The Office of Fair Trading (OFT) has ordered online cash for gold companies to improve the way they treat their companies.
The consumer watchdog told CashMyGold, Cash4Gold and Postal Gold to make changes to the way they lock customers into accepting offers and melt gold down if they have not received a response within a “restrictive time period”.
Two companies, CashYourGoldNow and Money4Gold, ceased trading as a result of the OFT probe.
The recession and the high price of gold has seen the popularity of cash for gold services rocket over past few years as viewers of daytime television will testify.
The three companies involved have all agreed to change their trading practices and provide people with either a quote for their gold that requires a positive acceptance, or a payment that can be returned within a reasonable time period. Both options must be accompanied by prominently displayed risks and options. Companies must also provide more detailed information about the weight and carat of the gold they receive.
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.”
The OFT action was taken after an investigation was launched to establish whether online gold brokers were complying with consumer protection legislation. Unlike high street brokers, where customers can review and reject a deal whilst the gold is still in their possession, online services can send an immediate payment that needs to be rejected quickly if the customer thinks the price is too low and wants to get their gold back.
Research carried out last year by the consumer group Which? found that some online gold companies that advertise on television offered an average of 6% the gold’s retail value compared to 25% offered by high street pawn brokers and jewellers.
Peter Vicary-Smith, chief executive of Which?, said: “Our investigation found that they offered shocking value for money, and were consistently outbid by pawnbrokers and jewellers. Hopefully, the OFT’s intervention will make it possible for people to shop around for the best deal before selling their gold.”
A Cash4Gold spokesperson said: “We have, and will continue to be, clear with our customers as to what they should expect, and appreciate the OFT’s efforts to ensure our competitors adopt some of the same practices that have been part of our service offering from day one. Unlike some other gold buyers who shut up shop, we were pleased to work closely with the OFT to fully resolve all concerns.”
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