[Federal Register Volume 60, Number 107 (Monday, June 5, 1995)]
[Notices]
[Pages 29620-29622]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-13664]
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FEDERAL TRADE COMMISSION
[File No. 932-3040]
San Antonio Singles of Texas, 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.
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. (2020 326-3222.
SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Section 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 San Antonio Singles of Texas, Inc., and Austin
Singles of Texas, Inc., corporations; File No 932 3040.
The Federal Trade Commission having initiated an investigation of
certain acts and practices of San Antonio Singles of Texas, Inc., and
Austin Singles of Texas, 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. San Antonio Singles of Texas, Inc., doing business as Great
Expectations of San Antonio (``GE San Antonio''), is a corporation
organized, existing, and doing business under and by virtue of the laws
of the state of Texas, with its corporate office at 10497 Town &
Country Way, Suite 214, Houston, TX 77024, and its principal place of
business located at 8131 I.H. 10 West, Suite 225, San Antonio, TX
78230.
2. Austin Singles of Texas, Inc., doing business as Great
Expectations of Austin (``GE Austin''), is a corporation organized,
existing, and doing business under and by virtue of the laws of the
state of Texas, with its corporate office at 10497 Town & Country Way,
Suite 214, Houston, TX 77024, and its principal place of business
located at 9037 Research Blvd. Suite 130, Austin, TX 78758.
3. Proposed respondents admit all the jurisdictional facts set
forth in the draft of complaint.
4. 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.
5. 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
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.
6. 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.
7. 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 [[Page 29621]] 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.
8. 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 its becomes final.
Order
I
It is Ordered that:
A. Respondents GE San Antonio, and GE Austin, 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. Secs. 1606 (a) and (c), and
Sections 226.18(e) and 226.22 of Regulation Z, 12 CFR 226.18(e) and
226.22;
B. Respondents GE San Antonio, and GE Austin, 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
finance charge, as required by Section 106 of the TILA, 15 U.S.C.
Sec. 1605, and Sections 226.4 and 226.18(d) of Regulation Z, 12 CFR
226.4 and 226.18(d);
C. Respondents GE San Antonio, and GE Austin, 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. Sec. 1638(b)(1),
and Section 226.17(a) of Regulation Z, 12 CFR 226.17(a);
D. Respondents GE San Antonio, and GE Austin, 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 make all disclosures in the manner, form,
and amount required by Sections 122 and 128(a) of the TILA, 15 U.S.C.
Secs. 1632 and 1638(a), and Sections 226.17 and 226.18 of Regulation Z,
12 CFR 226.17 and 226.18;.
E. Respondents GE San Antonio, and GE Austin, 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:
1. Failing to include, in the finance charge and the annual
percentage rate disclosed to the consumer, set-up or other fees that
are charged only to consumers who finance the costs of their
memberships, as required by Sections 106, 107, and 128 of the TILA, 15
U.S.C. Secs. 1605, 1606, and 1638, and Sections 226.4(b), 226.22, and
226.18 (d) and (e) of Regulation Z, 12 CFR 226.4(b), 226.22, and 226.18
(d) and (e); and
2. Failing to exclude, from the amount financed disclosed to the
consumer, set-up or other fees that are charged only to consumers who
finance the costs of their memberships, as required by Section 128 of
the Truth in Lending Act, 15 U.S.C. Sec. 1638(a) and Section 226.18(b)
of Regulation Z, 12 CFR 226.18(b); and
F. Respondents GE San Antonio, and GE Austin, 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. Sec. 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. 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 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 Section 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.
Sec. 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. [[Page 29622]]
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 responsibility with respect to
the subject matter of this order and that respondents, their successors
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 Member:
We were recently notified by the Federal Trade Commission staff
(``FTC'') that we may have inadvertently miscalculated and/or
improperly disclosed information in your Retail Installment Contract
which the FTC believes is inconsistent with certain provisions of the
Truth in Lending Act. After extensive investigation by us, along with
conversations with the FTC, we have decided that it would be in the
best interest of all parties to [refund] [credit to your account] the
amount of $__________ which would cover any incorrect calculations.
[Additionally, please be advised that your future monthly payments have
been reduced to $__________ starting ______________.]
We at Great Expectations are always interested in providing our
members prompt professional services and are here to answer any
questions you may have regarding this or any other matter.
Sincerely,
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 San Antonio Singles of Texas,
Inc. (``GE San Antonio''), and Austin Singles of Texas, Inc. (``GE
Austin'').
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 San Antonio and GE Austin, 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'') and the
finance charge, which resulted in some consumers paying more in
interest charges and finance charges than the franchises 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 these franchises 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 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.
The complaint also alleges that the named franchises failed to
include in the finance charge a set-up fee that each charged to its
customers that financed the costs of their memberships, but did not
charge to its customers that paid cash. The TILA requires that such
charges be made part of the finance charge. Instead, these franchises
included the set-up fees in the amount financed, which resulted in the
finance charge and the APR being underdisclosed.
Finally, the complaint alleges that 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. 95-13664 Filed 6-2-95; 8:45 am]
BILLING CODE 6750-01-M