Gold Coin Dealer Lear Capital Accused of Preying on Elderly
(Bloomberg) -- Lear Capital Inc., a dealer of gold and silver coins, was sued by the Los Angeles city attorney for allegedly deceiving often elderly customers and charging as much as 33% in transaction fees.
“The myriad of unfair and deceptive practices our lawsuit alleges, preying upon elderly and inexperienced investors, misleading consumers about often astronomical transaction fees," must stop, City Attorney Mike Feuer said in a statement. “Customers need restitution and Lear Capital must be held accountable for its alleged wrongdoing.”
Los Angeles-based Lear Capital has done more than $3 billion in sales over 20 years, according to its website. The city alleges the company’s sales strategy is to conduct transactions over the phone in which customers are given misleading information about the size of the fee they are being charged and to steer customers toward buying coins, which generate higher fees than bullion, by falsely saying that there’s a risk the government may "confiscate" bullion.
“Lear is a top-rated company that has been selling precious metals for more than 20 years," Seth Pierce, a lawyer for the company, said in a statement. “Lear provides detailed disclosures to its customers and takes great care to ensure that its sales practices comply fully with the law. We look forward to responding to the City Attorney’s unfounded allegations in court."
Gold-coin dealers who use high-pressure, boiler-room sales pitches against unsophisticated investors seeking to diversify their retirement funds have been in the crosshairs of local regulators. In recent years, the city of Santa Monica, California, went after three national precious-metal dealers over deceptive sales practices.
The Los Angeles city attorney alleges that Lear Capital sales representatives at times would use fast-paced, aggressive sales tactics with elderly customers, "designed to overwhelm, confuse, and pressure the customer into making a purchase, relentlessly pursuing the customer with constant, repeated calls."
Closely-held Lear Capital markets gold as a "safe haven" alternative to investments in stocks and bonds and silver as "the new oil" that could trade as high as $100 an ounce, according to the city’s complaint. Historically, silver has never reached half that amount and currently trades around $15 an ounce, Feuer said in the complaint.
The city attorney seek a court order halting the allegedly illegal sales practices, restitution for deceived customers, and penalties.
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