[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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    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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