Mr. William Hough was allegedly charged 33% in transaction fees - almost $300,000 - which he didn't know about because Lear Capital allegedly misleads customers over the phone and provides nothing in writing.
LOS ANGELES--City Attorney Mike Feuer announced today that his office has filed a lawsuit against Lear Capital, Inc., a Los Angeles-based dealer of gold and silver coins, claiming unfair and deceptive business practices. The lawsuit claims these alleged practices have harmed elderly and inexperienced customers in particular, robbing them of life savings in some instances.
"The myriad of unfair and deceptive practices our lawsuit alleges--preying upon elderly and inexperienced investors, misleading consumers about often astronomical transaction fees, threatening that its legal department will 'eat [consumers] alive' if they go public, sometimes wiping out huge chunks of life savings in the process—must stop," said Feuer. "Customers need restitution and Lear Capital must be held accountable for its alleged wrongdoing. And if the company doesn’t like it, ‘tough luck’—the very response it allegedly gave at least one customer who complained."
According to the City Attorney’s lawsuit, Lear Capital has conducted $3 billion in “trusted transactions,” primarily from selling gold and silver coins. Like other precious metals dealers, Lear Capital earns profits by charging a fee - the difference between the dealer’s wholesale cost and the retail price offered to customers. But unlike those of its competitors acting in good faith, the lawsuit asserts Lear Capital’s business model misleads customers about the amount of its fee—which can be as high as 33%, while reputable dealers often charge a fraction of this amount for the same or substantially similar precious metals.
In addition, while reputable precious metals dealers give customers the opportunity to review the terms of their potential purchases in writing before requiring payment, the lawsuit alleges Lear Capital typically will only communicate with customers by phone before the purchase is final. In doing so, Lear Capital allegedly eliminates any paper trail of the false, misleading and deceptive representations it makes to customers—such as leading customers into believing they are only being charged a small fee. The lawsuit contends that too often customers rely on Lear Capital’s misleading oral representations and only discover the fraud after it is too late—since Lear Capital typically does not provide the customer the specific terms of the purchase in writing until the customer has paid for the coins.
While experienced and sophisticated investors may not fall victim to Lear Capital’s alleged tactics, the City Attorney’s suit alleges that some unsuspecting investors – particularly, the elderly – have had their life savings and retirement funds decimated.
The lawsuit contends that when customers contact Lear Capital demanding an explanation about the actual fee they’ve been charged, or for other matters about which they believe they’ve been misled or deceived, Lear Capital often ignores the customer entirely, or promises return calls that never materialize. If customers do reach a Lear Capital representative – which occurs only by phone – Lear Capital allegedly continues its deceit. And when customers request that the fee or transaction be reversed or canceled because they were deceived and misled, the lawsuit claims Lear Capital informs them that there are “no refunds” and that “all sales are final,” and claims it has a recording of the phone call proving the customer agreed to the transaction.
If a customer continues to challenge these sales practices, the lawsuit alleges Lear Capital responds that the transaction is “fair because they agreed to it,” that they “need to take responsibility for their actions,” that they “should have paid attention during the call,” and “tough luck and better luck next time.” The suit also claims that Lear threatens customers with legal action if they go public with their complaint, telling them that Lear’s legal department will “eat them alive.”
The lawsuits seek injunctive relief, restitution, and civil penalties.
Read the complaint.