Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: FTC describes precious metals investment scams before Senate Special Committee on Aging, (Apr 30, 2014)

By Linda O’Brien, J.D., LL.M.

The FTC participated in a hearing today by the Senate Special Committee on Aging investigating schemes in the precious metals investment market.

Testifying on behalf of the Commission, Southwest Region Director Dama Brown described the agency’s efforts to stop precious metals investments scams and inform consumers how to avoid them. In her prepared remarks, Brown told lawmakers that the Commission is committed to protecting consumers from investment schemes that swindle money from consumers and often prey on older Americans concerned about the security of their retirement savings.

The testimony stated that, following the economic downturn in 2008, the FTC observed a proliferation of schemes that targeted financially-distressed consumers, including telemarketers offering precious metals as purported high-profit, low-risk investments. FTC cases have alleged that, to lure consumers into purchasing these investments, telemarketers claimed that the precious metals investments were certain to rise in price and the investments were safe because they were backed by physical metal.

According to the testimony, in reality, the telemarketers offered a highly leveraged, high-risk investment. Telemarketers allegedly failed to disclose that consumers were financing most of the investments’ purchase price and they were required to pay hefty fees. The terms of the investments rendered them highly risky and largely unprofitable. Many consumers lost their life savings to these unscrupulous operations.

The Commission recently filed three law enforcement actions involving precious metals investment schemes, the testimony stated. In addition to stopping the alleged scams, the Commission expects to return approximately $5 million to consumer victims.

The testimony described the common features of the precious metals schemes and the agency’s law enforcement actions. In FTC complaints against these scams, the agency has sought temporary restraining orders to immediately stop the violations, a freeze of the defendants’ assets, and an appointment of a receiver over the companies. The testimony also described the FTC’s consumer education efforts, which included providing information about how to avoid scams; what to know before investing in precious metals, coins, or other investments; and practical investment advice.

The Commission vote approving the testimony and its inclusion in the formal record was 4-0.

News: ConsumerProtection FederalTradeCommissionNews