Buying Your Customer’s Jewelry: Profit Center or Added Risk?

Given the market realities today, customers are increasingly asking jewelers to buy their jewelry. Consumers are looking to use their unwanted pieces to acquire some ready cash or put it toward the purchase of new jewelry. What should a jeweler consider in this area to avoid liability and risk?

First, a jeweler should be aware that if purchases from the public and subsequent sale of precious metal, stones, or jewels in any one year exceed $50,000 in the aggregate, they will have to institute an anti-money-laundering program pursuant to the USA Patriot Act. (Visit the Jewelers Vigilance Committee Web site at www.jvclegal.org for more information.)

Next, there are usually state or local laws targeting the sale of stolen property that often require jewelers to acquire identification from the person offering the jewelry for sale and further require the jeweler to keep a log with a detailed description of the item purchased. Check with your local consumer protection agency or state attorney general.

Consumer expectations are frequently outlandish when it comes to the value of the jewelry they’re offering for sale. Often they come in armed with the current price for an ounce of pure gold and expect that you will base your offer on that value. Be sure to explain that the gold in the item offered for sale is not pure and that the labor that went into the manufacture of the item will not be a part of your purchase price. Instead, you will probably pay only the value of the precious metal contained in the item. If you address these often unwarranted expectations, customers will believe the transactions were safe and fair.

If you intend to resell the item as jewelry, be aware that retailers are often required to have a special license for this activity, usually called a “secondhand dealers” license. Again, check with your local government agency.

If you intend to sell the gold or other precious metal to a refiner, make sure the refiner is reputable and has an anti-money-laundering program in place, which is required by law. If a company does not, take that as a warning about its legitimacy.

Avoiding risks and pitfalls is usually easy. It just takes some thought, as well as knowledge of the requirements associated with this activity. For additional information about legal compliance in this area or others, join JVC. Visit www.jvclegal.org for membership information.