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FTC turns the screw

The Federal Trade Commission (FTC) is seeking comments by April 4, 2016, to U.S. Code Title 16 Chapter I Subchapter B Part 23, which is “Guides for the Jewelry, Precious Metals, and Pewter Industries.”
You can read the current regulations at http://www.ecfr.gov/cgi-bin/retrieveECFR?gp=1&SID=bfc73ec94d2800260adb2ae84558f5f3&ty=HTML&h=L&mc=true&r=PART&n=pt16.1.23.

Under FTC regulations, Draped Bust halves along with a number of other U.S. coins can not be considered coin silver.

Under FTC regulations, Draped Bust halves along with a number of other U.S. coins can not be considered coin silver.

Under Part 23.6 titled “Misrepresentation as to silver content” it reads in subpart C, “It is unfair or deceptive to mark, describe, or otherwise represent all or part of an industry product as “coin” or “coin silver” unless it is at least 900/1000ths pure silver.”

What this technically means is that, according to the FTC, it is illegal for merchants to describe the Canadian 50 percent and 80 percent pure silver dollars, halves, quarters, and dimes as either silver and/or coins.

Further, U.S. coins such as the Flowing Hair, Draped Bust, and Lettered Edge Capped Bust half dollars that have a silver purity of 89.24 percent also are not legal to market as silver and/or coins.

The same goes for all early U.S. half dimes, dimes, quarters, and even Type 1 3-cent silvers.

This also applies to the U.S. Kennedy half dollars, Eisenhower dollars, and the Bicentennial quarters that were struck with a 40 percent silver content. Ditto for the World War II nickel issues with a 35 percent silver content.

Beyond that, there are many legal tender world coins with silver purities of 83.5 percent, 80 percent, 75 percent, 64 percent, 62.5 percent, 50 percent, and other alloys of less than 90 percent silver content that, according to the FTC, are illegal to describe as “silver” or a “coin” when they are offered for sale.

As for gold coins, the FTC Part 23.4 reads, in part,
“(1) Use of the word “Gold” or any abbreviation, without qualification, to describe all or part of an industry product, which is not composed throughout of fine (24 karat) gold.”

“(2) Use of the word “Gold” or any abbreviation to describe all or part of an industry product composed throughout of an alloy of gold, unless a correct designation of the karat fineness immediately precedes the word “Gold” or its abbreviation, and such fineness designation is of at least equal conspicuousness.”

Therefore, it would technically only be legal to describe as gold coins that are less than 24 karat purity as, for instance, “U.S. 90 percent gold coins.”

Under these regulations, could the U.S. Mint be prosecuted by the FTC for deceptive trade practices for its definition of a coin on its website at http://www.usmint.gov/collectorsClub/index.cfm?action=glossary as “flat piece of metal issued by the government as money?”

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I am not aware of any prosecutions for precious metals dealers engaging in deceptive trade practices by describing legal-tender monetary issues with some silver content, but less than 90 percent purity, as either silver or as coins. Similarly, I am not aware of any charges filed for not describing the actual gold purity of coins with less than 24 karat content. If such a deceptive trade practice charge were ever leveled, absent any other misrepresentation of the item, I suspect (though I am not an attorney or a judge) that such a case would be quickly dismissed.

Even if the chance of prosecution of coin dealers under this regulation is extremely remote, it would make sense to contact the FTC to modify these particular parts of the regulations to make it legal to describe legal-tender silver and gold coins as being silver and gold coins even with purities less what is currently specified.

Patrick A. Heller was the American Numismatic Association 2012 Harry Forman Numismatic Dealer of the Year Award winner.  He is the owner emeritus and communications officer of Liberty Coin Service in Lansing, Mich., and writes “Liberty’s Outlook,” a monthly newsletter on rare coins and precious metals subjects. Past newsletter issues can be viewed at http://www.libertycoinservice.com. Other commentaries are available at Coin Week (http://www.coinweek.com).  His radio commentaries titled “Things You ‘Know’ That Just Aren’t So, And Important News You Need To Know” can be heard at 8:45 a.m. Wednesday and Friday mornings on 1320-AM WILS in Lansing (which streams live and becomes part of the audio and text archives posted at http://www.1320wils.com).

More Collecting Resources
• Are you a U.S. coin collector? Check out the 2016 U.S. Coin Digest for the most recent coin prices.
• Download The Metal Mania Seminar with David Harper to learn more about the metals market.

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