PSA Card Guarantee

[benjulmag]

As has been noted in the thread about Blowout's latest revelation, what Blowout has brought to light represents only the tip of the iceberg in regard to the number of altered slabbed cards in the marketplace. My personal opinion is that it is the rule, not the exception, that vintage high-grade cards that have significant market value and which do not have documented provenance to a period when there was no economic incentive to alter, are altered.

This got me to thinking about the recourse defrauded collectors would have against PSA, and I looked up the latest version of the PSA Guarantee. One provision in particular stood out, which I don't recall having previously seen.

In each case of a Guarantee claim, there is a per-card cap of $250,000 and a lifetime cap of $500,000 per person (together, the “Maximum Amount”). PSA will not pay Guarantee claims in excess of the Maximum Amount.


As I read this, PSA in one fell swoop is trying to wipe out probably the great majority of its contingent liabilities, which, if successful, would probably save it from economic collapse should someday all these alterations come to light and PSA is bombarded with Guarantee claims it cannot afford to pay. There are many cards in the six-figure range. And there have to be a significant number of collectors whose card holdings are tied up in cards that are the prime alteration suspects where a $500K lifetime cap would not come close to making these collectors whole.

In past discussions about the PSA Guarantee I and others made the point of saying someday it could pose an existential threat to the company. Based upon this latest version, and assuming it is enforceable against collectors whose claims under the Guarantee involve cards acquired before this provision was added, PSA quietly in a brilliant legal move might have prevented doomsday from ever occurring.

[Smarti5051]

Well, not sure the wording of this guarantee was well thought out by the legal department. I suppose it successfully limits liability of a few crazy alteration claims: ie a 52 Mantle PSA 10 that is determined to be altered. But, I have to think less than .001% of all cards that would be subject to the guarantee would end up above the $250K per card cap.

The total cap of $500K "per person" could limit some liability. But, if you are at your cap and you paid $50K for an altered card which, if known, would reduce the value to $1K, wouldn't that card still have a value of close to $50K to any person that is not at their $500K PSA guarantee limit? Nothing in the language quoted would preclude a person from knowingly selling or assigning a card covered by the guarantee to another person who could, in turn, submit a guarantee claim to PSA.

[Peter_Spaeth]

It's meaningless in my opinion because THEY control the determination of whether the card sent back to them is altered or not. As we saw in the case of AJ's obviously altered Leaf Jackie where they stood behind the grade. They don't need fine print to cap their liability, just their own bad faith.

I do agree with Corey that the cards that have been specifically outed are the small tip of a big iceberg.

[benjulmag]

Originally Posted by Peter_Spaeth

It's meaningless in my opinion because THEY control the determination of whether the card sent back to them is altered or not. As we saw in the case of AJ's obviously altered Leaf Jackie where they stood behind the grade. They don't need fine print to cap their liability, just their own bad faith.

I do agree with Corey that the cards that have been specifically outed are the small tip of a big iceberg.

I agree that THEY control whether a card is altered. But assuming an obligation of good faith is required of them when making this determination and given that in many instances I believe it can be conclusively shown the card has been altered, I don't think this is a meaningless provision.

Granted as a practical matter no one is going to bring an action unless the claim is astronomical enough to justify the legal expense, but I can foresee where someday somebody might have the economic incentive, and in such an instance this provision could be helpful to PSA. The fact they added it suggests to me that they know the reviews they give cards submitted under the Guarantee are done in bad faith.

[Peter_Spaeth]

Originally Posted by benjulmag

I agree that THEY control whether a card is altered. But assuming an obligation of good faith is required of them when making this determination and given that in many instances I believe it can be conclusively shown the card has been altered, I don't think this is a meaningless provision.

Granted as a practical matter no one is going to bring an action unless the claim is astronomical enough to justify the legal expense, but I can foresee where someday somebody might have the economic incentive, and in such an instance this provision could be helpful to PSA. The fact they added it suggests to me that they know the reviews they give cards submitted under the Guarantee are done in bad faith.

It would be very hard to prove assuming it ever got that far. PSA puts on Reza, the person with the most experience grading cards in the world probably, who testifies it looks good to him and that's why he recommended not buying it back. The collector puts on someone else who can't examine the card outside the slab. I mean if the card was an inch short sure, but most altered cards aren't THAT obvious.

[benjulmag]

I think between what could be forensically proven, coupled with the egregious nature of some of the alterations, their so-called expert, regardless how experienced, would be shown to be either a liar or an idiot. Whatever the case, if I was a guy who stood to lose the value of most of his collection and the loss was at the level that warranted a lawsuit, I would file it.