you
    should diversify your portfolio. You took explanations about
    the collector value of coins. You even say and I think in your
    testimony recommend--I know you said it publicly--recommend
    that people hold on to their things for 5 to 10 years. It
    sounds an awful lot like you are giving financial advice. Do
    you believe that you are?
        Mr. Carter. No, we don't. In fact, we instruct the clients
    that we are not financial advisors, that we point them to our
    disclosures and ask them to seek out financial advice.
        Mr. Weiner. But Mr. Carter, when you say you recommend that
    someone holds on to an investment for a certain duration time,
    how is that not investment advice?
        Mr. Carter. It is disclosure advice, Congressman. It is to
    say that you should be prudent in the decisions you are making,
    that this should be a diversification strategy, that if you are
    buying a physical asset, something that you are buying today,
    and if your plan is to sell it tomorrow----
        Mr. Weiner. I understand, but Dr. Beales----
        Mr. Carter. But my point, Congressman, the reason why when
    you buy a physical asset, whether you are buying a piece of
    property or anything, there are expenses and fees.
        Mr. Weiner. I understand, but Mr. Carter, let me interrupt
    because I have a limited amount of time. But Mr. Beales asked a
    question. He is a former consultant to your company, isn't he?
        Mr. Carter. Yes.
        Mr. Weiner. Mr. Beales asked the question, why is it
    different than any other commodity. You shop around for the
    best picture. You shop around for the best piece of furniture.
    The marketplace will decide. Here is the difference. Those
    things are not sold to people as investments. As in the
    language that you used the other day on Fox Business News, you
    referred to the government debt, the large deficits, inflation,
    the fear of confiscation. You referred to this again. It is
    quite a different thing than purchasing a television or piece
    of furniture. These are the investments of middle-class
    Americans like that witness that you saw sitting in that very
    same seat. That is why you have additional protections for
    these type of people. These are people that when you say in
    fleeting reference that you have a float, a spread of 35
    percent, that means that a citizen would have to make a 54
    percent markup in order to get back to zero.
        And let me give you an example from today. Anyone in this
    room, anyone watching at home can look this up. This isn't me.
    It is not Mr. Carter saying it. One of Goldline's popular
    products is the one-quarter ounce proof American eagle. They
    sell it today for $685, Mr. Chairman. You can get it from the
    Mint for $403, available to the public with a bulk discount of
    more than 100 coins. Another competitor, Apmex, sells it for
    $425. You can get it on eBay today for $445 because it is true,
    Mr. Carter, that there is not a lot of scarcity to a lot of
    these products. So this is a 38 percent spread, a 61 percent
    markup over your competitor, which means the moment that the
    gold arrives, someone has to make up 35 percent of the market.
        Let me explain what that means to Mr. Scalise. That would
    mean that gold would have to go from $1,293 today to $2,081 for
    that person to break even. When you are selling something as an
    investment, as a hedge against inflation, as a way to protect
    yourself from the future, what you are doing is like you did to
    that gentleman who came right before you. You are buying them
    into the whole the minute they walk home. It simply is
    inexcusable. That is why Mr. Beales is incorrect to say that,
    oh, this is like any other consumer product. No, for middle-
    class Americans, those struggling to make it who call up that
    number, who order these products, it is their savings, and as
    you know, you didn't limit it to a small percentage of that
    previous witness's savings; it was almost his entire savings.
    And that is why this legislation is needed.
        Thank you, Mr. Chairman. I ask for a second round if one is
    available.
        Mr. Rush. The Chair recognizes Mr. Scalise for 5 minutes.
        Mr. Scalise. Thank you, Mr. Chairman.
        Ms. Greisman, you had testified earlier that the definition
    in the legislation before us of reasonable resale value could
    mislead consumers. Can you be more specific on that?
        Ms. Greisman. Yes, of course. Our concern is that it might
    encourage unscrupulous marketers to collude and set prices, but
    we would be more than happy to work with staff and we have had
    discussions to find a different way to state the same goal.
        Mr. Scalise. Thank you. So the bill as it is currently
    written could actually lead to collusion, which would actually
    be very detrimental to consumers as opposed to what we have
    now.
        Mr. Carter, how many competitors do you have in the
    marketplace? What is a rough estimate of people that sell gold?
        Mr. Carter. It is estimated that there are 5,000
    competitors in our marketplace.
        Mr. Scalise. Five thousand competitors? Okay. Obviously if
    you had the ability to have collusion by having language like
    in the bill presented before us, according to the FTC, then
    that number may shrink dramatically and consumers would be much
    more limited and possibly would be exposed to really bad deals.
        Let us equate, when we talk about savings and investments,
    let us say someone is buying stocks. They are not buying gold
    but they are purchasing a stock. Clearly you are going to have
    some people who are going to buy a stock and it is going to do
    well. You are going to have some people who buy a stock and it
    is going to lose money, and maybe if they hold it a little bit
    longer then it would gain money. How many of your customers
    make money? How many lose money? I guess according to people we
    have been listening to, everybody loses money, but if you can
    kind of expand on that?
        Mr. Carter. It is important that the whole period is
    maintained by a client. That is why we disclose it. I will give
    an example, Congressman. Our most popular coin, the Swiss 20
    franc, which has our highest threat, if you bought that product
    from us 5 years ago, you would have so far achieved a 90
    percent return. If you bought that product from us 10 years
    ago, you have achieved a 240 percent return, both of those
    numbers after our fees. So that has been a very positive return
    on that product as compared over the last decade with any
    stocks. The S&P is down. The Dow is down. We all know what has
    happened with real estate. And yet our product and our
    customers have seen a reasonable, some would say a very
    attractive return.
        Mr. Scalise. So what you are saying is, your most popular
    product that you sell has actually experienced a large rate of
    return including if you back out the fees and the spread?
        Mr. Carter. That is correct.
        Mr. Scalise. Let me ask Dr. Beales, you know, when we
    really talk about what the focus of this hearing is and, you
    know, again, I have expressed what I think about that, but when
    you talk about the Moody's warning, and Moody's is a very
    respected rating agency, this isn't somebody on talk radio or a
    TV show. Moody's is a very respected rating agency. They have
    warned that the United States' triple A bond rating under the
    current spending of this Congress is in jeopardy. Are you
    familiar with that? Are you familiar with what Moody's has
    warned about the actual credit worthiness of the United States
    of America?
        Mr. Beales. Not in any detail, no. I am sort of generally
    aware that it is there but I am not familiar with its details.
        Mr. Scalise. There are a lot of very respected agencies
    that have written about what that threat is, and that threat is
    not, it is surely not anything that any gold company has laid
    out there. It is not from somebody on a television show running
    around trying to scare people. It is from a rating agency which
    I haven't heard anybody discredit who actually analyzes the
    borrowing and spending practices of the United States of
    America, and the fact that you have got Moody's out there
    warning of a possible downgrade in the United States' debt
    rating, that is serious business, and it is real. It is not
    somebody running around talking about the sky falling. It is a
    rating agency saying if this country doesn't stop borrowing
    money we don't have and if we don't stop spending money at the
    rapid pace that this Congress has been spending that we are
    going to be in real trouble. Our children and our grandchildren
    are in jeopardy of losing the opportunities that we have all
    enjoyed.
        Our country has had a history of passing on a better
    opportunity to the next generation than the one before it. That
    has been the history of our country going back to George
    Washington, and that is in jeopardy right now, not because you
    are selling gold, because the people running this Congress are
    spending too much money. They are spending money we don't have.
    They are taking over car companies and banks and they are
    taking over health care. And in the meantime, the public out
    there is getting scared to death about all of this because they
    are saying where this is going to end, so they are going out
    and they are doing things like they are buying gold. You are
    not driving up the price of gold. It is going up on its own
    because people are concerned about the value of the dollar not
    based on a talk show host but based on real agencies like
    Moody's. Other countries are telling the United States of
    America to stop borrowing and spending money at this rapid pace
    because there are dire consequences to it.
        So I would hope that rather than Congress sitting up and
    beating up on people that are selling gold, they should
    actually go and look at why people are buying gold and why the
    United States' debt rating is in jeopardy according to Moody's.
    We have got to control the spending. We have to actually stop
    borrowing money from countries like China and other places and
    create some jobs in this country, and if we do that, that will
    solve these problems. But right now instead of focusing on
    those problems, Congress is beating up on the people selling
    gold. Clearly, they are not listening.
        I yield back.
        Mr. Rush. The Chair recognizes the gentleman from Maryland,
    Mr. Sarbanes, for 5 minutes.
        Mr. Sarbanes. Thank you, Mr. Chairman.
        Mr. Carter, I had a question about the spread disclosure.
    So in the Coin Facts, I guess you describe this spread issue
    and talk about like it can be as high as 30 to 35 percent,
    right?
        Mr. Carter. Yes.
        Mr. Sarbanes. If in a particular case a salesperson knows
    that it could be more than that, does the salesperson have any
    responsibility to make that clear to the potential purchaser or
    do they just leave the customer thinking that--and most
    customers are going to assume that that is sort of the top, the
    ceiling. Do they lead them to believe that that is what the
    spread might be, assuming even--well, actually let me back up.
        Does the salesperson affirmatively bring the spread issue
    to the attention of the customer beyond handing them this
    disclosure form? Is that part of the training or compliance or
    other directives that the salespeople operate under?
        Mr. Carter. There are multiple points in time when the
    disclosures of spread are covered, Congressman, and a point I
    want to make is that our maximum spread, the difference between
    our ask price and our bid price, is 35 percent. There is no
    higher spread. That is variable. So point one is that the
    customer in our sales process has to contact us and their first
    request to us is information that covers the Coin Facts that is
    mailed to them. That is the first point, easy font, easy to
    understand with an example of what the spread means. The second
    point, if the customer choose to purchase a product, our
    account agreement, which we have examples of these if anybody
    would like a copy of it, this account agreement covers the risk
    disclosures again. The customer has to sign this verifying that
    they understand have read the disclosures including what we
    were just discussing before any sale is final.
        And the last point I will make, Congressman, is that we
    provide a 7-day full refund, no questions asked, buyer's
    remorse, talk to your spouse. We will give you 100 percent of
    your money back if you change your mind. We feel like we have
    the best processes for disclosures and sales process in the
    industry to make sure our customers are informed.
        Mr. Sarbanes. Let me go back to my first question then. It
    sounds as though it is not necessarily the case that the
    salesperson affirmatively describes to the customer what the
    spread is. They give them the materials and you have got a
    spread of 30 to 35 percent in there, which you claim is the
    most it can be, and then there are opportunities for them to
    sign saying they have read something, but in the sales pitch,
    in the discussion, the oral discussion that has had with the
    customer, it is not necessarily the case that they are made
    aware of the spread issue from what I am understanding.
        The second question I had is, if the spread is going to
    be--well, whatever the spread is going to be in a particular
    case, is that information provided to the customer? I guess
    following on the first point, the answer to that must be no. So
    30 to 35 percent is sort of the range that they can get off the
    paper but they are not going to know specifically what the
    spread is going to be in their particular case, right?
        Mr. Carter. No, sir. We cover in the sales process in the
    time of the sale the spread between the commission salesperson
    and the customer, and in addition there is a sales confirmation
    process that is separate from the sales process where we have a
    client service representative that covers the products that
    have been purchased, the total amount that you are paying, the
    fees associated with it to confirm that----
        Mr. Sarbanes. So if there was a hard sell going on by one
    of your salespeople where that information wasn't being
    provided, that would be noncompliant with the policies that you
    claim you have in place, it sounds like.
        Mr. Carter. Congressman, there are multiple places where we
    disclose the spread, as I said. It is not only the initial
    information that is mailed out to the customer where they take
    a period of 7 to 10 days to read, there is also a confirmation
    of that at the sales process.
        Mr. Sarbanes. All right. I have run out of time. So real
    quick let me just ask you this. You say 35 percent is the
    highest spread. We have information that it is higher, but just
    based on the first witness, who I think if I recall, the
    investment was $143,000. At the sale point, which was 6 months
    later, at a point when it didn't appear that the value of gold
    had changed much at all, at the sale point he got $80,000 back.
    The implication of that was that you had a loss of value. Now,
    you would attribute that to the numismatic markup in the spread
    but that is--I mean, I did the math and that is 43 percent
    right there. So just in that particular case, it doesn't appear
    that the claim that the spread is limited to 30 to 35 percent
    applied and that suggests there may be other situations that
    are similar to that.
        Mr. Carter. If I could respond, Congressman, Dr. Bazan's
    testimony, the spread was 35 percent on the products that he
    purchased, the difference between our ask and our bid price. As
    it has been pointed out before, that is a markup of 54 percent.
    So we buy the product back. What was not provided in the
    testimony is that when we bought the proof American gold coins
    back from Dr. Bazan, we paid a price of over $2,080 an ounce.
    So when gold was trading at $1,110, Dr. Bazan received from
    Goldline double what the melt value of the coin was. And the
    reason why that is, is because these are coins that have a
    scarcity and a demand and a collector value. So it is not in
    this case the melt value of the coin that drives the price, it
    is the market price. We paid twice the melt value to Dr. Bazan
    when he liquidated. So the difference between what he
    originally paid in his ask and the bid price is really our
    spread, and he held it much shorter despite our disclosures, he
    held it for a much shorter period of time and was not able to
    overcome that spread to earn a profit like other customers have
    held our other products and actually earned a profit. We don't
    like to see any client disappointed, certainly not Dr. Bazan
    either, but he went directly against the disclosures. By the
    way, the disclosures----
        Mr. Sarbanes. Oh, I understand he sold it faster than you
    recommend. I understand that point. But I am just talking about
    the markup appears, if that's equivalent to the spread, appears
    to be beyond what you indicated is the ceiling on that. I have
    run out of time. Thank you.
        Mr. Rush. The Chair recognizes the gentleman from Nebraska,
    Mr. Terry, for 5 minutes.
        Mr. Terry. Thank you, Mr. Chairman.
        I am just trying to get my mind around the issue here, if
    the FTC is here, there is inherently an accusation, and Mr.
    Weiner has been very clear with his accusation of fraud and
    deceptive practices and deceptive advertising. So I kind of
    want to get into that aspect of whether there is a real basis
    for this. And so typically if you are providing accurate,
    truthful information to the consumer, you don't have fraud. It
    is when you are providing, as Mr. Weiner has said, lies, fear
    and lies is what he says. If you are going to use that as the
    basis for turning someone in or designing legislation, you
    should probably add in the DCCC and some of their advertising.
    But we won't go there today.
        But I want to ask, this seems to be--I have got the book,
    account and storage agreement. So Mr. Carter, is this what you
    provide your customers like the doctor--what was his name--
    Bazan, Dr. Bazan? Is this what he received? Let me take a step
    back. You don't do outbound to him. You didn't call him and try
    to sell him or pitch to buy gold? He contacted you or a
    consumer contacts you?
        Mr. Carter. Correct.
        Mr. Terry. And then you send them the information, correct?
        Mr. Carter. Yes.
        Mr. Terry. What information do you send them?
        Mr. Carter. We send them an investor investment kit. Dr.
    Bazan contacted us via the Internet first. You are absolutely
    correct. We do not make outbound calls so he actually was
    searching for a product and originally contacted us by one of
    our Internet advertisements. The time between he initially
    contacted us and actually made a purchase was 60 days. In that
    period of time, he was mailed the disclosure----
        Mr. Terry. Again, I'm going to interrupt you because I just
    have a little bit of time. What did he receive then after he
    called and requested the information, or generically, what does
    every consumer receive?
        Mr. Carter. Every consumer receives the Coin Facts risk
    disclosures, which is a complete coverage of our pricing,
    diversification, risk factors. This is for him to be prepared
    and to seek and understand what he is considering. He receives
    the account and storage agreement that he can read at his
    leisure and must be signed before a sale is final if he chooses
    to purchase.
        Mr. Terry. Well, and I have just seen these documents today
    but when we heard testimony earlier regarding the spread, I was
    handed this, and within about 3 minutes found the information
    on page 11 and it seems to be fairly clearly, unlike some of
    the bills we write here, clearly set forth and pretty easy to
    figure out that if you are going to sell it back, you are going
    to take a 35 percent loss on selling it back, or however you
    want to phrase it. Do you agree that that is clear?
        Mr. Carter. Yes, I do. I think it is very clear in two
    forms, easily understandable with examples.
        Mr. Terry. And in that regard, with the bill that Mr.
    Weiner has proposed and the disclosure requirements, with what
    you provide the consumers today, do you feel that your
    disclosures are below what he is asking for, exceed or would
    already meet the requirements that were proposed in his hill?
        Mr. Carter. As it is presently written, I believe the
    disclosures that we require exceed what the Congressman is
    proposing. He is proposing different disclosures, but what we
    provide to the client, prospective client from a disclosure
    standpoint, is much more comprehensive than what the bill
    states, with the exception of the resale value that as I said
    in my testimony will be very difficult to determine with a
    competitor base of 5,000.
        Mr. Terry. I am out of time. Thank you.
        Mr. Rush. We will conduct a second round of questioning for
    2 minutes, and we will allow each member an additional 2
    minutes to question the witnesses, and the Chair recognizes
    himself for 2 minutes.
        Mr. Carter, you were present during Dr. Bazan's testimony.
    Is that correct?
        Mr. Carter. Yes.
        Mr. Rush. And he presently sits right behind you now. So
    are you suggesting to him that he did something wrong in his
    transaction with Goldline?
        Mr. Carter. Mr. Chairman, I am suggesting that having known
    the disclosures that we gave him and him acknowledging them
    through his signoff, that if he were to need this money very
    quickly as he did, he decided that he wanted to, according to
    our account notes, invest in a different stock, which is 100
    percent his choice, but having regarded the disclosures of hold
    period and diversification put him in a position where because
    it was such a short period of time that he would not recover
    the fees associated with the original purchase, and so in that
    regard, and when he called for liquidation, the person he spoke
    to informed him of that, that this is well short of our 3- to
    5-year disclosure period and advised him of that but yet in his
    quote he had a hot stock he wanted to pursue. Perfectly fine.
    We all understand that. But it is directly and contrary to what
    we encouraged him to read and disclose and do, and as a
    result----
        Mr. Rush. Dr. Bazan seems to be a man of some wherewithal.
    I mean, he seems to be a man of sound mind and a competent
    individual. Are you telling me that a member of your
    organization advised him that if he divested of his purchase
    that he would lose approximately $60,000 at that moment and
    then in spite of that he went on and divested of his purchase?
        Mr. Carter. We didn't advise him. What we said is that this
    is in contrast to a 3- to 5-year hold period before he
    liquidated to make sure that that was a decision----
        Mr. Rush. And that he would stand to lose $60,000 if he did
    not accept your scenario, and you won't call it advice but----
        Mr. Carter. Yes, Mr. Chairman, the liquidation process
    would tell him the amount of money that he was going to
    receive. That is why they call the amount of money he would
    receive if he were to liquidate.
        Mr. Rush. So are you suggesting now, are you telling the
    subcommittee that Dr. Bazan is totally at fault in this
    situation? He is totally at fault for losing $60,000 of his own
    money?
        Mr. Carter. I am saying yes, I am saying Dr. Bazan did not
    adhere to the compliance and the disclosure requirements that
    we provide.
        Mr. Rush. The Chair recognizes the ranking member, Mr.
    Whitfield, for 2 minutes.
        Mr. Whitfield. Well, thank you again, and once again I want
    to thank all the witnesses for being here and the members for
    joining us as we explore this issue. Rather than a question, I
    guess I will kind of summarize this in my mind, but the FTC as
    far we know never initiated any enforcement action against
    Goldline or tried to institute any fine or civil penalty
    against Goldline. I know Mr. Weiner talked about you were
    giving financial advice, and maybe it could be interpreted that
    way but when you do read the account and storage agreement,
    paragraph 7 says that client understands that Goldline believes
    coins and bullion are appropriate for 5 to 20 percent of a
    portfolio although certain individuals or organizations might
    recommend a different percentage. Client will independently
    determine what percentage is appropriate for him or her based
    upon their individual circumstances.
        Now, I would agree that buying gold is not like buying a
    television or buying any normal consumer product but I would
    say that gold is similar in some ways because they are trying
    to determine value of land, futures, diamonds, silver, fine
    art, rubies, emeralds, all of those things, and it would seem
    to me that if this is a major problem, that maybe this
    legislation should include other things, not just gold, but I
    look forward to working with the chairman and Mr. Weiner, who
    introduced the legislation, and others. I know that the FTC has
    already said that they do have problems with the legislation
    because of the definition of reasonable resale value as well as
    some exemption issues, but I don't think you can--you have been
    in business 50 years? Goldline has been in business 50 years?
    Is that correct, Mr. Carter?
        Mr. Carter. Yes, we have.
        Mr. Whitfield. So this is a company that has been in
    business for 50 years and 40 percent of its business is repeat
    customers, so I cannot imagine that this is widespread, but I
    may be wrong, but thank you all for your testimony and I look
    forward to working with you.
        Mr. Rush. The Chair recognizes Mr. Weiner for 2 minutes.
        Mr. Weiner. Thank you very much, Mr. Chairman.
        Mr. Bazan, the previous witness, he didn't lose all that
    money because of what he did; he lost all that money because
    you overcharged him. You took $140,000 investment and gave him
    $85,000 when he tried to turn it back to you. That is it. That
    is what happened. If he would have bought $140,000 and someone
    else gave him $120,000 back, they got a better deal there,
    didn't they? Of course. That is what happened here. The idea,
    he didn't follow our prescription to wait 5 to 10 years, well,
    I ask you, Mr. Chairman, what if the market went down in that
    time? Does that then go to 15, then 20? The whole point is what
    Mr. Scalise inadvertently said. He said the same thing happens
    in the stock market. You buy stock, it goes up, it goes down.
    Yes, we protect people and make sure there is transparency. We
    make sure that everyone understands what they are buying. One
    person buys a stock, another person buys the stock. It is the
    same thing. You charge for a product much, much more for
    someone else. You brag about how much the return was, and by
    the way, you are very good at this. You brag about how much the
    return was if you bought the Swiss franc. You didn't point out
    that that 200 percent increase corresponds to a 319 percent
    increase in that same period of time in the gold market. It is
    a bad investment.
        It is not whether or not you think gold goes up and down,
    Mr. Scalise, and it will. But I tell you one thing for sure: if
    you are holding a lot of Swiss francs when the market
    collapses, good luck going and buying a loaf of bread with
    that. Good luck. Maybe your neighborhood store will take your
    Swiss franc. The only value it has at that point is whether or
    not you can sell it for more dollars than you bought it. That
    is the only measure. That is it. That is an investment. I know
    you are an investment advisor. You might want to write this
    down. This isn't well, it is my booklet that if you hold it 5
    to 10 years maybe it will get better. No, 5 to 10 years in an
    up market, right? If it goes down it is going to take more than
    that, won't it, Mr. Carter? If gold goes down, it takes more
    than that, won't it?
        Mr. Carter. Certainly, like any----
        Mr. Weiner. Of course, of course. So it could be 50. Then
    are you going to have a witness who comes here who lost his
    life savings, some middle-class guy, oh, it is his fault
    because he didn't wait 30 years. This is not whether or not
    consumers are idiots, it is whether or not they are being lied
    to and exploited by your company, and I would say this, and I
    would say this, Mr. Chairman, and I appreciate Mr. Whitfield's
    offer, is that there is some responsibility that we have not to
    exploit people in this moment of fear by making it worse. There
    is some responsibility. There is some responsibility to be
    honest with them. When you are dealing with their life savings,
    50 years and complaints and non-disclosure agreements you make
    people sign, the fundamental question is this, is should you be
    doing this, should you be exploiting people this way, should
    you be taking advantage of the fear and anxiety that they have?
    Should you be implying to people that a confiscation order is
    in place that hasn't been in place since my father was born?
    That is just wrong. And what we should try to do, Mr. Chairman,
    is we should endeavor to give people the tools to do it. And I
    say to my good friend, yes, it is in here, we are going to rip
    you off. That doesn't make it right. It doesn't make it right
    when we know by comparing--you can go to my website and look at
    the comparison.
        There are places that aren't doing it or aren't doing it as
    much, and this is in the seam, I would say by way of
    conclusion, Mr. Whitfield, because this I think is where we can
    try to find some common ground. This isn't a seam. It is kind
    of an investment but it is kind of a commodity. I think we do
    need to structure things a little bit differently. To a lot of
    people, to the witness, to a lot of Americans that buy your
    product, it is being treated as an investment. You go on the
    business stations to talk about it. You use words like
    divestment strategy. It is treating it like an investment. You
    don't hedge inflation by buying a TV. And for that reason, I
    say we need to find this way. And one thing is clear. If you
    look at the district attorney of Santa Monica, the FTC, the
    attorney general of Missouri, the Better Business Bureau, we
    need to get this under control, and I appreciate you shedding
    some light on and to all members of the panel and to you, Mr.
    Chairman.
        Mr. Rush. Mr. Terry is recognized for 2 minutes.
        Mr. Terry. Unanimous consent for 4 minutes to have the same
    amount of time as Mr. Weiner.
        Mr. Rush. Mr. Terry is recognized for 2 minutes and
    whatever amount of time he wants, he can have it.
        Mr. Terry. I would agree with Mr. Weiner in part and
    disagree. One is, it is not a good investment. It is not
    something I would do. As a matter of fact, when I was in
    college, a friend of mine thought that gold would be a great
    investment. We went to a shop. They wanted 20 percent on top of
    the sale. I said I am not going to do that. I made up my own
    mind. But to call what is in here a lie is wrong. I mean, it is
    clearly set forth in here. So the issue is in the
    interpretation of the consumer they get to decide whether that
    is a good investment or not.
        So I would ask the gentlelady from the FTC, have you had a
    finding on the advertising from this company that they have
    lied to consumers? Because you get to decide that, because that
    would be right under your jurisdiction. Have you found that?
        Ms. Greisman. Congressman, as I mentioned earlier, there is
    no FTC action against Goldline.
        Mr. Terry. All right. So is there any actions pending about
    whether or not they have lied?
        Ms. Greisman. I cannot indicate whether or not the company
    may or may not be under investigation.
        Mr. Terry. I am switching gears on you here a little bit,
    but how many complaints have there been against all of the, was
    it 500, I am sorry, Mr. Carter, 500 or 5,000?
        Mr. Carter. Five thousand.
        Mr. Terry. Five thousand companies selling gold.
        Ms. Greisman. Over the past 5 years, the FTC has received
    roughly 850 complaints involving coins and precious metal
    investments. It is a small number but again that is not
    dispositive as to whether or not there may be----
        Mr. Terry. True. I would agree with that statement. How
    many against Goldline?
        Ms. Greisman. I don't recall the specific number, sir.
        Mr. Terry. Do you know how many against ITM? Have you heard
    of them?
        Ms. Greisman. I do not know the answer.
        Mr. Terry. Okay. So all of the complaints totality is what
    again?
        Ms. Greisman. Over the past 5 years, roughly 850.
        Mr. Terry. And out of the 850, have there been any actions
    against those companies for fraudulent advertising?
        Ms. Greisman. I can't answer that question because I
    don't--I can't answer it directly. I can say as I said earlier
    the FTC has not sued any company recently involving
    misrepresentations in connection with precious metals or coins.
        Mr. Terry. Okay. So the issue here before this committee is
    whether it is a good investment or not, and I am not sure that
    is wise for this committee to make that decision, but I do
    think it is the obligation of the business to fully disclose
    all of the costs in here in that transaction as well as if you
    are going to buy it back from the consumer, and frankly, I
    think that information is laid out in pretty plain language.
        So at that point in time I will yield back.
        Mr. Rush. The Chair now recognizes the gentleman from
    Maryland, Mr. Sarbanes, for 2 minutes.
        Mr. Sarbanes. Mr. Carter, you said that you feel that the
    disclosure that you all provide to the customers is pretty good
    disclosure, correct, in your view?
        Mr. Carter. Yes.
        Mr. Sarbanes. And in fact, I think you said to Congressman
    Weiner or somebody that the disclosure you have even goes
    beyond some of the requirements that are laid out in the
    legislation as you read it. Is that correct?
        Mr. Carter. We disclose more than is specifically
    identified in the legislation although the legislation does
    identify things that we currently don't disclose that we would
    challenge and have issue with.
        Mr. Sarbanes. Is your disclosure better or worse in your
    judgment than most of the other companies that are in the
    industry in which you operate?
        Mr. Carter. Well, as I said, there are 5,000. We believe
    that we have best practices in the industry and full disclosure
    with our eye on the prospective client. I haven't done
    exhaustive research on what our competitors are disclosing. I
    want to make sure that our disclosures are fair and that the
    prospective client is making----
        Mr. Sarbanes. You don't have any sense of whether you think
    you are sort of at the top of the class when it comes to the
    disclosure you do, or middle?
        Mr. Carter. Yes, I do, Congressman. I believe we are at the
    top of the class.
        Mr. Sarbanes. And I presume that you strive for disclosure
    because you feel like that is a good thing for your customer?
        Mr. Carter. Absolutely, yes.
        Mr. Sarbanes. So one would hope that you would feel the
    same way about the customers of these other companies that
    operate these offerings, right?
        Mr. Carter. Absolutely, Congressman, and what I said in my
    testimony is that we are for disclosure. That is not our issue
    with this bill. The issue with this bill is the definitions of
    what is excluded and the type of disclosure about resale value
    in aggregating 5,000 competitors is just not workable for any
    competitors including ourselves. So we absolutely support
    disclosure. It is just this current legislation, the type of
    disclosure that it is requesting is not capable and would
    ultimately harm the customer because of the information that is
    provided.
        Mr. Sarbanes. Well, I get the feeling that you are
    generally supportive of what Congressman Weiner is trying to
    do, and I expect there is going to be some further development
    on this legislation. He has put the pieces together that I
    think make a lot of sense, and you certainly are someone who
    promotes good, strong disclosure, which is what is at the heart
    of this bill, so I am sure he looks forward to having your
    support going forward, and I yield back.
        Mr. Rush. The Chair will declare to the subcommittee
    members and to the witnesses that the record for this hearing
    will remain open for 14 days so that any member of the
    committee might want to ask questions of the witnesses in
    writing and the witnesses will be asked to respond as quickly
    as possible promptly to the questions in writing from members
    of the committee. The record will remain open for an additional
    14 days.
        With that said, the committee now stands adjourned. I want
    to again thank the witnesses for your investment of your time
    in this particular matter. Thank you, and may you return home
    with Godspeed. Thank you so much. The committee stands
    adjourned.
        [Whereupon, at 5:12 p.m., the Subcommittee was adjourned.]
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