Why Cash4Gold Is a Lousy Deal
Updated December 2, 2009
For months, unhappy customers have been bellyaching about Cash4Gold to the Better Business Bureau, the Postal Inspection Service, the Federal Trade Commission, the Florida Attorney General and the entire internet including YouTube. Now there's even a class action lawsuit.
Cash4Gold airs commercials -- its most memorable starring strapped celebrities M.C. Hammer and the late Ed McMahon during last year's Superbowl -- promising to buy old gold jewelry rattling around in dresser drawers across the nation. All you have to do is request the company's prepaid "refiner's return pack," drop in your orphan earrings, dated brooches and dented tiaras and send them off to the company's Pompano Beach, Fla. headquarters. There, the company says, its employees record the jewelry's arrival, photograph each piece, evaluate its worth and mail you a check. If you don't like the amount, you can get your stuff back as long as you call within twelve days of the date on the check. Otherwise, the gold goes to the refinery where it is melted down for possible use in your next filling.
This is a business tailor made for the recession. Gold has boomed by nearly $400 an ounce in the two years since C4G began its mail-in business -- along with the increasing numbers of people desperate for an extra buck. C4G reportedly receives 15,000 to 20,000 packs a week. At the current spot price of about $1,200 an ounce, well, you do the math.
The complaints reverberating across the internet and at the heart of the lawsuit are threefold: valuables customers sent never arrived or got lost; checks arrive too late for customers to cancel the transaction; and the amounts paid are piddling, for example, 29 cents or $1.41. "The company makes promises that they don't keep," contends the plaintiffs' attorney John Balestriere. The company has said that the losses are due to inept handling by the U.S. Postal Service. (A Postal Inspection Service spokesman admitted to me that airport contract workers do pilfer packages they believe to contain valuables or cash.) In an interview with Florida Trend magazine. CEO Jeff Aronson said the company has addressed most complaints. Indeed, C4G has managed to raise the "F" rating it received from the BBB of Southeast Florida --but only to the C level currently. (The BBBs ratings are based on an algorithm; on Tuesday, C4G's rating was C-minus, on Friday C.) A C is considered "average," C-minus "acceptable."
All that may be beside the point, however. The fact is that even if C4G kept perfect track of every last piece of jewelry and sent out every check on time, the return on your gold would be barely enough to take your family out to dinner -- at MacDonald's. Here's why. Let's say that your beloved bought you a one-ounce 14-carat gold necklace for $1,600. Does that mean Cash4Gold will pay you $1,600? Sorry, buster! It pays only for the gold content, not for the beauty of the jewelry. A 14-carat item is only 58.3% gold. An ounce of it is worth $644. (Gold is weighed in troy ounces, which are smaller than ordinary ounces.) Don't expect a check for anything near that amount in the mail from C4G, however. Aronson told Florida Trend magazine that he pays only 20% to 80% of the spot price of gold. The more you send him, the greater the percentage you'll get. Obviously, a one-ounce necklace is not much; so assuming you'd get only 20% of the value, about $128.80. (You can figure the melt-down value of your gold clicking over to www.dendritics.com/scales/metal-calc.asp.) In contrast, pawnshops and jewelry stores in one experiment paid 35 to 70% of the gold's meltdown value.
The average consumer has no way of knowing any of this, however. At this writing, neither the C4G website nor its advertising or mailing packs disclose how much the company will pay for the gold it receives. Nor does it give any examples like the one I provided. In a FAQ down deep in its website, the company tells people that pawnshops or jewelers may pay them more. But its home page practically screams its promise to pay "25% more." More than what? Maybe more than Scrooge.