[Federal Register Volume 60, Number 107 (Monday, June 5, 1995)]
[Notices]
[Pages 29622-29625]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-13663]
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FEDERAL TRADE COMMISSION
[File No. 932 3040]
Sterling Connections, Inc., et al.; 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, the video dating service franchises 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 franchises 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.
[[Page 29623]] 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)).
In the Matter of STERLING CONNECTIONS, INC., PRIVATE EYE
PRODUCTIONS, INC., AND GREATEX DENVER, INC., corporations; File No.
932 3040.
Agreement Containing Consent Order To Cease and Desist
The Federal Trade Commission having initiated an investigation of
certain acts and practices of Sterling Connections, Inc., Private Eye
Productions, Inc., and GREATEX Denver, Inc., corporations (hereinafter
sometimes referred to as proposed respondents), and it now appearing
that proposed respondents are 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 respondents, their
attorney, and counsel for the Federal Trade Commission that:
1. Sterling Connections, Inc., doing business as Great Expectations
of Seattle (``GE Seattle''), is a corporation organized, existing, and
doing business under and by virtue of the laws of the state of Oregon,
with its office and principal place of business located at 305 108th
Ave., N.E., Suite 205, Bellevue, WA 98004.
2. Private Eye Productions, Inc., doing business as Great
Expectations of Portland (``GE Portland''), is a corporation organized,
existing, and doing business under and by virtue of the laws of the
state of Oregon, with its office and principal place of business
located at 5531 S.W. Macadam Ave., Suite 225, Portland, OR 97201.
3. GREATEX Denver, Inc., doing business as Great Expectations of
Denver (``GE-Denver''), is a corporation organized, existing, and doing
business under and by virtue of the laws of the state of Washington
with its office and principal place of business located at 3773 Cherry
Creek North Dr., Suite 140, Denver, CO 80209.
4. Proposed respondents admit all the jurisdictional facts set
forth in the draft of complaint.
5. Proposed respondents waive:
(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.
6. 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 respondents, 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.
7. This agreement is for settlement purposes only and does not
constitute an admission by proposed respondents 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.
8. 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
respondents, (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
respondents' address as stated in this agreement shall constitute
service. Proposed respondents waive any right they may have to any
other manner of service. The complaint may 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.
9. Proposed respondents have read the proposed complaint and order
contemplated hereby. They understand that once the order has been
issued, they will be required to file one or more compliance reports
showing that they have fully complied with the order. Proposed
respondents further understand that they 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. Respondents GE Seattle, GE Portland, and GE Denver, their
successors and assigns, and their 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 Truth in Lending Act (``TILA''), 15 U.S.C. 1606 (a) and
(c), and Secs. 226.18(e) and 226.22 of Regulation Z, 12 CFR 226.18(e)
and 226.22;
B. Respondents GE Seattle, GE Portland, and GE Denver, their
successors and assigns, and their 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 Sec. 226.17(a) of Regulation Z, 12 CFR 226.17(a);
C. Respondents GE Seattle, GE Portland, and GE Denver, their
successors and assigns, and their officers, agents, representatives,
and [[Page 29624]] 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 Secs. 226.17
and 226.18 of Regulation Z, 12 CFR 226.17 and 226.18;
D. Respondents GE Seattle, GE Portland, and GE Denver, their
successors and assigns, and their 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, respondents shall:
1. For each TILA disclosure relating to any executory contract or
any contract or any contract consummated within two years prior to
August 2, 1994, determine to whom respondents 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 Sec. 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.
1607(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, respondents shall provide the Federal Trade Commission with
the name and address of three independent accounting firms, with which
they, their 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 respondents;
C. Within thirty (30) days following the date of adjustments made
pursuant to this section, respondents shall direct the independent
agent to review a statistically-valid sample of refunds. Respondents
shall provide the Federal Trade Commission with a certified letter from
the independent agent confirming that respondents have 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 respondents.
III
It is further ordered that respondents, their 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 their compliance with this order.
IV
It is further ordered that respondents, their successors and
assigns, shall distribute a copy of this order to any present or future
officers and managerial employees having responsibilty with repsect to
the subject matter of this order and that respondemts. their succesors
and assigns, shall secure from each such person a signed statement
acknowledging receipt of said order.
V
It is further ordered that respondents, 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 their 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 respondents 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 they have complied with this order.
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 are 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 cause 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 respondents Sterling Connections, Inc.
(``GE Seattle''), Private Eye Productions, Inc., (``GE Portland''), and
GREATEX Denver, Inc. (``GE-Denver'').
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 compliant alleges that GE Seattle, GE Portland, and GE Denver,
as creditors under the Truth in Lending Act (``TILA''), have 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. These franchises failed to
accurately calculate and disclose the annual percentage rate (``APR''),
which resulted in some consumers paying more in interest charges than
the franchises disclosed. The complaint further alleges that this
practice is unfair or deceptive in violation of the Federal Trade
Commission Act. The complaint also alleges that these franchises failed
to disclose the finance charge more conspicuously than any other
disclosure except the APR and the creditor's identify.
Additionally, the complaint alleges that these franchises failed to
accurately [[Page 29625]] 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 have failed to separate the
itemization from all other information provided in connection with the
transaction. Also, these franchises failed to provide a descriptive
explanation of the financing terms. For example, the named franchises
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.'' The named franchises also failed to provide a
description of the amount financed, the total of payments, and the
total sales price.
Finally, the complaint alleges that all of the named franchises
failed to identify the creditor in each transaction, and failed to
provide the total sales price.
The consent agreement would prohibit the franchises named herein
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 the named
franchises to make adjustments to the account of any consumer to whom
they 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 the named franchises to
maintain records of their compliance with the consent agreement,
distribute copies of the agreement to their employees, and advise the
Federal Trade Commission of any changes in their 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. 95-13663 Filed 6-2-95; 8:45 am]
BILLING CODE 6750-01-M