Minnesota Hopes New Background Checks Will Deter Scammy Coin Dealers

As the prices of precious metals began to take off in recent years, so did the number of less-than-legitimate buyers and sellers of coins. These scammy individuals, often ex-cons, tarnished the industry by misleading people into selling their valuable coins for a fraction of what they were worth, along with instances of theft and fraud. This week, Minnesota begins implementing a new law that hopes to discourage these people from getting into the business by requiring criminal background checks.

Under the new law, any bullion coin dealer — i.e., anyone in Minnesota who buys, sells, solicits, or markets coins containing more than 1% by weight of silver, gold, platinum, or other precious metal — will be required to undergo a background check. Those found to have perpetrated a financial crime in the previous 10 years will not be allowed to register with the state.

Additionally, dealers must provide customers with specific details — including precious metal content of coins — of transactions in writing. All purchased coins must also be itemized during the purchase. Dealers may not misrepresent the value, characteristics or earnings potential of a transaction.

The Minneapolis Star Tribune, which revealed the dirty underbelly of the area’s coin-buying industry back in 2011, reports that this law makes Minnesota the first state to regulate the retail coin industry.

In its 2011 investigation, the newspaper found six dozen coin salesman in the Minneapolis-St. Paul area with serious criminal convictions, like fraud, bank robber, and forgery on their records.

Since that time, the state’s attorney general’s office has filed four civil consumer-fraud cases against coin dealers.

The background checks will begin Aug. 1 and starting in July 2014, registered coin dealers will be listed on the Minnesota Commerce Department’s website.