The Cash4Gold Scam

A while back I wrote about how Vector Marketing has a history of using misleading marketing to lure college students into shilling their products for a pittance (read the story here). And it appears that Cash4Gold does the same. What is Cash4Gold? In case you didn't know, it is one of several companies (others including Dollars4Gold and Goldkit) that offer money in exchange for trading in your old jewelry or such. What you do is send for an envelope in which you put your items, which is then shipped off back to Cash4Gold, who melt it down and send you a check. It seems like an easy and convenient way to get rid of some stuffy or broken items and get some cash--but in reality, you're better off staying away. Why can Cash4Gold be considered a scam? Read on.

Back in late 2008, a single mother named Michelle Liberis decided to blow the whistle on Cash4Gold (her employer). She posted on ComplaintsBoard.com, a forum for issues people have with companies and their possible shady practices, after learning a friend was interested in selling jewelry to the company she worked for from June to October '08 (1). She wrote the following:

"I am a former employee of Cash 4 Gold. I did not know much about the company before being hired. On my first day of being hired, I was taught the "Cash 4 Gold Scam" from beginning to end [...] Cash 4 Gold is definitely not a trustworthy or credible company to do business with. You are almost better off taking your items to a local pawn shop or shopping around for other companies. With the economy the way it is, Cash 4 Gold seems to be a way out of financial stress for some, but in actuality becomes a stress of its own. I would advise you to think twice before sending in valuables or items inherited and of sentimental value, its not worth it" (2).

The substance of the letter was a detailing of the "Cash 4 Gold Scam"; namely, that the company engaged in misleading practices designed to make people part with their gold for cheap, and have little recourse if they felt they were cheated. Among the claims: that the phones often didn't work, costumer service was faked, and (most crucially) that while checks were often dated right after the submitted gold was appraised, the company would sit on the checks before mailing them--making it less likely the person who sent in their gold would have enough time to contest the amount on the check before the 10-day window for returns expired. Liberis' post impressed buyer watch dog site Consumerist.com, who posted the letter in its entirety (3).

Soon after, Cash4Gold came down hard. Not only did Cash4Gold send letters to Consumerist and blogs that picked up on the story, but also against Yahoo and The Los Angeles Times, who ran similar stories detailing possible wrongdoing and fraud. They asserted Liberis' posts were "false and defamatory"; Liberis, the company said, was fired for "chronic absenteeism without adequate excuse" and a "disruptive attitude", a rationale Liberis contests (1). Cash4Gold also pursued legal action against Liberis and one of her colleagues that is still pending--at one time Consumerist was also named an offending party in the suit, but it has since been dropped (4).

But do these claims have any validity? Consumerist tallied up the evidence and sums it up by saying that there is ample support that Liberis' whistleblowing post was accurate. First off, there's the question of whether they will pay "top dollar" as mentioned in their ads for your gold. Consumer Reports' anonymous test consumers sent 24 identical gold pendants, purchased for $175 each, to Cash4Gold. The "melt value" for the pendants was calculated at $70, based on the market price for gold at the time of the tests (never less than $900 an ounce during May through July 2009). The results were less than inspiring; Cash4Gold sent back checks ranging from $7.60 to $12.72 (or 11% to 18% of melt value)--the lowest amount of any firm tested, but not dramatically lower. All prices were less than what someone could get at a jeweler or pawn shop (1). This assessment has been echoed; for instance, news magazine Inside Edition got a price of $209.81 for 23 pieces priced at about $1000 (5). So in short, you aren't getting your money's worth by using Cash4Gold and are better off going to the local pawn shop.

But what about some of the other charges listed by Liberis? One was that the refinery she worked at was closed due to work code violations? Cash4Gold says this never happened, but Consumerist checked with the local fire bureau and found out that the company received numerous citations--the site had a roof fire at one point. As of September 2009, there were no reported violations as Cash4Gold's new location (1).

The Consumerist shoppers had no issue with mail and delivery times, but there is evidence that at the very least this hasn't always been the case (and that Liberis was correct in her assertions.) The Better Business Bureau processed 269 complaints about the company by early 2009 (6), plus another 40 or so by May (7), and the company has a "C" rating on the site currently--but it has sunk to as low as a "D-" (1). Furthermore other claims by Liberis are denied in the suit against her, but are verified on Cash4Gold's own blog.

Among other stories reported are that contesting a check amount results in the company instantly doubling or tripling the price. In either case, however, the consumer is still making less than the appraised or melt value. It's pure profit motive. Uncontested, Cash4Gold can make 80% margins. In fact, Liberis asserts, she made bonuses if she could keep the customers from getting a better deal (1). The reason you're getting such a raw deal? Florida Trend estimated the company needed to make $155 per transaction to cover their large marketing costs,such as the Super Bowl ad featuring Ed McMahon (7).

So for all intents and purposes, from what can be determined Liberis was in the right. And yet she's been saddled with defending herself. The very nature of those charges have changed. As Consumerist reports: " In its original lawsuit against Liberis (PDF), the company asserted that her statements were "false and defamatory." Yet a later order against her (PDF) prohibited her from publishing "confidential and proprietary information" as well. Obviously a statement can't be both proprietary (hence true) and false at the same time. We've asked Cash4Gold to clarify which part of Liberis' statements were which, but it has refused" (1).

So there you have it. People interested in seeing what you can say about possible fraudulent business practices should watch the court case with interest--otherwise, even posts like these could be considered defamatory. Regardless, the proof is in the pudding--Cash4Gold will not pay "top dollar" for your gold. The company CEO Jeff Aronson responds to these complaints: "If all you care about is the net dollar, and you're willing to go to the seedy part of town, and you're willing to travel around ... I want you to go there [...] I don't want you to come to me. I want you to come to me for convenience and ease. That's what I want you to come to me for. If not, I'm happy for you to go someplace else" (8). But the fact remains that despite what Cash4Gold says, the number of complaints it receives is high (6), and you should be wary. At the end of the day, it's not worth parting with your gold (which can only appreciate in value if the economy is doing poorly) for a pittance. And it's unfortunate that you can be threatened for legal action for saying so.