In a day when the stock market is unpredictable and huge financial institutions sometimes appear to be built out of nothing but smoke and mirrors, it can be tempting to want to invest your nest egg in something more concrete, especially something like “precious metals,” a phrase that, to some, exudes wealth and security.
But the Federal Trade Commission has charged a telemarketing group with preying on elderly consumers by misleading them into buying precious metals on credit with the promise of low-risk financial rewards.
According to the FTC, the company allegedly scammed customers out of at least $10 million $10 million by not disclosing the true costs of the scheme.
Potential investors were not told that their investment was just a start and that they would have to pay more money later or lose their investments, which generally turned no profits anyway.
The FTC alleges:
[T]he defendants failed to clearly disclose the investments’ total cost, and often failed to disclose that about 80 percent of the purchase would be financed through a loan with interest. The defendants also allegedly misrepresented or failed to clearly disclose fees and commissions, such as a $200 account opening fee and that consumers would be charged as much as 39 percent of their investments in commissions. The defendants also failed to tell consumers they were likely to receive equity calls on their accounts. When a consumer’s equity decreased to a certain level, an equity call was issued, and the consumer had to invest more money or allow the investment to be liquidated at a loss. In some instances, consumers were not told their accounts were liquidated.
Most investors lost money both because the investments were failures and through accumulated fees and commissions.
The telemarketers have been charged with violating the FTC Act and the FTC’s Telemarketing Sales Rule. It has filed its complaint with a U.S. District Court in Florida and is calling for a halt to the allegedly deceptive practices and refunds for affected customers.