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

[fcloud-migration]

I think the rule goes out the window when it's a mechanical error, how ever, this is a tough call because the error is the grade. The grading companies guarantee the grade, and should make it right. It is unfortunate that the original submitter didn't send it right back to get it in the right holder, but that's life.

[jtryka]

Tomb, I disagree. I think the designation is a part of the grade that is often essential in determining value. If not, why are they valued higher? Why do they get more points in the registry? This is the same as RD, or DCAM, or the FB designation etc., they are an indication of strike which is essential to the grade of a coin. I firmly believe that they should be included in the grade, but the need for designations arose with the grade inflation that has occurred over the years. It used to be that you couldn't have a high grade coin without the full strike, but now you can. In a way, I almost look at it like an MS-65 equates to a true MS-63, while an MS-65FH is more like a true MS-65. The designations are a statement about the condition of the coin, even if it is a small aspect and as such should be part of the guarantee. Let's take a more common example that we all have seen at one time or another, a coin graded MS-62 that has a rub on the high points. Well to anyone, that is an AU coin that might have received the MS-62 grade due to eye appeal or a generous grader. Is that a mistake in the grade or a type on the holder?

[TomB]

The simple reason they are valued higher is because someone (a grading service) told collectors that they were worth more. It's a sad commentary to state that many people will pay more for the same coin simply because they are told it is worth more and will not use their own mind. The perfect example is with Roosevelt dimes. I know of quite a few pieces that are now worth much more than they were three months ago. Why is this? Well, the services added a designator. These coins are literally the same coin and are being reholdered at the same grade but now they have the designation and, as such, some collectors are willing to believe they are worth more. It is the perfect counterpoint to what you wrote.

 

They get more points in a Registry in order to drive submissions higher. It's marketing. This is why low priced coins receive very high points-per-cost values in the Registry while high priced coins receive low points-per-cost in the Registry when you look at the Complete Type Set. Marketing. If someone who might be enticed to build a type set sees that his/her MS68 clad Roosevelt dime is worth 10 points because it is an inexpensive coin then this person is less likely to start this set, however, if this person is mis-led with a value of 500 points for this common, inexpensive coin then they are more likely to start the set. Please note, this collector is not likely to finish the set, but, while they are buying they are viewed as an active consumer of product. Marketing.

 

Color designators are tricky as the coin can, all else being equal, turn in the holder while a FH or FB coin will not lose the FH or FB, all else being equal, in the holder. I view them (color designations) as a somewhat different animal because of this.

[DonHeath]

IMO the purchaser trusted the grading service as a neutral arbiter who is known to be professional and accountable. I believe the mechanical error is an issue between the submitter and the service. An innocent third-party has been damaged by both's actions. Without some reliance on the protection the certification affords, third-party grading has little value. The service should honor their commitment and make the purchaser whole.

 

I also believe the submitter is culpable, and should be held accountable by the service based on the information provided.

[Beijim]

Lacking a precise definition of mechanical error, I nonetheless construe that there are three ways in which such an error can occur:

 

• The grader/finalizer physically writes or types an incorrect letter or number, or accidentally makes a stray mark or keyboard entry that selects a particular designation; OR
  
• A person responsible for transcribing or otherwise reentering the data provided by the grader/finalizer commits a transcription error, compromising previously correct data; OR
  
• Another coin of the same type and grade but deserving the designation(s) appears on the same invoice as the subject coin, and the encapsulator accidentally crosses the labels.
  

These are mechanical errors, as they occur in the absence of intent. It's believable that they occur with nonzero probability (we all make mistakes).

 

I see no reason why such errors can't affect the coin's designation(s) just as easily as they might affect its grade, year, or mint mark. Therefore, I conclude that the grading company ("NGC" in Mark F.'s hypothetical) must stand behind designation errors to the same extent they stand behind any other labeling errors. If it's on the label, it's part of the trust relationship.

 

A simpler way of putting this is: What's on the label is paramount. How it got to be wrong is immaterial (ACG excepted ).

 

Beijim

 

[andy007]

Great posts here, this is why I read the boards. I agree with several of the points of view here. I can see this happening as both a mechanical error and a mistake on the part of the graders, although a knowledge of the inner workings of the methods of assigning a certain coin it's grade prior to the sealing stage, and exactly how a grade is printed or entered into their system would help. I think it could be a case of a mechanical error most likely, for whatever that is worth.

 

Regardless of which error it may be, it was on the part of a professional services' payment to get correct what they initially did not achieve. As has been pointed out, the grading standards by the third party graders does involve itself in market grading, or valuation and does guarantee it's opinion.

 

So, if it is called a mechanical error, which I assume it was??? I would still think it would be in the best interests of that third party grader, if reputable, to make good on the coin, and obtain as much information in tracing the coin's lineage, of course that is within what means they have for doing so.

[Beijim]

My prior screed notwithstanding, I agree completely with Don and andy007. Although I believe the grading service should stand behind what's on the label it encapsulated with the coin, I also believe the grading service should be ruthless in pursuing the submitter if it has reason to believe that the submitter knowingly accepted the mishap as an opportunity to defraud the ultimate buyer.

 

Beijim

 

[gmarguli]

A simpler way of putting this is: What's on the label is paramount. How it got to be wrong is immaterial (ACG excepted ).

 

Right.

 

What happened to the story line that the coin is slabbed and then a finalizer looks at it to make sure the grade is correct? Remember hearing this?

 

If it doesn't happen (which I STRONGLY suspect at one of the grading services) then you pay for your mistakes. If it does happen, then you should have caught it and you pay for your mistake.

 

If a business doesn't pay for its mistake, then the custome will have to pay and they will indirectly make the company pay.

[coinman1794]

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.

 

 

One thing I can say for certain about NGC (regardless of whatever grading service is really involved here) is that NGC stands behind the star designation. I have submitted 2 or 3 star coins to them through appearance review in the last few months that had ugly spots developing. They conserved them and sent them back to me no questions asked! So, NGC does stand behind designations.

 

I can't necessarily say the same for other services or the actual service involved in this hypothetical situation, if for no other reason than becuase I have never tested them.

[Wihlborg]

I also feel that designations are not technically part of a coins grade and Tomb’s example is exactly how I feel about designations, but I also feel that a grading company is responsible for anything printed on one of their labels, mechanical or otherwise. IMO most people buy certified coins with the assumption that since the coin has been evaluated by ‘experts’ and put in a holder, what is on the label is correct.

 

The timing of this thread is ironic as I just received a coin back from NGC today that had a similar problem. I bought a coin from the web site of one of the big dealers. It was listed as a ‘d’ mint coin, but when I received it I found that although the label did indeed list it as a ‘d’ it was actually an ‘s’ mint. Since I also needed the ‘s’ mint coin, I did not care, but I did want the label corrected so I contacted NGC and they had me send it in to be corrected for free.

 

Now let’s say that someone needed only the ‘d’ mint coin and a ‘d’ mint coin was more expensive than the ‘s’ mint coin. The buyer receives the coin and finds that the holder’s label is wrong. He just paid ‘d’ mint money for a ‘s’ mint coin. The dealer says all sales are final. Who is responsible? The dealer may or may not have known that the coin was labeled incorrectly, but ultimately the problem would never have happened if the grading company had done what they were paid to do correctly.

 

I am not knocking the grading companies, with the amount of coins passing through the doors a mistake like this is bound to happen once in a while. The real test is how they make good on their mistake.

 

John

 

 

[jtryka]

I also believe the grading service should be ruthless in pursuing the submitter if it has reason to believe that the submitter knowingly accepted the mishap as an opportunity to defraud the ultimate buyer.

 

This really bugs me that everyone is all lined up to bash the seller of the coin. It's like selling a car, and the parties hire an independent appraiser, and that appraiser screws up and misses something, thus creating a liability to the buyer of the lemon. Should the appraiser pursue the seller? Where is the fraud here? The seller submitted the coin, the company graded it. Unless it was David Hall giving the graders a wink and a nudge, nudge, poke, poke, to get an inflated grade, the seller has no responsibility. If you send a coin to be graded and it comes back a point or two higher than you thought, do you send it back since it must be a "mechanical error?" Of course not, because the service is the expert, that is why we pay them. I just got a Frankin back that NGC said was FBL, but I don't think it is, should I send it back? Should I sit in fear in the corner of my house worried that the professional grading gestapo will hunt me down should I ever decide to sell this questionably designated coin? This is idiocy.

 

Is there some Kool-aid spilling over here from the other side of the street? This thread is steadily degrading into "the seller (read dealer) is a rat and a horrible person that should be hunted down and forced to pay for the grading services error" and "despite what you may think, the services are never wrong in their grading, and this was clearly a typo on the holder, they are perfect and within their rights to weasel their way out of their own commitments however they see fit. And we as collector will bend over and enjoy every minute of it!"

[MarkFeld]

jtryka,

 

Supposedly, under the authorized/member dealer agreement, the owner of a mechanical error coin is supposed to return it to the grading company to be corrected/properly labeled.

 

I believe that a seller who has knowledge of the problem and continually attempts to pass on the obvious "mechanical error", deserves to be "bashed", and then some!

[TomB]

A little quick on the trigger this morning, jtryka?

[jtryka]

You're right, what was I thinking?

 

Dealers are all lying scumbags, and PCGS is awsome and great, and the giver of life to flowers and trees, whoops, I mean NGC is awesome and great, etc. etc.

 

So by your reckoning Markfeld, you and every other dealer should be lining up around the block by all grading service offices to return every overgraded coin you have ever owned to have that little "mechanical error" on the label corrected. And I guess I better send that Franklin back.

[MarkFeld]

Part lll :

 

The actual coin in this saga, is a 1945 Mercury dime graded MS65FB.

 

The bands are typical for the issue - in other words, about as flat as a pancake. The coin was submitted under an economy type tier and insured by the owner for approximately $100 (it might have been a lower amount - I can't remember for certain).

[coinman1794]

I know we are to assume that this is a mechanical error, but I wouldn't consider it a mechanical error, personally. Can you tell us who made that decision. In other words, did one of the parties involved make that claim, etc.

[MarkFeld]

coinman,

 

Thus far, the grading company is taking the position that it is a "mechanical error".

 

 

[Wihlborg]

I also would not consider this example a 'mechanical error'. The grading company can call it whatever they like, but as far as I am concerned they made the mistake so they are ultimately responsible.

 

John

 

[TomB]

The grading company in question should take the hit on this coin. This is consistent with what I have written all along here. I don't care if they call it a mechanical error, they are supposed to have a quality control inspector to catch these things. Pay out the money and then go after the consignor.

 

It's funny, my response to jtryka using Roosevelt dimes almost included the 1945 Merc in FB as an example. However, I wanted to keep that coin and the 1953-S Franklin in FBL as reserve coins should someone question the use of a new designation in my post.

 

So, who is the grading company?

[gmarguli]

Part lll : The actual coin in this saga, is a 1945 Mercury dime graded MS65FB.

 

The bands are typical for the issue - in other words, about as flat as a pancake. The coin was submitted under an economy type tier and insured by the owner for approximately $100 (it might have been a lower amount - I can't remember for certain).

 

 

Changing the series makes it a little different. FB is a MUCH easier designation to tell than FH. A FH is a much harder designation to understand. That might make me change my opinion. First we are talking about a designation that is iffy and I admitted I don't even fully understand what it takes to get the FH designation. Now we are talking about a coin that is usually fairly easy to tell if it is FB and you can show someone what they need to get that designation in a few seconds without much debate.

 

The insured value means nothing. I've insured coins for $1000 and had them come back with awful grades making them $50 coins. Clearly the grading service made a mechanical error and instead of MS65 the grade really should have been MS67. Damn mechanical errors.

 

I've also insured coins for $50 and had them turn out to be $3000 coins. Another mechanical error?

 

The coins above just graded differently than I expected. If the grade was wrong, am I to blame?

 

I say the grading service made the mistake, they should have to pay for their mistake. What happens if this coin was sold to a new collector? They stick it in their set not knowing the standard for this designation. They go to sell their new set and hear the bad news. Does the collector get burned because of the grading service error or does the grading service step-up and pay to make the collector whole again? If they don't, then they will lost credibility in the marketplace and very possibly in the courts. Losing a court case like this could DRAMATICALLY affect the company.

 

Bend over and pay the money.

[Tradedollarnut]

First, let me admit that this thread has gotten so convoluted with the changing examples that I'm not even sure whether it's a dime or a quarter!

 

But...... I would say it's an obvious mechanical error and the grading company is not liable. I would say that the seller committed fraud and should be criminally prosecuted. I would say that it's in the grading company's best interests to step up and mediate a solution among the submittor, seller and buyer - or, barring an agreed solution, to buy the coin back and charge the submittor for the difference.

 

Ultimately, the submittor has the responsibility to screen the coins received back from the services for obvious errors [ie: MS/PF, FB/NFB, etc]. This does not extend to grades, which are a matter of opinion, but to cases where an obvious mistake has been made.

[MarkFeld]

I hope to know more in a week or two. At the present time, I am waiting to find out if my credit card company will reverse the charge - I paid through Paypal, which in turn, billed my credit card.

 

Paypal would not willingly reverse their charge to my credit card, stating, basically, that as long as I received something - tough luck.

 

My credit card company is required to wait 30 days from the return of the item (date of receipt by the owner was April 28) before they will consider reversing the charge from Paypal.

 

Here's where it gets even messier - at their request, I sent the coin to the grading company, who in turn, removed the "FB" designation from the label. They then sent the coin to me and I returned it to the owner, who had consigned it to the Ebay seller.

 

Some time last year (when the owner had tried to sell it more than once through middlemen), he had been asked/told to send the coin back to the grading company to have the label corrected. He opted, instead, to go for the big bucks and sell the coin with the obviously-incorrect "FB" designation.

 

If the credit card company reverses the charge, there wont be a problem. If they refuse to do so, then I will have to go to battle with the grading company to try to get them to reimburse me for their error. Again, their initial stance has been that they are not responsible for "mechanical errors" and that this is obviously a case of a "mechanical error".

 

I hope it doesn't come to a confrontation, but I am prepared to fight, if need be. It doesn't seem right/fair to me, that I, as an innocent party, should be hurt financially, while the slime ball owner profits from the mistake of the grading company. Also, my chances, however slim they were, of being made whole by the owner, went out the window when the "FB" designation was removed from the label by the grading company. I have cooperated fully, from day one, but, at this point am out more than $5000.

 

By the way, I have been saying "I" rather than "Pinnacle", because I buy coins off of Ebay for Pinnacle and happened to charge the purchase on my credit card. Pinnacle will reimburse me, if need be, and then go to war with the grading company, if necessary .

 

Fun stuff, isn't it?

 

[keithdagen]

Mark,

 

Riddle me this: was the coin even close? And if so, how does the grading company handle it then. If the coin is 98% FB, and might or might not be a true FB, the submittor may get the coin back and think he's just lucky.

[MarkFeld]

Keith, the bands are so far removed from "FB" that is DEFINITELY a screw up.

 

And, it's not a "subjective" one, as in the case of a coin receiving a grade that some or many would disagree with. No one who knows squat, would even consider the possibility of assigning the "FB" designation. Those who are familiar with the typical 1945 Mercury dime, will know, sight-unseen what I'm talking about.

[truthteller]

Mark,

 

Why did you send the coin to the grading company for removal of FB? Frankly, the coin has now been 'altered' and the seller now has the right to refuse refund. IMO, the credit card company also has a right to refuse the refund since the item is not 'in original' condition. I have known secondhand stories where a coin dealer 'bought' a coin from another, sent it in for 'regrading', coin comes back lower grade or 'different', then coin dealer wants to return the coin. Would that be fair?

 

TRUTH

[IrishMike]

None of this would have happened if the grading company had not made an error. In this day and age when thousands of coins are sold online they should not be let off the hook. In fact one grading company has a sister company that sells coins online. Therefore I don't understand the criticism leveled at the buyer i.e. you because you purchased it more or less sight unseen. I don't see why the grading company would want to take on the negative criticism that will fall on their name if they don't buy the coin back.

[MarkFeld]

Truth, I sent it in at the request of the grading company. That is part of the reason I feel they will need to make good if I can't get a refund through my credit card company.

 

I agree with you that the credit card company has the right to refuse a refund. Remember, it is further complicated by the fact that the original Paypal payment was made to the Ebay seller (now deceased) who had the coin on consignment from the owner/sleazeball.

 

This story is unbelievable, but true!

[truthteller]

Mark,

 

Does the estate of the deceased have the money? Or did the original submitter get paid? This is getting very ugly. Is the best recourse to make a claim on the estate of the ebay seller? Will you be alive long enough to see an end to this story?

 

TRUTH

[jtryka]

Ultimately, the submittor has the responsibility to screen the coins received back from the services for obvious errors [ie: MS/PF, FB/NFB, etc]. This does not extend to grades, which are a matter of opinion, but to cases where an obvious mistake has been made.

 

I could be mistaken, but aren't most if not all designations also a matter of opinion? Isn't NGC's standard for FBL and FS tighter than PCGS? Is one wrong? or are they just differences of opinion?

 

I would say that the seller committed fraud and should be criminally prosecuted. I would say that it's in the grading company's best interests to step up and mediate a solution among the submittor, seller and buyer - or, barring an agreed solution, to buy the coin back and charge the submittor for the difference.

 

Again, let's all crucify the seller. Yes, maybe the seller is scamming, he/she may be a lying scumbag, but to pin it all on the seller and let the service off scott free is assinine. But if you want to pursue this strategy of sticking to all the sellers of coins, how about this, now every time a coin is downgraded or loses a designation, the Service refunds the difference in value to the owner and comes after you, the original submitter for the difference. How does that sound? Do we as collectors/dealers/investors really feel comfortable with taking full financial responsibilities for the actions of the professional grading companies? Because that is the road you are headed down.

 

[Tradedollarnut]

A normal 1945 looks like a rail road car rolled over the band area. There is absolutely no matter of opinion as to whether that is or is not full bands. That's an obvious mechanical error and obligation for correction falls upon the submittor by the terms of the submission agreement. If you don't like the terms of the agreement, then don't submit, but if you do submit, you agree to the terms. Therefore, the submittor is at fault. He should have returned the coin to have the designation removed. Also, the seller is at fault. An obvious error on the slab was sold for full value with intent to deceive. Fraudulent behavior, pure and simple.

 

Some may have it out for dealers, some may have it out for grading companies, but look at this the way a judge would look at it: where is the intent to harm? The grading company made a clear error - no intent to harm. The submittor received back an obvious error and chose not to have it corrected in violation of the submission agreement - clear intent to harm. The seller sold the coin knowing full well it was worth nowhere near the asking value - clear intent to harm. When it's all evaluated, the fault is very clear and thus the remedy is also very clear.