The cash for gold sham
The OFT has cracked down on the dodgy practices of five gold-buying firms.
For many of us, money is too tight to mention at the moment. Inflation is rocketing, our salaries aren’t, and many jobs are not exactly secure, with unemployment levels now just shy of 2.5 million.
It’s therefore not surprising that we are looking for extra ways to improve our bank balances, whether that means buying our food in a slightly cheaper supermarket, cutting out the use of the car wherever possible, or trying to sell unwanted goods on auction sites.
One route is to sell your gold to one of the many gold-buying outfits that advertise their services on countless digital channels during the day. However, according to the Office of Fair Trading, if you’ve used them up to now, there’s a chance that you will have been mistreated.
Time for some action
The Office of Fair Trading has taken enforcement action against five gold-buying firms, following an investigation into the sector and the business methods employed by firms within the gold-buying market.
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Three firms – CashMyGold, Cash4Gold and Postal Gold – have agreed to change the way they operate, while a further two firms – CashYourGoldNow and Money4Gold – have ceased trading altogether.
So what were these firms doing that was causing customers to lose out?
How the deals work
First, it’s worth reviewing how the gold-buying process works.
Say I have some old gold earrings that I no longer need. I can post the earrings off to a gold-buying firm, who will then inspect the gold and work out how much they think it is worth, once they’ve melted it down. They will then give me an offer for the earrings.
At this point, I can accept the offer, try to negotiate for a bit more cash, or turn down the offer outright, at which point the firm will send me the earrings back.
I can then try somewhere else.
Locking into a deal
The OFT’s investigation found that these firms had been locking customers into accepting their offers for the customers' gold.
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Here’s how it would work. I’d send off some gold to one of these firms, and after checking it out, they would send me an offer for that gold. However, if I did not reject the offer within a certain timeframe, the firm would take my silence as approval for their offer. My gold would then be melted down, even though I had never actually accepted the offer.
Clearly, there are some problems with such an approach. According to the OFT, some of the time periods with which customers had to respond to the offer were too restrictive, not allowing them time to consider the offer and respond. It’s difficult to try to negotiate a higher price when your gold has already been melted down!
Thanks to the OFT’s intervention, the firms have agreed to a number of changes to their business practices. They are:
- Customers will be provided with the option of receiving either a quotation for their gold which requires positive acceptance or simply a payment for their gold. The firms will also display both options and the subsequent risks clearly and prominently.
- Consumers will be provided with clear information on the prices offered for gold, including on the weight and carat of the items assessed.
- Consumers will be provided with clear information on other significant features of the service, such as whether gemstones are purchased or returned, and the risk of damage or loss should a consumer send a gemstone.
- The firms will make clear when referring to the ‘high price’ or ‘top price’ paid for gold that the prices offered to customers are based on the scrap or smelt value of gold.
Getting a fair deal
Obviously, the OFT’s changes are a good thing. They improve transparency, so that all parties in the transaction know what to expect, and that’s a welcome improvement on how things worked previously.
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However, the fact remains that for many customers, these deals rarely see them getting a fair price for their gold. Indeed, in some cases customers have received just half of the market value of the gold.
So how do you ensure you get fair value for your gold?
One way is to ensure you only deal with buyers that offer prices directly linked to the London Gold Fix market. As the name suggests, gold fixing is basically the process by which the price of gold is set on the London market. This is generally seen as a decent benchmark, though it’s not perfect.
These gold-buying websites are not the only places that you can flog your gold to of course. You may prefer to use a pawn broker, in which case be sure to have a read of The lowdown on pawn broking. Alternatively, you could always try to sell your gold to one of the many high-street jewellers that now buy second-hand jewellery.
Whatever you do, make sure you shop around for the best possible deal, and check the small print so that you know exactly what you are signing up for. Good luck!