Dealers to reject
Minnesota clients by Pat Heller | Posted
on 7/01/2014
The nation’s coin dealers
are saying no to Minnesotans. Their choice is to reject
these clients or comply with a draconian new state law.
It might surprise some that it has come
to this, but there has been a long lead time in reaching
this point of decision to stop doing business with people
in the Land of 10,000 Lakes.
Last year the Minnesota legislature and
governor, in response to what were considered a large number
of incidents of coin dealers taking advantage of customers
in that state, enacted what was supposed to be a consumer
protection solution. That law took effect on Tuesday, July
1.
The Minnesota Department of Commerce has
set up a checklist on its website (http://goo.gl/wJrh74)
to provide guidance to coin dealers nationwide as to whether
they need to register with that department and to comply
with the surety bond requirements (which includes national
background checks going back 10 years on every staff person
that might serve Minnesota customers), providing customers
with detailed information about each item purchased from
the dealer, and other provisions of the law.
Under the law, a dealer who has $5,000 or
more of purchases and sales of “bullion coin” with Minnesota
consumers in a 12-month period is required to register with
the Minnesota Department of Commerce. The $5,000 threshold
is determined by looking back to transactions from July
1, 2013, through June 30, 2014. If a coin dealer passed
that threshold during that 12-month period, then he is required
to be registered if they want to make any sales to Minnesota
customers from July 1 onward. This threshold is also met
if a Minnesota consumer makes a sale or purchase with a
non-Minnesota dealer at a coin show located outside of Minnesota.
Many dealers might think they don’t do that
much volume in “bullion coins.” However, you have to go
by how this law (http://goo.gl/wJrh74) defines that term:
“Bullion Coin … means any coin containing one percent by
weight of silver, gold, platinum or other precious metal.”
For all practical purposes, this means that any coin containing
even the slightest amount of gold, silver, platinum or palladium
falls within the definition of “bullion coin.” Even if you
sell a single high-grade $1 gold Liberty to a Minnesota
consumer for $5,050, that single “bullion coin” transaction
makes a coin dealer subject to registration.
The law is so onerous in compliance requirements
that there isn’t space to list them all in this article.
Further, compliance can easily cost coin dealers hundreds
of dollars on up to tens of thousands of dollars annually,
depending on their volume with Minnesota customers.
Minnesota coin dealers Gary Adkins and Greg
Allen, both who serve on the board of directors of the Industry
Council for Tangible Assets have worked tirelessly first
to prevent adoption of this law then to remove its most
burdensome aspects. Since then, they have worked with the
state’s Department of Commerce officials to encourage regulatory
interpretations that reduce the compliance hassles with
the law.
Now that the law has taken effect, how actively
have coin dealers in Minnesota and nationwide complied with
registration and all the other requirements?
As of June 30, the Minnesota Department
of Commerce reported to Greg Allen that only about 30 dealers
had completed the registration process to comply with this
new law. Of these, only one company outside the state of
Minnesota had registered. One other coin dealer outside
of Minnesota has had their legal staff working on registration
for the past month but has not yet been able to jump through
all the hoops (and there are many of them) to complete the
process.
I personally know of dozens of non-Minnesota
companies (including my own) whose activity with customers
in Minnesota means that they should be registered. This
law has been on the books for almost a year. So, what gives?
In conversations with other Minnesota coin
dealers, Adkins and Allen have learned that a significant
number think their volume of “coin bullion” transactions
is low enough that they are not subject to the law. This
would be correct, for instance, for dealers who only handle
copper or copper-nickel coins, paper money, or if dealers
did not transact any business with Minnesota “consumers.”
Other dealers told them that they were closing their companies
rather than registering or that they were changing their
businesses so that they would no longer be required to register.
One coin dealer said he was publicly refusing to register,
hoping to be charged with failure to register and then take
the matter up in the courts. The operators of two coin shows
scheduled in Minnesota in July reported that the number
of tables sold had fallen sharply compared to their previous
events – with virtually no dealers coming from outside the
state.
ICTA sent out an online survey to its membership
late on June 30. From preliminary results, only a small
percentage of dealers had either registered or had any intentions
to register. In fact, 85 percent of early respondents indicated
that they would no longer engage in transactions with Minnesota
consumers (the choice for my company).
Now that this Minnesota law has taken effect,
how will retail collectors and precious metals investors
fare? The unintended consequences of this law, as happens
so often, are almost certain to result in fewer options
for them. There will be fewer dealers to serve them in state
and a sizable percentage of out-of-state coin dealers will
no longer do business with them. Out-of-state coin dealers
will almost all stop taking booths at Minnesota coin shows.
The dealers who do undergo the financial and record-keeping
requirements to register with the Minnesota Department of
Commerce will not be in as good a position to offer consumers
attractive prices, whether buying or selling. As Minnesota
consumers are forced to patronize dealers out of state because
in-state dealers have either closed shop or become less
competitive with prices, that increases the potential for
consumer fraud.
In my opinion, the new Minnesota bullion
coin dealer law, enacted to supposedly protect consumers,
will instead expose collectors and investors from that state
to greater risk of criminal loss. And, with businesses closing
or moving out of Minnesota, you can be sure that tax collections
by Minnesota will decline. Unfortunately, it will be the
Minnesota consumers of “bullion coins” that will likely
suffer under this law rather than the politicians who enacted
this boondoggle.
Coin dealers in Minnesota and across the
nation who thus far may have ignored the issue of whether
to register with the Minnesota Department of Commerce cannot
ignore the issue any longer. If you are a non-Minnesota
dealer with any kind of activity with customers in that
state, you will be easy to catch and prosecute for failure
to register – even if you never set foot in that state.