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[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\
---------------------------------------------------------------------------
    \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\
---------------------------------------------------------------------------
    \3\GoldPrice.com, Gold Price History (www.goldprice.org/gold-price-
history.html) (accessed May 7, 2010).
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------

                          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.

                                  
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