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Topic: Should TPG's share some or all liability to notes that they grade  (Read 9035 times)
friedsquid
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I'm not sure if this has been discussed previously, but due to the recent issues that came up on the forum I wonder if anyone feels that a Third Party Grader should share some, or all of the responsibility of a note that they grade. Many people rely on a TPG to determine the condition of their notes (and not that I agree this should be done) but the fact remains that a TPG charges one to grade a note using their supposedly expertise in the field, yet I doubt they have any liability beyond perhaps of re-grading the note, or refunding the cost of grading at best. Should these TPGs not be required to have some type of liability insurance that makes them accountable for what they claim?
I also find that in the case that just occurred, for whatever reason PMG did not know or catch the issue and this note amazingly became better with age (and a little cleaning) leaving an unsuspected buyer with a bitter taste in their mouth once the history of the note is discovered.
I know there will always be cases that are not as public as this and notes change hands privately and things go unnoticed, but I think this is the exact thing that would discourage a collector from continuing in the hobby if they got burnt this badly. I would like to thank Brent for posting the original pics and all I can say is that the more information we have available to us the better off we are...I know many collectors have gotten burnt at some time, some losses small and some quite large, but it hurts no matter how much it is...

In addition I would like to add that MMARS mentioned that he had photos (before and after) of many notes that had issues with them and I am hoping that eventually these and any other photos found by members can be posted and kept track of for both old and new members to look at to better inform us ...A place where one could go and get a better understanding of the history of certain notes in question...
« Last Edit: February 18, 2016, 11:48:00 am by friedsquid »



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mmars
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« Reply #1 on: February 19, 2016, 01:07:11 am »

I also find that in the case that just occurred, for whatever reason PMG did not know or catch the issue and this note amazingly became better with age (and a little cleaning) leaving an unsuspected buyer with a bitter taste in their mouth once the history of the note is discovered.

Actually, PMG got the assessment of "previously mounted" correct whether or not they saw the note's before picture with the stain.  The stain is consistent with mounting.  The removal of the stain got rid of the discolouration but likely left behind evidence of the former mounting.  How the note was treated would likely be guess work.

Collectors react with solicitude at the mention of cleaning notes.  However, a very experienced dealer told me years ago that the MAJORITY of old notes in the collector market have been altered in some way.  That includes not only washing/cleaning/pressing, but also rubbing out pencil marks, repairing tears, and trimming.  I think his estimate was 80% or 90%.  Certainly, with the 1935 series, I can believe that.  Every 1935 series note is worth a strong premium over face value, so even the low grade $1 notes get their share of enhancements.  The point I'm trying to make here is that most people in the hobby are oblivious to this fact, or they are pretending to be oblivious.  If grading companies rejected notes that appeared enhanced, they would be rejecting more than half of all notes they receive, and that's not a good way to do business.  It stultifies me to learn how many people, even with decades of experience, profess to not be able to recognize alterations to notes.  I think most of you are pretending to be ignorant and have at least some ability to tell when there is something "fishy" about a note in hand.  Maybe you can't fully comprehend why a note comes across as fishy, but certainly most of you would be able to tell the difference between an original note and an enhanced note in a side-by-side comparison with a high success rate.

Grading companies grade notes that are presented to them, meaning they grade the note based on what they see, not what they know.  It's not their business to investigate the provenance of every note like it's a genealogical research project or an episode of CSI.  That's a wise approach to grading because, technically, a note never really stops circulating after it is released to the public.  The first half of a note's life is spent being redeemed for face value, and its condition declines with time.  Then, if it does not get destroyed, the note stops being redeemed for face value and enters the collector's realm where it gets exchanged for above its face value, and that's when its condition magically starts improving with time.  Many will argue that notes can't "improve" with time, and that's partially correct.  Enhancements to notes to make them seem better are rarely perfect, but it is our inability to recognize evidence of these enhancements that make it seem like notes improve with time.  So if a note that grades VF is washed and lightly pressed to make it appear AU, and you cannot tell that the note is washed and pressed, it's an AU note to you. Even if you correctly discern that the note is altered, it is next to impossible to know what the original grade was prior to being altered.  Grading companies are no more psychic than the rest of us; they can't tell what the note's grade was 6 months ago.  All they can do is grade what is in front of them, assessing grade then and there.  They are not responsible to anyone for what the note looked like in the past.  How can they be?  They are not responsible for what happens to notes before or after slabbing.  All they can really do is recognize when some notes exhibit definitive signs of originality and give those notes a special designation (like "EPQ" or "original").  Notes that lack distinct signs of originality may or may not be original, but even in cases where tampering is obvious, there is no way to know the extent of the tampering.

It is not the responsibility of grading companies to police the numismatic marketplace, to do research on note rarity and publish this research, or to educate collectors on how to protect themselves.  Suggesting that they should be responsible for any of these things is implicitly assuming that grading companies are WAY more important than they really are.

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Seth
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« Reply #2 on: February 20, 2016, 12:30:25 am »

TPGs are like bond rating agencies. They are paid to give their opinion on an item's quality. Their opinion is nothing more than that—an opinion. It's not a guarantee. If an AAA-rated bond turns out to be bad, the agency that rated it AAA has no liability. Liability is all on the holder. Same with TPG.

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friedsquid
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« Reply #3 on: February 20, 2016, 09:48:29 am »

TPGs are like bond rating agencies. They are paid to give their opinion on an item's quality. Their opinion is nothing more than that—an opinion. It's not a guarantee. If an AAA-rated bond turns out to be bad, the agency that rated it AAA has no liability. Liability is all on the holder. Same with TPG.

I fully understand what you are saying, but funny how deceiving their name even is
PMG   "PAPER MONEY GUARANTY" :-D



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eyevet
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« Reply #4 on: March 03, 2016, 04:37:26 pm »

Guaranty and guarantee have different meanings.  Guaranty is a matter of trust while guarantee is a matter of money.

Guaranty

1.General: Written undertaking that something is of a specified benefit, content, or quality, or that it will provide satisfaction or will perform a duty or obligation in a specified manner.

2.Legal: Three-party contingent liability agreement under which a third-party (the guarantor) agrees to be directly or collaterally responsible for the obligation (contract fulfillment, loan) of a first-party (the principal) to a second-party (bank, client) in case the first-party defaults or fails to fulfill its part of a deal.

example: The guaranty on the contract ensured all parties would be made whole and happy by the end of the project.

Guarantee

example:  The company was so sure that their new product would be a hit that they offered a money back guarantee for customers that weren't satisfied and want a refund.


 

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