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A scrap metal dealer who bought the egg at a US bric-a-brac market discovered it is an ultra-rare Fabergé egg worth around €24 million. Yui Mok/PA Wire/Press Association Images

Column Let's stop dragging our feet – we need to regulate cash-for-gold

The lack of regulation means priceless treasures can be accidentally destroyed, criminals operate virtually unimpeded, and vulnerable communities are preyed upon.

LAST MONTH an incredible story hit the headlines about a scrap dealer who struck the jackpot when he purchased at auction a golden egg, in the hope of making money off its scrap value, only to later discover it was a Fabergé egg worth about €24,000,000.

This unique artwork, one of only 43 Fabergé eggs remaining in existence, escaped being summarily melted down for scrap merely because the dealer could not find a buyer of scrap metal willing to pay more than it had cost him to purchase it. Had he found such a dealer, a priceless treasure would have been casually and quietly destroyed, with no record kept or checks made; it would have permanently vanished into history.

There are many reasons to look carefully at the ‘cash for gold’ industry and the potential for the casual destruction of irreplaceable historical artefacts is only a minor one. For criminals, it effectively provide a safer and more convenient method of changing stolen goods into legitimate cash than traditional fences; once sold, the swift and thorough destruction of the stolen property is easily explainable as being part of the ordinary course of the business; items are typically melted down within a very short space of time and recast into standard measures, such measures being comprised of metal from numerous other objects.

Stolen goods cannot be traced

Unlike traditional methods of fencing where stolen items can be traced back through a chain of sellers as the goods remain unchanged and intact, ‘cash for gold’ businesses can represent an event horizon beyond which the stolen goods cannot be traced. This is not to say that such businesses are deliberately or knowingly facilitating criminals, the majority of the industry’s trade is certainly legitimate, but the practical effect is that it is far harder for the Gardaí to prosecute criminals once the goods have been sold and melted down. In the words of the former Garda Commissioner, the melting of stolen items can result “in major difficulties for Gardaí in their efforts to identify and recover such items …”

Further, these businesses, in effect, fulfil a similar role in many deprived neighbourhoods as moneylenders or pawnbrokers; at a steep price, they provide quick, easy and anonymous cash. However, whereas there is at least some regulation of moneylenders and pawnbrokers in place, such as ‘cooling off’ periods after a transaction, there are effectively no regulations covering transactions undertaken in the ‘cash for gold’ industry; these transactions can often feature desperate people unloading themselves of large percentages of their personal capital, not to mention treasured family heirlooms, at a very poor return.

The frequently poor valuations placed on such transactions are an effective mirror of the high interest charged by certain moneylenders; a premium levied due to the uneven bargaining power and level of urgency between the parties. This is further compounded by the fact that most consumer regulations and legislation do not effectively cover these transactions.

Regulation is sorely needed

That this industry needs to be regulated is widely accepted; numerous questions have been raised on the subject in the Dáil, at least two private members bills have been tabled unsuccessfully, and the Department of Justice has published a report on the matter. Despite this, no regulation of this industry has been forthcoming; the matter remains under consideration, as it has for the last four or more years. Such a delay is hardly unexpected or uncommon; many pressing issues must wait for a long time as they slowly wend their way through our legislature before finally being addressed.

What is different about the delay in regulating the ‘cash for gold’ industry is the relative simplicity of what is required. It is on a practical level most likely impossible to address the unfair valuations rife in the industry; the volatile fluctuations of the price of gold would make legislative protection almost certainly ineffective; after all, what is a fair price for a product that can lose 60 per cent of its value in an hour? However, important steps to address the daily operation of these businesses can be taken which will benefit both the Gardaí and the consumer. Most of these steps were contained in the Private Members Bills rejected by the government. In broad outline they are:

  • To operate in the industry should require a licence;
  • Reporting obligations for large transactions under the Money Laundering Acts should be extended to cover the industry;
  • A 30 day ‘cooling-off’ period, before the destruction of items, should apply for the benefit of both consumers and Gardaí;
  • Gardaí should have a right of inspection of items during that period;
  • Cataloguing of items and recording of transactions should be mandatory;
  • Identification of sellers should be photocopied and retained for the ‘cooling off’ period.

These ideas are not new, nor do they require new ground to be broken; much of the regulation could effectively mirror large parts of the Pawnbrokers Act, 1964 (as amended) which has successfully provided for the regulation of pawnbrokers for many decades. Similarly, legislation in American States such as South Carolina could be examined, or those Bills that have been raised in the English Parliament.

All legislation requires careful thought and consideration. A poorly-drafted law can have negative ramifications for decades after it is passed; the aphorism “legislate in haste, repent at leisure” is a good general guideline. However, it is equally possible for a parliament to be overly-cautious, to bury change and innovation in reports and committees. The legislation required to provide oversight of the ‘cash for gold’ industry is relatively succinct, can be relatively discrete from other Acts, and can be transposed from existing legislation relatively quickly. It is not as simple as copying and pasting the legislation, some alterations will be needed, but there already exists a solid template from which to work.

The current lack of oversight facilitates the conversion of stolen property into cash, hinders the retrieval of that property and leaves vulnerable communities at the mercy of the type of transaction against which this country has already legislated.

Stephen Fitzpatrick is a practising barrister based in the Four Courts who specialises in Civil and Commercial Litigation, including Personal Injury. He has a Degree in Politics and Economics and a long-standing interest in Public Affairs. He is not currently a member of any political party. 

Read: Cash for Gold shops should ask for proof of identity, says TD

Read: Shatter publishes probe into Cash for Gold shops

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Stephen Fitzpatrick
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