[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