[Federal Register Volume 60, Number 107 (Monday, June 5, 1995)]
[Notices]
[Pages 29625-29627]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-13660]



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FEDERAL TRADE COMMISSION
[File No. 932 3040]


TRIAAC Enterprises, Inc.; Proposed Consent Agreement With 
Analysis To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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SUMMARY: In settlement of alleged violations of federal law prohibiting 
unfair acts and practices and unfair methods of competition, this 
consent agreement, accepted subject to final Commission approval, would 
require, among other things, a video dating service franchise to 
properly and accurately disclose the annual percentage rate (APR) and 
other credit terms of financed memberships, as required by the federal 
Truth in Lending Act, and would require the franchise to make refunds 
to consumers who were misled by the undisclosed finance charges and 
APRs.

DATES: Comments must be received on or before August 4, 1995.

ADDRESSES: Comments should be directed to: FTC/Office of the Secretary, 
Room 159, 6th St. and Pa. Ave., NW., Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT:
Stephen Cohen, FTC/S-4429, Washington, DC 20580. (202) 326-3222.

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Sec. 2.34 of the 
Commission's Rules of Practice (16 CFR 2.34), notice is hereby given 
that the following consent agreement containing a consent order to 
cease and desist, having been filed with and accepted, subject to final 
approval, by the Commission, has been placed on the public record for a 
period of sixty (60) days. Public comment is invited. Such comments or 
views will be considered by the Commission and will be available for 
inspection and copying at its principal office in accordance with 
section 4.9(b)(6)(ii) of the Commission's Rules of Practice (16 CFR 
4.9(b)(6)(ii)).
Agreement Containing Consent Order To Cease and Desist

    In the matter of TRIAAC Enterprises, Inc., a corporation; File 
No. 032 3040.

    The Federal Trade Commission having initiated an investigation of 
certain acts and practices of TRIAAC Enterprises, Inc., a corporation, 
(hereinafter sometimes referred to as proposed respondent) and it now 
appearing that proposed respondent is willing to enter into an 
agreement containing an order to cease and desist from the use of the 
acts and practices being investigated.
    It is Hereby Agreed by and between proposed respondent and counsel 
for the Federal Trade Commission that:
    1. TRIAAC Enterprises, Inc., doing business as Great Expectations 
of Sacramento (``GE Sacramento''), is a corporation organized, 
existing, and doing business under and by virtue of the laws of the 
state of California with its office and principal place of business 
located at 2277 Fair Oaks Blvd., Suite 195, Sacramento, CA 95825.
    2. Proposed respondent admits all the jurisdictional facts set 
forth in the draft of complaint.
    3. Proposed respondent waives:
    (a) Any further procedural steps;
    (b) The requirement that the Commission's decision contain a 
statement of findings of fact and conclusions of law; and
    (c) Any right to seek judicial review or otherwise to challenge or 
contest the validity of the order entered pursuant to this agreement.
    4. This agreement shall not become a part of the public record of 
the proceeding unless and until it is accepted by the Commission. If 
this agreement is accepted by the Commission, it, together with the 
draft of complaint contemplated thereby, will be placed on the public 
record for a period of sixty (60) days and information in respect 
thereto publicly released. The Commission thereafter may either 
withdraw its acceptance of this agreement and so notify proposed 
respondent, in which event it will take such action as it may consider 
appropriate, or issue and serve its complaint (in such form as the 
circumstances may require) and decision, in disposition of the 
proceeding.
    5. This agreement is for settlement purposes only and does not 
constitute an admission by proposed respondent that the law has been 
violated as alleged in the draft of complaint, or that the facts 
alleged in the draft complaint, other than the jurisdictional facts, 
are true.
    6. This agreement contemplates that, if it is accepted by the 
Commission, and if such acceptance is not subsequently withdrawn by the 
Commission pursuant to the provisions of Sec. 2.34 of the Commission's 
Rules, the Commission may, without further notice to proposed 
respondent, (1) issue its complaint corresponding in form and substance 
with the draft of complaint and its decision containing the following 
order to cease and desist in disposition of the proceeding, and (2) 
make information public in respect thereto. When so entered, the order 
to cease and desist shall have the same force and effect and may be 
altered, modified, or set aside in the same manner and within the same 
time provided by statute for other orders. The order shall become final 
upon service. Delivery by the U.S. Postal Service of the complaint and 
decision containing the agreed-to-order to proposed respondent's 
address as stated in this agreement shall constitute service. Proposed 
respondent waives any right it may have to any other manner of service. 
The complaint may [[Page 29626]] be used in construing the terms of the 
order, and no agreement, understanding, representation, or 
interpretation not contained in the order or the agreement may be used 
to vary or contradict the terms of the order.
    7. Proposed respondent has read the proposed complaint and order 
contemplated hereby. It understands that once the order has been 
issued, it will be required to file one or more compliance reports 
showing that it has fully complied with the order. Proposed respondent 
further understands that it may be liable for civil penalties in the 
amount provided by law for each violation of the order after it becomes 
final.

Order

I

    It is ordered that:
    A. Respondent GE Sacramento, its successors and assigns, and its 
officers, agents, representatives, and employees, directly or through 
any corporation, subsidiary, division, or other device, in connection 
with the offering of credit, do forthwith cease and desist from failing 
to accurately calculate and disclose the annual percentage rate, as 
required by sections 107 (a) and (c) of the TILA, 15 U.S.C. 1606 (a) 
and (c), and sections 226.18(e) and 226.22 of Regulation Z, 12 CFR 
226.18(e) and 226.22;
    B. Respondent GE Sacramento, its successors and assigns, and its 
officers, agents, representatives, and employees, directly or through 
any corporation, subsidiary, division, or other device, in connection 
with the offering of credit, do forthwith cease and desist from failing 
to accurately calculate and disclose the finance charge, as required by 
section 106 of the TILA, 15 U.S.C. 1605, and sections 226.4 and 
226.18(d) of Regulation Z, 12 CFR 226.4 and 226.18(d);
    C. Respondent GE Sacramento, its successors and assigns, and its 
officers, agents, representatives, and employees, directly or through 
any corporation, subsidiary, division, or other device, in connection 
with the offering of credit, do forthwith cease and desist from failing 
to segregate the disclosures required by the TILA from all other 
information provided in connection with the transaction, including from 
the itemization of the amount financed, as required by section 
128(b)(1) of the TILA, 15 U.S.C. 1638(b)(1), and section 226.17(a) of 
Regulation Z, 12 CFR 226.17(a);
    D. Respondent GE Sacramento, its successors and assigns, and its 
officers, agents, representatives, and employees, directly or through 
any corporation, subsidiary, division, or other device, in connection 
with the offering of credit, do forthwith cease and desist from failing 
to make all disclosures in the manner, form, and amount required by 
sections 122 and 128(a) of the TILA, 15 U.S.C. 1632 and 1638(a), and 
sections 226.17 and 226.18 of Regulation Z, 12 CFR 226.17 and 226.18;
    E. Respondent GE Sacramento, its successors and assigns, and its 
officers, agents, representatives, and employees, directly or through 
any corporation, subsidiary, division, or other device, in connection 
with the offering of credit, do forthwith cease and desist from failing 
to comply with the TILA, 15 U.S.C. 1601 et seq., and Regulation Z, 12 
CFR Part 226.

II

Refund Program
    It is Further Ordered that:
    A. Within thirty (30) days following the date of service of this 
order, respondent shall:
    1. Determine to whom respondent disclosed on the original TILA 
disclosure an annual percentage rate that was miscalculated by more 
than one quarter of one percentage point below the annual percentage 
rate determined in accordance with section 226.22 of Regulation Z, 12 
CFR 226.22, or that disclosed a finance charge that was miscalculated 
by more than one dollar below the finance charge determined in 
accordance with Sec. 226.4 of Regulation Z, 12 CFR 226.4, so that each 
such person will not be required to pay a finance charge in excess of 
the finance charge actually disclosed or the dollar equivalent of the 
annual percentage rate actually disclosed, whichever is lower, plus a 
tolerance of one quarter of one percentage point;
    2. Calculate a lump sum refund and a monthly payment adjustment, if 
applicable, in accordance with section 108(e) of the TILA, 15 U.S.C. 
1604(e);
    3. Mail a refund check to each eligible consumer in the amount 
determined above, along with Attachment 1; and
    4. Provide the Federal Trade Commission with a list of each such 
consumer, the amount of the refund, the number of payments refunded, 
the amount of adjustment for future payments and the number of future 
payments to be adjusted;
    B. No later than fifteen (15) days following the date of service of 
this order, respondent shall provide the Federal Trade Commission with 
the name and address of three independent accounting firms, with which 
it, it officers, employees, attorneys, and agents, have no business 
relationship. Staff for the Division of Credit Practices of the FTC 
shall then have the sole discretion to choose one of the firms 
(``independent agent'') and so advise respondent;
    C. Within thirty (30) days following the date of adjustments made 
pursuant to this section, respondent shall direct the independent agent 
to review a statistically-valid sample of refunds. Respondent shall 
provide the Federal Trade Commission with a certified letter from the 
independent agent confirming that respondent has complied with Part II. 
A. of this order;
    D. All costs associated with the administration of the refund 
program and payment of refunds shall be borne by the respondent.

III

    It Is Further Ordered that respondent, its successors and assigns, 
shall maintain for at least five (5) years from the date of service of 
this order and, upon thirty (30) days advance written request, make 
available to the Federal Trade Commission for inspection and copying 
all documents and other records necessary to demonstrate fully its 
compliance with this order.

IV

    It Is Further Ordered that respondent, its successors and assigns, 
shall distribute a copy of this order to any present or future officers 
and managerial employees having responsibility with respect to the 
subject matter of this order and that respondent, its successors and 
assigns, shall secure from each such person a signed statement 
acknowledging receipt of said order.

V

    It Is Further Ordered that respondent, for a period of five (5) 
years following the date of service of this order, shall promptly 
notify the Commission at least thirty (30) days prior to any proposed 
change in its corporate structure such as dissolution, assignment, or 
sale resulting in the emergence of a successor corporation, the 
creation or dissolution of subsidiaries or affiliates, or any other 
change in the corporation that may affect compliance obligations 
arising out of the order.

VI

    It Is Further Ordered that respondent shall, within one hundred and 
eighty (180) days of the date of service of this order, file with the 
Commission a report, in writing, setting forth in detail the manner and 
form in which it has complied with this order. [[Page 29627]] 

Attachment 1

    Dear Great Expectations Customer:
    As part of our settlement with the Federal Trade Commission for 
alleged violations of the Truth in Lending Act, we are sending you the 
enclosed refund check in the amount of $______. The refund represents 
the amount you were overcharged as a result of errors made by Great 
Expectations in calculating or disclosing the annual percentage rate or 
finance charge.
    [In addition, your future monthly payments have been reduced. 
Starting immediately, your monthly payments will be $______.]
    We regret any inconvenience this may have caused you.
    Great Expectations
Analysis of Proposed Consent Order To Aid Public Comment

    The Federal Trade Commission has accepted an agreement to a 
proposed consent order from respondent TRIAAC Enterprises, Inc. (``GE 
Sacramento'').
    The proposed consent order has been placed on the public record for 
sixty (60) days for reception of comments by interested persons. 
Comments received during this period will become part of the public 
record. After sixty (60) days, the Commission will again review the 
agreement and the comments received and will decide whether it should 
withdraw from the agreement or make final the agreement's proposed 
order.
    The complaint alleges that GE Sacramento, as a creditor under the 
Truth in Lending Act (``TILA''), has violated the TILA and its 
implementing Regulation Z. Specifically, the TILA requires creditors to 
make clear and consistent disclosures of the credit terms in a financed 
transaction. GE Sacramento failed to accurately calculate and disclose 
the annual percentage rate (``APR'') and the finance charge, which 
resulted in some consumers paying more in interest charges and finance 
charges than the franchise disclosed. The complaint further alleges 
that this practice is unfair or deceptive in violation of the Federal 
Trade Commission Act.
    Additionally, the complaint alleges that GE Sacramento failed to 
accurately disclose the itemization of the amount financed, which 
assists consumers in understanding whether they are being charged a 
prepaid finance charge or whether any of the proceeds are being 
distributed to third parties, and failed to separate the itemization 
from all other information provided in connection with the transaction. 
Also, GE Sacramento failed to provide a descriptive explanation of the 
financing terms. For example, GE Sacramento failed to explain that the 
APR is ``the cost of your credit as a yearly rate'' and that the 
finance charge is ``the dollar amount the credit will cost you.'' GE 
Sacramento also failed to provide a description of the amount financed, 
the total of payments, and the total sales price.
    Finally, the complaint alleges that GE Sacramento failed to 
identify the creditor in each transaction.
    The consent agreement would prohibit GE Sacramento from failing to 
accurately calculate and disclose the APR and any other terms required 
by the TILA.
    The consent agreement includes a refund program requiring GE 
Sacramento to make adjustments to the account of any consumer to whom 
it disclosed an APR or finance charge that was lower than the amount 
the consumer actually was required to pay.
    The consent agreement would also require GE Sacramento to maintain 
records of its compliance with the consent agreement, distribute copies 
of the agreement to its employees, and advise the Federal Trade 
Commission of any changes in its corporate structure.
    The purpose of this analysis is to facilitate public comment on the 
proposed order, and it is not intended to constitute an official 
interpretation of the agreement and proposed order or to modify in any 
way their terms.
Donald S. Clark,
Secretary.
[FR Doc. 95-13660 Filed 6-2-95; 8:45 am]
BILLING CODE 6750-01-M