Gold-buying firms warned by OFT
Three companies that buy gold jewellery from consumers have been ordered to improve the way they treat their customers following an investigation by the trading watchdog.
The firms - CashMyGold, Cash4Gold and Postal Gold - have agreed to change their business practices after the Office of Fair Trading (OFT) raised concerns that people were being "locked into" accepting offers for their gold.
It found that the businesses sent consumers a payment, and if this was not rejected and returned within a restrictive time period, their silence was taken as consent and their jewellery was melted down.
A further two companies - CashYourGoldNow and Money4Gold - stopped trading after the OFT approached them about improving their business practices. St Albans-based Money4Gold is now in voluntary liquidation.
There has been a increase in the number of companies offering to buy old gold jewellery by post in the past couple of years as the price has soared.
The OFT launched its investigation in January last year following a number of complaints from consumers, which raised concerns that certain gold firms were not treating customers fairly.
Following the investigation, Manchester-based CashMyGold, London-based Cash4Gold, and Postal Gold, of the Isle of Man, have agreed to change the way they make offers for people's gold.
Customers will now have the option of either receiving a quotation which they must actively accept, or they can receive a payment, which they can then return, as is currently the case.
Both options will have to be displayed clearly and prominently to consumers, with the risks of each option set out.
Customers will also have to be given clear information on the prices being offered for their gold, including details on the weight and carat of the items being assessed.
Firms will also have to make clear that when they claim to pay a "high price" or a "top price" for gold, these prices are based on the scrap or smelt value of the gold, and not its value as jewellery.
In addition, customers must also be given information on other important features of the service, such as whether gemstones contained in jewellery are bought or returned, and what the risk of them being damaged or lost is.
Heather Clayton, senior director of the OFT's Consumer Group, said: "These days we see more and more new business models which involve consumers distance-selling goods to firms.
"These options are good for consumers, providing business practices are fair. Where we see problems, however, we are keen to intervene early so that these markets develop with an appropriate level of consumer protection.
"Any companies operating similar business models must make sure they treat consumers properly and provide clear information on how the service operates so that people make informed decisions about whether they wish to part with their possessions."
Research carried out by consumer group Which? Money into the market for companies that buy gold through the post found that the firms consistently offered lower prices than those offered by pawnbrokers and independent jewellers.
It found that the firms offered an average of just 6% of the retail price of their gold, compared with an average of 25% offered by pawnbrokers and high street jewellers.
It said the firms were "shockingly bad value" and urged people not to use them.
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