The responsibility of a grading service in the event of a "mechanical error"?

[MarkFeld]

Part l :

 

Hypothetically speaking, let's say that NGC makes a mechanical error and labels an obviously non-FH Standing Liberty Quarter as "FH".

 

For purposes of this discussion, I'll chose a 1929-D, which shows a CCDN bid of $550 without "FH" and $6040 with "FH".

 

You buy the coin off of Ebay for $5500, from a seller with hundreds of positive comments (and no negative ones) in his feedback. An image was included in the Ebay listing but it was not clear enough to reveal the "mechanical error".

 

You pay for the coin and when you receive it, you are horrified to see this "no brainer" non-FH example - no one who knows anything about the series, would or could honestly claim it was anything other than a "mechanical error'.

 

The seller wont take the coin back.

 

Should NGC have any responsibility in the matter?

 

If so, what?

 

Does it matter if the seller was an authorized NGC dealer?

 

Does it matter if the seller had the coin on consignment from an authorized NGC dealer?

 

Waht should you do with the coin?

[KIEFERSCOINS]

I had one on a small scale: 1948-D Jefferson nickle in PCGS MS-66. I sold it as a 48-D and when the buyer looked at the coin, he saw it was a plain 48. PCGS made a mistake. I never noticed it and offered to pay a refund for the slab. He declined and kept the coin.

 

If the seller wouldn't take the coin back, I think any of the services should step in and stand up for their product, even if they loose several thousand dollars.

 

Cameron Kiefer

[truthteller]

Did the seller offer a return policy? In my opinion, a designation, such as FH, is part of the grade, such as MS63FH or MS63FBL. If NGC makes an overgrade, then that's part of dealing or buying slabs as opposed to raw coins. Now if NGC mislabeled the date or the mintmark, that is another story and you definitely can ask NGC for reattribution. But since a mislabeled date or mintmark is mechanical, I think it voids the NGC guarantee.

 

TRUTH

[braddick]

I believe TRUTH is right, or, at minimum, should be right- but I think when the dust settles and this collector is unable to find resolution via his Seller, NGC needs to step up and take responsibility. It isn't fair, but it is good business.

Had it not been for NGC's neglect (and, admittingly, that is what it is as a Finalizer is to catch these mistakes before they leave in-house) this transaction debacle would not have taken place.

[keithdagen]

Heritage recently had a 1917 T1 SLQ in 65FH at auction. The owner had bought it, then consigned it. It made it to online bidding before someone pointed out that there was a little "S" near the left of the base. Lot got pulled, but someone could have made out like a bandit there.

[MarkFeld]

Part ll :

 

The Ebay seller probably would have allowed a return. BUT, he died after the Ebay transaction took place. The coin was shipped to the winning bidder by the guy who, it turns out, had consigned it to the Ebay seller.

 

It is a virtual certainty that the consignor, an NGC authorized dealer, knew it was a mechanical error. He had originally submitted it for grading, with an insurance value and designation, as if it were a non-FH example and, on more than one occasion, had tried to sell it through middlmen, only to have it returned.

 

Remember, this is a hypothetical situation, for now, at least. The coin and grading company have been changed, in order to protect the innocent (or guilty).

 

 

[CameoCC]

I would ask the ebay buyer what would the fair thing to do and most likely do it. I would then work with the grading service to correct the problem.

 

Todd

[coinman1794]

 

Should NGC have any responsibility in the matter?

 

If so, what?

 

Waht should you do with the coin?

 

 

I know for a fact that if this happened, NGC would correct the problem and either buy the coin back, or pay the difference in value between the FH and the non-FH. You just send it in through appearance review. NGC has been very good about sticking behind their guarantee, and, this situation, although a mechanical error, certainly falls under the guarantee. After all, the Fh designation is a part of the grading process,it's not like missing a mintmark. It is something that is interpreted, along with the grade. And the services have a responsibility to type the label correctly, and they can't tell someone who just bought the coin that they won't stand behind the grade ! The label says what it says, and once the coin changes hands, the new owner is relying in NGC for protection against incorrectly graded items.

[TomB]

Hmmmmm.....Is this truly based on reality? If so, and if both of your posts are equally true, this is how I believe it should be handled-

 

NGC should pay the injured party (new coin owner) what they paid for the coin as it is unrealistic to think that someone can see the FH designation clearly in an image on the net. They then should aggressively persue the consigner of the coin with all the information and evidence that they have on the coin and the consigner's history with it. I would think that they might be able to go to small claims court on such an issue, or, if there are stipulations in the agreement for arbitration between the consigner (an NGC authorized dealer) and NGC that arbitration would be the way to go. No matter what the outcome, NGC is better off losing the several thousand dollars on the coin and keeping their image intact.

[gmarguli]

This is NOT a mechanical error. A mechanical error is labeling a coin as proof when it is an obvious MS coin or listing a coin as a 1951 BTW 50¢ when it is a 1951 GWC 50¢. Those are mechanical errors.

 

This is a grade error. This is what the grading companies stand behind. I frequently cannot tell a FH from a non-FH SLQ. Very honestly, I have seen so many examples listed as FH that were flat and flat ones that were listed at FH that I gave up trying to figure it out. It's a tiny detail that I don't really care about.

 

The seller has no obligation to take the coin back. It might be a good business decision to take it back, but he has no obligation to do so. It is meaningless where the seller got the coin from.

 

The buyer needs to send the coin to NGC to be examined for possible downgrade and they will pay the difference if they agree.

[truthteller]

Mark,

 

'The coin and the grading service has been changed to protect the innocent'.

 

 

I think this makes a world of difference. NGC would probably compensate you for the error since they are a reputable grading service. PCGS probably would not compensate you or give you the runaround until your dead. ACG would swipe your coin, crack it out, and give you back the coin minus the holder. All other services are dubious at best for any compensation.

 

TRUTH

[keithdagen]

Mark,

 

'The coin and the grading service has been changed to protect the innocent'.

 

 

I think this makes a world of difference. NGC would probably compensate you for the error since they are a reputable grading service. PCGS probably would not compensate you or give you the runaround until your dead. ACG would swipe your coin, crack it out, and give you back the coin minus the holder. All other services are dubious at best for any compensation.

 

TRUTH

 

[ursabear-migration]

I think the seller should (if possible) shoulder the responsibility, then the seller should go to NGC for reparations.

 

If the seller is not in the loop (part II), the buyer should have it reviewed by NGC and request reparations directly.

 

In any case, I don't think it is the end-buyer's responsibility to absorb the error, whether or not the error is intentional.

[MarkFeld]

For purposes of this discussion, please take it as a given that a "mechanical error" is involved.

 

At a later date, I will reveal the actual/precise details regarding the specific coin, etc, so that the hypothetical is, instead, reality.

[mark]

Mark:

 

How do you define "mechanical error"? I think the "FH" is part of the grade. And, I thought that over-grades aren't generally considered a mechanical error. (So, for instance, isn't a collector is paid compensation for a coin graded MS66 that upon resubmission for a review winds up grading MS64? And neither PCGS nor NGC try to wiggle out of paying compnesation by asserting that the original grade was a mechanical error?)

 

Given my view that the FH is part of the grade, I am at a loss to see how or why you say it's a mechanical error. Can you possibly explain why you say the FH is a mechanical error? Please? Or is the FH a stalking horse for something truly a mechanical error, eg, labeling a 1916-P Mercury as 1916-D?

 

Mark (MarkNotFeld)

[Elcontador]

In a related matter, a year or two ago, I remember a long thread about this very issue pertaining to a specific SLQ which was being auctioned by one of the larger auction houses. The coin clearly had a flat / dished head. Like in this example, the price between FH & non was significant.

 

To this day, I don't know how / if the matter was resolved & would like to find out what happened.

[MarkFeld]

Mark (not Mark Feld),

 

While I cannot reveal the particulars yet, let's just say the head is so flat that no honest and professional grader would even consider designating the coin as FH. And, because of that, NGC says that it was a mechanical error, just as if the date or mint mark were incorrect.

 

[gmarguli]

While I cannot reveal the particulars yet, let's just say the head is so flat that no honest and professional grader would even consider designating the coin as FH. And, because of that, NGC says that it was a mechanical error, just as if the date or mint mark were incorrect.

 

I've seen FLAT heads in several reputable slabs with the FH designation.

 

If NGC is trying to get out of paying for their mistake, then that is sad and will likely cost them FAR MORE in reputation that to cut a check.

 

Many coin buyers buy coins based on what the grading services say. If the coin is an MS64FH, then that is what the coin is. God has spoken. No one can say differently.

 

NGC should pay. A mint mark/date/denomination/type screw-up is one thing - an honest mechanical error. A blown designations another. Pay up!

 

[MarkFeld]

Please do not get upset with NGC or anyone else at this point - I have already mentioned that "Remember, this is a hypothetical situation, for now, at least. The coin and grading company have been changed, in order to protect the innocent (or guilty)."

 

 

 

[jtryka]

let's just say the head is so flat that no honest and professional grader would even consider designating the coin as FH. And, because of that, NGC says that it was a mechanical error, just as if the date or mint mark were incorrect.

 

This is just bogus in my opinion, and would open up a slippery slope rendering the company's grading guarantee virtually worthless. I could see it for a VG 1914-D lincoln mislabeled MS-64RD, but with a designation like this, it's really too close to cheese out on the guarantee. What's next, that MS-67 Saint is really just an MS-65? It would be obvious to any serious collector, so it must be a mechanical error? If that happened, the whole market for high grade condition rarities would collapse tomorrow. Why pay thousands for an MS-69 state quarter when it could be just an MS-67 and worth $10? All the companies make mistakes, and some are more costly than others. Labeling a coin with the wrong date or mintmark is less costly since it's easy to see the error. Errors in grades are more costly, either in terms of honoring the guarantee, or the hit your reputation takes if you try to weasel your way out of it.

[TomB]

I realize I have responded to this already, however, I would like to write that I cannot accept that a strike qualifier is part of the grade. It is a designation, in my opinion, that is seperate from the actual numerical grade. In that way, I can easily accept it as a mechanical error and not a mis-graded coin.

[MarkFeld]

Tom, I am in agreement with you. But, once/if it is established that there is a "mechanical error", then what, under these circumstances?

[gmarguli]

Please do not get upset with NGC or anyone else at this point - I have already mentioned that "Remember, this is a hypothetical situation, for now, at least. The coin and grading company have been changed, in order to protect the innocent (or guilty)."

 

Too late. I've already registered the web site NGCsucks.c[/i]om and I am busy working on it. No, I'm not upset with NGC or the actual grading company this happen with or anyone involved in this (possibly hypothetical) situation. At least not right now.

 

If it is a real situation then the grading company, whichever one it is, should pay up. It's not a big deal now. It will be a big deal if the owner of this coin doesn't get full compensation.

 

My feelings won't change no matter what company did this - provided it is an actual situation. I would be equally upset at either company for doing this. It shows a lack of customer and product commitment.

[truthteller]

Tom,

 

I respectfully disagree. In my opinion, a FH or FB or FBL is inherently part of the grade. Before the designations, when raw coins traded, a FH gem BU quarter would be part of the criteria for getting the Gem Category. Unlike today, 20 years ago, full bands strike on a merc dime was a must to get gem or superb grading. Now fastforward today, the designations merely add to the grade status and make the coin more desireable from a strike characteristic point. The grading services now break into parts, strike, luster and marks criteria in order to achieve a certain graded coin whereby luster and marks make up part of the grade criteria and designation of FB or FH add to the strike criteria. So both are now inclusive in the resulting grade MS65FH. If you take away FH, you are literally taking the strike portion of the grade formula out of the picture. So it cannot be merely a mechanical error.

 

TRUTH

[gmarguli]

I realize I have responded to this already, however, I would like to write that I cannot accept that a strike qualifier is part of the grade. It is a designation, in my opinion, that is seperate from the actual numerical grade. In that way, I can easily accept it as a mechanical error and not a mis-graded coin.

 

 

What about a coin that is borderline cameo and is in a cameo slab. Upon regrade it doesn't get the designation. The grading service shouldn't have to pay up?

 

What about the RD designation on copper? The coin is BN, but it isn't part of the grade so they should have to pay?

 

The * designation?

 

I feel that if a grading company is going to put this designation on the insert, then it is part of the grade.

 

Pay up for botched designations.

 

I would be extremely upset if I sent in a coin for regrade and the designation changed and I was told "Sorry, but that's a mechanical error and we don't pay for those." I'd probably never do business with that service again and if it were a big dollar amount, they'd be hearing from my lawyers.

 

 

[TomB]

I'll answer anything relating to my opinions on this from Greg and Truth, however, I can't see both posts at one time as I type my reply. Therefore, since I hit the reply button from Greg's post, I will write about what Greg wrote.

 

Let me say that Mark has pounded us with the concept that this coin had no legitimate reason to have anyone call it a FH coin. So, I am going on the basis that there is essentially no head at all on the coin including a lack of leaves, hairline, earhole and, more or less, cranium. In this case the coin in question is not a borderline coin. Had this issue dealt with a coin that might be a borderline coin then my response might have been different.

 

I don't agree with the idea that if a designation goes on a slab then it is part of the grade, after all, I don't think the ANA has a * grade category for coins. The * designation stands for eye appeal, not PQ for the grade or just missing the next grade. I think we both agree with that statement.

 

The rest of your post does not apply to me since I had already written, in my first post, that the company in question should pay up to the injured party and then aggressively, including legal action, go after the consignor.

[TomB]

Hey Truth, I know we don't disagree much with respect to coins, and that's a good thing for me because it means that I haven't strayed too much from the course. But, you know, people can have well-thought out ideas that are not in agreement and it doesn't mean either are wrong.

 

The way I see it is that FB, FBL, FH, ad nauseum are designations that apply to roughly 1-2% of a coin's surface. They are, at times, closely linked to how well the coin is struck on a global basis. However, this is not always the case and should not be extrapolated to be the case all the time. I understand what you are saying about the "time before the slabs" but, you know, things change. Included in this is the grading criteria for the ANA. To be honest, I don't know that the grading criteria for the ANA has changed much over this period, but I also don't think that the ANA ever required miniscule areas of the coin to be struck up in order for a coin to receive the gem status. I could be wrong.

 

If you take a wonderful SLQ with a just made it full head and no shield rivets and have this coin grade MS65FH and then find its twin, so to speak, that just misses the full head status but is equivalent in other areas (and maybe even has a better shield) then what will this coin grade? Likely your answer will be MS65. So, the coins have the same grade but differ in designation and the non-FH coin may actually have just as good a strike but the 1% of the coin that comes into play is only 90% as struck up as the FH coin.

 

To me the designations are just that, a designation to justify a higher selling price. Similar to the *, FB, FBL and others. The grade is the surface and patina preservation since the coin left the Mint while the designation is minutia that many could do without.

[truthteller]

Tom,

 

So when are you going to offer me that PanPac, eh?

 

TRUTH

[TomB]

 

 

 

 

Ummmmm.....no time soon?

 

But, thanks for asking!

[truthteller]

 

 

 

 

TRUTH