A Los Angeles-based dealer of gold and silver coins is being sued by the City Attorney’s Office, which alleges that the company engages in unfair and deceptive practices directed at elderly and inexperienced customers, some of whom have lost their life savings as a result.
Los Angeles City Attorney Mike Feuer told reporters Tuesday that his office is seeking an injunction, penalties and restitution against Lear Capital Inc.
“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,” Feuer said.
“Customers need restitution and Lear Capital must be held accountable for its alleged wrongdoing,” he said. “And if the company doesn’t like it, `tough luck’ — the very response it allegedly gave at least one customer who complained.”
Lear Capital’s attorney, Seth Pierce, said he intends to dispute the lawsuit’s claims in court.
“Lear is a top-rated company that has been selling precious metals for more than 20 years,” Pierce said in a statement emailed to City News Service. “Lear provides detailed disclosures to its customers and takes great care to ensure that its sales practices comply fully with the law. We look forward to responding to the City Attorney’s unfounded allegations in court.”
Precious metals dealers earn profits by charging a fee — the difference between the dealer’s wholesale cost and the retail price offered to customers. The lawsuit alleges Lear Capital’s business model misleads customers about the amount of its fee, which can be as high as 33%, while its competitors often charge a fraction of that amount for the same or substantially similar precious metals.
The lawsuit alleges that Lear has threatened customers with legal action if they go public with a complaint, telling them that the company’s legal department will “eat them alive.”
One alleged victim, William Huff, said he was bilked out of nearly $900,000 of his life savings when the company charged him 33% in fees for each of his investments with Lear.
“I was taken for one-third of my IRA account,” Huff said. “They called me early in the morning, I was still in bed, to do this recording of this deal, and apparently I missed the part where they said 33%. This has been going on for two years.”
The suit alleges that reputable precious metals dealers give customers the opportunity to review the terms of their potential purchases in writing before requiring payment, while Lear Capital typically will only communicate with customers by phone before the purchase is final, eliminating any paper trail of alleged false, misleading and deceptive representations about its fees.
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, Lear Capital often ignores them entirely, or promises return calls that never materialize, the suit alleges.
If customers do manage to reach a Lear Capital representative by phone and request that the fee or transaction be reversed or canceled, they are told there are no refunds, that all sales are final, and that the company has a recording of the phone call proving the customer agreed to the transaction, according to the suit.
If a customer continues to challenge the sales practices, 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 alleges.
Feuer said his office hosts multiple education opportunities for people to understand their investments and to be vigilant in spotting scams.
According to Lear Capital’s website, it has conducted more than $3 billion in transactions since 1997.
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