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Every year consumers lose billions of dollars to fraudulent
telemarketing investments. Under one scheme, telemarketing companies may
use high-pressure sales tactics to persuade consumers to make leveraged
investments in precious metals, such as silver, gold and platinum. The
companies may falsely claim such investments carry low risk and can be
expected to generate high profits. However, the price of precious metals
is volatile and an investment in these commodities is speculative and
risky. And by leveraging, borrowing money to make the investment, the
degree of risk is magnified. During recent years, many consumers who
have invested in these programs have lost a high percentage of their
Before you agree to make a leveraged purchase of precious metals, read
How the Scams Works
A salesperson may call urging you to invest in precious metals. The
caller may predict that the market price of metals is about to skyrocket
during the next few days or weeks and that if you don't act now, your
investment opportunity may be lost. Claims may be made that your
investment can be expected to generate substantial profits, with little
risk, in as little as six months.
The salesperson may explain that, under their investment plan, you are
to pay a portion of the cost of the metal in cash, often 20 percent, and
a financial institution will loan you the balance. The financial
institution will arrange for your metal to be held as collateral for the
During the sales pitch, you also may be given information about program
fees and commissions. But, in fact, FTC cases against such telemarketers
suggest that many of the fees and commissions charged were
misrepresented or concealed and that fees ate up the majority of the
money that the consumers actually paid into the program. In addition,
consumers often do not receive written account statements that
completely disclose program fees.
Besides potentially losing your initial cash outlay to commissions and
fees, a highly leveraged investment increases the risk of an equity
call. An equity call occurs when changes in the price of the metals or
program fees causes the value of your investment to fall to where the
financing company considers your metal insufficient collateral to secure
the loan. Upon receiving an equity call, you must decide whether to put
more money into the investment or have the financing company sell the
metal in order to pay off the loan. Either way, you are likely to lose
some or all of your investment.
How to Avoid Losing Your Money
Consider the following precautions if you receive an investment
* Be skeptical about any unsolicited phone calls about investments.
You may be on a list that contains the names, addresses, phone numbers,
and descriptions of people who have responded before to telephone
solicitations regarding questionable schemes.
* Avoid high-pressure sales tactics. Sales presentations that urge
you to buy now or you'll lose your investment opportunity are clues to a
possible fraud. If you feel pressured, simply hang up the phone.
* Ask the caller to send you information about the company and its
operation and verify the data. Check out the company's offer with
someone whose financial advice you trust.
* Contact the consumer protection agency, Attorney General, and
Better Business Bureau in your state and in the state where the company
is located to learn if they know of any consumer complaints against the
What to Do If You Feel Victimized
If you believe you are a victim of a fraudulent precious metals
investment, first contact the company and try to get your money back.
Write a complaint letter to the company that sold you the metal and to
the company that financed the transaction. If possible, direct your
complaint personally to the highest ranking officials in the company.
Also, report your problem to your local consumer protection agency,
state Attorney General, and the Better Business Bureau.
In addition, you may wish to contact the National Fraud Information
Center (NFIC), Consumer Assistance Hotline at 1-800-876-7060, 9 a.m. -
5:30 p.m. EST, Monday - Friday, to report the company. The NFIC is a
private, non-profit organization that operates a hotline to provide
services and assistance in filing complaints.
You also may file a complaint with the FTC by writing to: Correspondence
Branch, Federal Trade Commission, Washington, D.C. 20580. Although the
FTC generally does not intervene in individual disputes, the information
you provide may help to indicate a pattern of possible law violations
requiring action by the Commission.
from the Federal Trade Commission - 3/94
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