[House Report 111-673]
[From the U.S. Government Publishing Office]
111th Congress Report
HOUSE OF REPRESENTATIVES
2d Session 111-673
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GUARANTEE OF A LEGITIMATE DEAL ACT OF 2010
_______
December 7, 2010.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Waxman, from the Committee on Energy and Commerce, submitted the
following
R E P O R T
[To accompany H.R. 4501]
[Including cost estimate of the Congressional Budget Office]
The Committee on Energy and Commerce, to whom was referred
the bill (H.R. 4501) to require certain return policies from
businesses that purchase precious metals from consumers and
solicit such transactions through an Internet website, having
considered the same, report favorably thereon with an amendment
and recommend that the bill as amended do pass.
CONTENTS
Page
Amendment........................................................ 1
Purpose and Summary.............................................. 2
Background and Need for Legislation.............................. 3
Legislative History.............................................. 4
Committee Consideration.......................................... 4
Committee Votes.................................................. 4
Committee Oversight Findings and Recommendations................. 4
Statement of General Performance Goals and Objectives............ 5
Constitutional Authority Statement............................... 5
Earmarks and Tax and Tariff Benefits............................. 5
Federal Advisory Committee Statement............................. 5
Applicability of Law to Legislative Branch....................... 5
Federal Mandates Statement....................................... 5
Committee Cost Estimate.......................................... 5
Budget Authority and Congressional Budget Office Cost Estimate... 6
Section-by-Section Analysis of the Legislation................... 7
Explanation of Amendment......................................... 8
Changes in Existing Law Made by the Bill, as Reported............ 8
AMENDMENT
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Guarantee of a Legitimate Deal Act of
2010''.
SEC. 2. RETURN REQUIREMENTS FOR PURCHASERS PRECIOUS METALS.
(a) Unlawful Conduct.--It shall be unlawful for any purchaser of
precious metals to--
(1) sell, transfer to a third party, or refine through
melting or otherwise permanently destroy an item of jewelry or
precious metal before the purchaser of precious metals has
received an affirmative acceptance of an offer to purchase the
item for a specific price from the consumer to whom such offer
was made;
(2) fail to promptly return to the consumer any jewelry or
other precious metal if the consumer declines the offer to
purchase made by the purchaser of precious metals; or
(3) fail to insure any shipment to the consumer of such
jewelry or precious metals in an amount equal to--
(A) the amount the consumer insured the shipment of
the jewelry or precious metals to the purchaser of
precious metals, if the consumer provides the purchaser
of precious metals with proof of such insurance; or
(B) 60 percent of the melt-value of the jewelry or
precious metals, if the consumer does not provide the
purchaser of precious metals with proof of such
insurance.
(4) Law Enforcement Exception--Paragraph (1) of this
subsection shall not prohibit the sale or transfer of any item
of jewelry or precious metal to law enforcement agencies or
their personnel.
(b) Definitions.--As used in this Act--
(1) the term ``purchaser of precious metals'' means a person
who is in the business of purchasing jewelry or other precious
metals directly from consumers; and
(2) the term ``melt-value'' means the reasonable estimated
value of any item of jewelry or precious metal, as determined
by the purchaser of precious metals, if such item were
processed and refined by the purchaser of precious metals.
(c) Regulations.--The Commission may issue regulations under section
553 of title 5, United States Code, to carry out the purposes of this
Act.
SEC. 3. ENFORCEMENT BY THE FEDERAL TRADE COMMISSION.
(a) Unfair and Deceptive Act or Practice.--A violation of this Act or
a regulation issued pursuant to this Act shall be treated as an unfair
or deceptive act or practice in violation of a regulation under section
18(a)(1)(B) of the Federal Trade Commission Act (15 U.S.C.
57a(a)(1)(B)) regarding unfair or deceptive acts or practices.
(b) Powers of Commission.--The Commission shall enforce this Act in
the same manner, by the same means, and with the same jurisdiction,
powers, and duties as though all applicable terms and provisions of the
Federal Trade Commission Act (15 U.S.C. 41 et seq.) were incorporated
into and made a part of this Act. Any person who violates this Act
shall be subject to the penalties and entitled to the privileges and
immunities provided in that Act.
SEC. 4. EFFECTIVE DATE.
The provisions of this Act shall take effect 60 days after the date
of enactment of this Act.
PURPOSE AND SUMMARY
H.R. 4501, the ``Guarantee of a Legitimate Deal Act of
2009'', was introduced by Rep. Anthony D. Weiner (D-NY) on
January 21, 2010. H.R. 4501 requires certain practices from
businesses that purchase precious metals from consumers. The
legislation prohibits purchasers of precious metals from
melting down or destroying a consumer's jewelry or precious
metals before receiving an affirmative acceptance of an offer
to purchase the jewelry for a specific price. The legislation
further requires purchasers of precious metals to promptly
return a consumer's jewelry or precious metals if the consumer
declines a purchaser's offer. Finally, H.R. 4501 sets a
standard for the amount of insurance provided by online
purchasers of precious metals on shipments of jewelry or
precious metals to consumers.
BACKGROUND AND NEED FOR LEGISLATION
The industry for mail-in gold (and other precious metals)
is a new and rapidly growing branch of the used jewelry buying
industry. In a mail-in transaction, customers mail their
jewelry to a mail-in gold company, which appraises the value of
the precious metals and makes the customer an offer by sending
the customer a check by mail. The customer generally has a
limited number of days to reject the offer, and if the customer
does not reject the request within that number of days, the
company will consider the offer accepted.\1\ The company then
melts down the jewelry for sale as bullion.\2\
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\1\Cash4Gold.com, Terms and Conditions (online at
www.cash4gold.com/wp-content/themes/theme_cash4gold_black/terms-
conditions.php) (accessed May 9, 2010); GoldKit.com, Terms and
Conditions (www.goldkit.com/terms_and_conditions.asp) (accessed May 9,
2010).
\2\Cash4Gold's Rush, Florida Trend (May 1, 2009) (online at
www.floridatrend.com/article.asp?page=2&aID=51067).
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The rapid growth of the mail-in gold industry has been
driven in large part by the increasing price of gold. In the
past three years, the price of gold has nearly doubled, from
just over $600 per ounce in 2007 to approximately $1,200 an
ounce in 2010.\3\
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\3\GoldPrice.com, Gold Price History (www.goldprice.org/gold-price-
history.html) (accessed May 7, 2010).
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The mail-in gold industry has drawn scrutiny over its
business practices after widespread complaints from consumers
who claimed that they did not receive a fair payment for their
jewelry. The Consumerist and Consumer Reports conducted a test
comparing the offers of three mail-in gold companies for
identical pieces of jewelry in 2009. The companies offered
between 11% and 29% of the jewelry's actual value based on the
price of gold.\4\ ABC's Good Morning America and CBS's Inside
Edition each conducted similar tests, receiving offers under
20% of the actual value of the jewelry sent to mail-in gold
companies.\5\
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\4\Cashing in Gold? Here's the Catch, Consumer Reports Magazine
(Nov. 2009).
\5\Cash4Gold's Super Bowl Ad, Inside Edition (Feb 4, 2009) (online
at http://www.insideedition.com/news.aspx? storyID=2588); Gold Rush:
People Rush to Sell Gold Instead of Finding It, ABCNews.com (Mar. 20,
2009) (online at abcnews.go.com/GMA/story?id=7125707&page=1).
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In addition to low payments, delayed checks and lost
packages have been the basis of numerous consumer complaints.
The Better Business Bureau of Southeast Florida and the
Caribbean has reported that of the 324 complaints concerning
Cash4Gold over the past 36 months, a pattern of allegations is
apparent: valuables shipped to Cash4Gold that the company never
reported as arriving, offers that consumers said were lower
than what the company's advertisements had led them to expect,
and checks arriving by mail too late to cancel a
transaction.\6\
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\6\The Consumerist, The Article Cash4Gold Doesn't Want You to Read
(Sept. 2, 2009) (online at consumerist.com/2009/09/the-article-
cash4gold-doesnt-want-you-to-read.html); Better Business Bureau,
Reliability Report for Cash4Gold (online at www.seflorida.bbb.org/
Business-Report/Cash-4-Gold--16000679) (accessed May 10, 2010).
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The United States Postal Service Office of Inspector
General conducted an investigation of more than 1,300 loss
claims covering 18 months in 2008 and 2009 on mail addressed to
Cash4Gold, finding no irregularities in its Postal Services'
mail processing.\7\ Because many consumers have experienced the
loss of their jewelry, the mail-in gold companies have been
criticized for inadequately insuring the shipping packages
provided to consumers. With respect to the delayed checks
issue, consumers are advised by the mail-in companies that they
have a certain number of days from issuance of the checks to
reject the offer and cancel. Consumers have reported delays in
receiving their checks. These delays in the delivery of checks
have prevented some consumers from rejecting an offer made by a
mail-in gold company before the company melted down their
jewelry.
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\7\United States Postal Service Office of Director General,
Southeast Area Field Office. Case #09IMI1529IM18IM, Cash4Gold, South
Florida P&DC, Pembroke Pines, FL 33028, Mail Theft.
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LEGISLATIVE HISTORY
H.R. 4501 was introduced by Rep. Weiner of New York and
referred to the Committee on Energy and Commerce on January 21,
2010. The bill was referred to the Subcommittee on Commerce,
Trade, and Consumer Protection on January 22, 2010, and the
Subcommittee held a legislative hearing on H.R. 4501 on May 13,
2010. At the hearing, witnesses representing the Federal Trade
Commission (FTC), Consumers Union, and the Jeweler's Vigilance
Committee testified in support of the legislation.
COMMITTEE CONSIDERATION
On June 30, 2010, the Subcommittee on Commerce, Trade, and
Consumer Protection met in open markup session to consider H.R.
4501. At the end of consideration, the Subcommittee agreed to
favorably forward H.R. 4501 to the full Committee, amended, by
a voice vote. During Subcommittee markup, a bipartisan
manager's amendment offered by Chairman Rush was adopted by a
voice vote. The manager's amendment strengthened the bill's
consumer protections by including purchasers of precious metals
who do not maintain an Internet website and giving the FTC
discretionary rulemaking authority.
On July 15, 2010, the Committee on Energy and Commerce met
in open markup session and considered H.R. 4501 as approved by
Subcommittee. There were no amendments offered during
consideration of the bill. Subsequently, the Committee ordered
H.R. 4501 favorably reported to the House, as amended by the
Subcommittee, by a voice vote.
COMMITTEE VOTES
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee to list each record vote
on the motion to report legislation and amendments thereto. A
motion by Mr. Stupak ordering H.R. 4501 reported to the House,
as amended, was approved by a voice vote. There were no record
votes taken during consideration of this bill.
COMMITTEE OVERSIGHT FINDINGS AND RECOMMENDATIONS
In compliance with clause 3(c)(1) of rule XIII and clause
(2)(b)(1) of rule X of the Rules of the House of
Representatives, the oversight findings and recommendations of
the Committee are reflected in the descriptive portions of this
report. These include the finding that the mail-in gold
industry has been the subject of widespread complaints from
consumers who claimed that they did not receive a fair payment
for their jewelry or precious metals.
STATEMENT OF GENERAL PERFORMANCE GOALS AND OBJECTIVES
In accordance with clause 3(c)(4) of rule XIII of the Rules
of the House of Representatives, the performance goals and
objectives of the Committee are reflected in the descriptive
portions of this report, including the goal of prohibiting
purchasers of precious metals from melting down or destroying a
consumer's jewelry or precious metals before receiving an
affirmative acceptance of an offer.
CONSTITUTIONAL AUTHORITY STATEMENT
Under clause 3(d)(1) of rule XIII of the Rules of the House
of Representatives, the Committee must include a statement
citing the specific powers granted to Congress to enact the law
proposed by H.R. 4501. Article I, section 8, clauses 3 and 18
of the Constitution of the United States grant the Congress the
power to enact this law.
EARMARKS AND TAX AND TARIFF BENEFITS
H.R. 4501 does not contain any congressional earmarks,
limited tax benefits, or limited tariff benefits as defined in
clause 9(d), 9(e), or 9(f) of rule XXI of the Rules of the
House of Representatives.
FEDERAL ADVISORY COMMITTEE STATEMENT
The Committee finds that the legislation does not establish
or authorize the establishment of an advisory committee within
the definition of 5 U.S.C. App., section 5(b).
APPLICABILITY OF LAW TO THE LEGISLATIVE BRANCH
Section 102(b)(3) of Public Law 104-1 requires a
description of the application of this bill to the legislative
branch where the bill relates to terms and conditions of
employment or access to public services and accommodations.
This bill does not relate to employment or access to public
services and accommodations.
FEDERAL MANDATES STATEMENT
Section 423 of the Congressional Budget and Impoundment
Control Act (as amended by Section 101(a)(2) of the Unfunded
Mandates Reform Act, P.L. 104-4) requires a statement whether
the provisions of the reported bill include unfunded mandates.
In compliance with this requirement the Committee has received
a letter from the Congressional Budget Office included herein.
COMMITTEE COST ESTIMATE
Clause 3(d)(2) of rule XIII of the Rules of the House of
Representatives requires an estimate and a comparison by the
Committee of the costs that would be incurred in carrying out
H.R. 4501. The Committee adopts as its own the cost estimate on
H.R. 4501 prepared by the Director of the Congressional Budget
Office included herein.
BUDGET AUTHORITY AND CONGRESSIONAL BUDGET OFFICE COST ESTIMATE
With respect to the requirements of clause 3(c)(2) of rule
XIII of the Rules of the House of Representatives and section
308(a) of the Congressional Budget Act of 1974 and with respect
to requirements of clause 3(c)(3) of rule XIII of the Rules of
the House of Representatives and section 402 of the
Congressional Budget Act of 1974, the Committee has received
the following cost estimate for H.R. 4501 from the Director of
the Congressional Budget Office:
September 2, 2010.
Hon. Henry A. Waxman,
Chairman, Committee on Energy and Commerce,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R 4501, the Guarantee
of a Legitimate Deal Act of 2010.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Susan Willie.
Sincerely,
Douglas W. Elmendorf.
Enclosure.
H.R. 4501--Guarantee of a Legitimate Deal Act of 2010
H.R. 4501 would prohibit purchasers of precious metals from
selling or refining an item of jewelry or precious metal until
the seller has accepted the purchaser's offer to buy the item
for a specific price. The bill also would require purchasers to
return the jewelry or precious metal to the seller if the
purchaser's offer is declined and to insure the shipment of
returned items. The Federal Trade Commission (FTC) would be
required to develop regulations to carry out those new
requirements.
Based on information from the FTC, CBO expects that
developing and enforcing the new regulations would impose a
minimal cost on the agency; therefore, CBO estimates that
implementing H.R. 4501 would not significantly increase
spending subject to appropriation. Enacting H.R. 4501 could
increase civil penalties and thus would affect federal
revenues; therefore, pay-as-you-go procedures apply. However,
CBO estimates that such effects would not be significant in any
year. Enacting H.R. 4501 would not affect direct spending.
H.R. 4501 contains no intergovernmental mandates as defined
in the Unfunded Mandates Reform Act (UMRA) and would not affect
the budgets of state, local, or tribal governments.
By establishing new requirements for businesses that
purchase jewelry or precious metals from consumers, H.R. 4501
would impose private-sector mandates as defined in UMRA. Based
on information from industry sources, CBO estimates that
additional costs to meet the insurance requirements would
comprise the largest share of the cost to comply with the
mandates in the bill. According to industry sources, about 8
percent of customers decline the offer price, and the average
value of items that a customer attempts to sell is less than
$150. The insurance rate from the U.S. Postal Service for a
package of that value is $2.75. CBO has no information on the
total number of packages of jewelry or precious metals handled
by the industry each year. However, according to an industry
press release, one of the largest companies in the industry in
terms of sales volume receives almost 5,000 packages per day
for processing. Based on those data, CBO estimates that the
aggregate cost of the mandates would probably fall below the
annual threshold established in UMRA for private-sector
mandates ($141 million in 2010, adjusted annually for
inflation).
The CBO staff contacts for this estimate are Susan Willie
(for federal costs) and Sam Wice (for the private-sector
impact). The estimate was approved by Theresa Gullo, Deputy
Assistant Director for Budget Analysis.
SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION
Section 1. Short title
Section 1 designates that the Act may be cited as the
``Guarantee of a Legitimate Deal Act of 2010''.
Section 2. Return requirements for purchasers of precious metals
Section 2(a) requires certain practices of businesses that
purchase precious metals from consumers. Purchasers of precious
metals are prohibited from selling, transferring to a third
party, and refining by melting or otherwise destroying a
consumer's jewelry or precious metals before receiving an
affirmative acceptance from the consumer of the purchaser's
offer. The purchaser's offer must be for a specific price. This
requirement is intended to prevent the situation in which a
purchaser of precious metals sells, transfers to a third party,
or melts down or otherwise destroys a consumer's jewelry or
precious metals before the consumer has a chance to decline the
purchaser's offer. A consumer's failure to either accept or
decline a purchaser's offer within any limited period of time
defined by the purchaser shall not constitute an affirmative
acceptance of the purchaser's offer by the consumer. This
requirement does not prohibit the sale or transfer of jewelry
or precious metals to law enforcement agencies and their
personnel.
This section further requires purchasers of precious metals
to promptly return consumers' jewelry or precious metals if the
consumer declines the offer to purchase the item. When
returning consumers' jewelry or precious metals, purchasers are
required to insure the shipment to the consumer in an amount
equal to the amount the consumer insured the shipment of
jewelry or precious metals to the purchaser, if the consumer
provides proof of such insurance. If the consumer does not
provide proof of such insurance, the purchaser of precious
metals is required to insure the return shipment in an amount
equal to 60% of the melt-value of the jewelry or precious
metals.
Section 2(b) defines the term ``purchaser of precious
metals'' to mean a person who is in the business of purchasing
jewelry or other precious metals directly from consumers. The
term ``melt-value'' is defined to mean the reasonable estimated
value of any item of jewelry or precious metal, as determined
by the purchaser of precious metals.
Section 2(c) provides the FTC with the authority to issue
regulations to carry out the purposes of the Act.
Section 3. Enforcement by the Federal Trade Commission
This section makes a violation of the Act or a regulation
issued pursuant to the Act an unfair or deceptive act or
practice in violation of a regulation under section 18(a)(1)(B)
of the FTC Act. The FTC is empowered to enforce the provisions
of the Act under the authority of the FTC Act.
Section 4. Effective date
This section stipulates that the provisions of the Act
shall take effect 60 days after the date of enactment of the
Act.
EXPLANATION OF AMENDMENT
No amendments were adopted during full Committee
consideration of H.R. 4501.
CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED
H.R. 4501, as reported, does not make any changes in
existing law.