[Federal Register Volume 61, Number 66 (Thursday, April 4, 1996)]
[Notices]
[Pages 15071-15074]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-8331]



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FEDERAL TRADE COMMISSION

[File No. 922-3312]


Budget Rent A Car Systems, Inc.; Consent Agreement With Analysis 
To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Consent agreement.

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SUMMARY: In settlement of alleged violations of federal law prohibiting 
unfair or deceptive acts or practices and unfair methods of 
competition, this consent agreement, accepted subject to final 
Commission approval, would require the Lisle, Illinois-based auto 
rental company, if it resumes collecting ``loss of turnback'' fees, to 
clearly disclose to customers who do not purchase a ``loss damage 
waiver'' that they are liable for damage or loss in excess of the 
actual cost of repairs to damaged vehicles. It will also require Budget 
to pay $75,000 in consumer redress. The consent agreement settles 
allegations that Budget sought to collect ``loss of turnback'' fees--
the amount Budget lost because damaged vehicles could not be resold to 
the manufacturer at a price higher than retail--from customers who had 
not purchased ``loss damage waivers,'' without disclosing the 
customers' purported liability for these charges in advance. Budget 
also allegedly misrepresented that its rental contracts entitled the 
company to make these ``loss of turnback'' collections.

DATES: Comments must be received on or before June 3, 1996.

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

FOR FURTHER INFORMATION CONTACT:
Randy Brook, Seattle Regional Office, Federal Trade Commission, 915 
Second Avenue, Suite 2806, Seattle, WA 98174. 206-220-6350. Robert 
Schroeder, Seattle Regional Office, Federal Trade

[[Page 15072]]
Commission, 915 Second Avenue, Suite 2806, Seattle, WA 98174. 206-220-
6350.

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

    The Federal Trade Commission having initiated an investigation of 
certain acts and practices of proposed respondent Budget Rent A Car 
Systems, Inc., a corporation, and it now appearing that proposed 
respondent is willing to enter into an agreement containing an order to 
cease and desist from the acts and practices being investigated.
    It is hereby agreed by and between Budget Rent A Car Systems, Inc., 
by its duly authorized officer and its attorney, and counsel for the 
Federal Trade Commission that:
    1. Proposed respondent is a Delaware corporation with its principal 
office and place of business located at 4225 Naperville Road, Lisle, 
Illinois 60532-3662.
    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. All rights 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 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 
complaint, 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 the 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 of facts, other than 
jurisdictional facts, or of violations of law as alleged in the draft 
of complaint.
    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: (a) 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 (b) 
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 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 draft complaint and the 
following order. Proposed respondent 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

Definitions

    For purposes of this order:
    A. ``Turnback'' means any preset price, premium, bonus, or formula 
that could result in respondent receiving more than the vehicle's fair 
market value upon repurchase by the vehicle's original vendor, 
financer, or their designee.
    B. ``Fair market value'' means the vehicle's price as listed in an 
industry-wide and generally accepted publication or directory of used 
car values, or the resale price received in a commercially reasonable 
sale.
    C. ``LDW'' means any option that respondent offers that limits or 
eliminates a renter's liability to respondent for loss of or damage to 
the respondent's vehicle during the pendency of the rental agreement.
    D. ``Insurance'' means the renter's own standard vehicle insurance, 
and any alternative, supplemental, or secondary coverage the renter 
possesses that provides coverage for rented vehicles including, but not 
limited to, the coverage currently furnished by many credit card 
companies.
I
    It is ordered that respondent, its successors and assigns, and its 
officers, agents, representatives, and employees, directly or through 
any partnership, corporation, subsidiary, division, or other device, in 
connection with the promoting, offering for rental, or rental of any 
vehicle, in or for any rental location where it seeks loss of turnback 
or turnback value in any form for vehicles rented in that location, in 
or affecting commerce, as ``commerce'' is defined in the Federal Trade 
Commission Act, does forthwith cease and desist from:
    A. Failing to disclosure, clearly and prominently, in connection 
with any representation relating to the renter's liability for loss of 
or damage to a rental vehicle, including any representation about LDW, 
that in the event of loss of or damage to a vehicle for which LDW was 
declined, respondent may charge the renter between $x and $y [specify 
range of dollar amounts Budget may seek] more than the cost of repairs 
or the fair market value of the vehicle, that many insurance companies 
will not pay this charge, and that the renter will have to pay it. This 
paragraph applies specifically to, but is not limited to, Budget's 
rental contracts and to any representation relating to the price or 
terms of LDW made through respondent's inputs in the ``company-specific 
location'' part of third-party, computerized reservation systems, such 
as ``Apollo,'' ``PARS,'' ``Sabre,'' or ``System One.''
    Provided, however, that if respondent uses a ``short-form'' rental 
contract or other document or electronic form of agreement that makes 
it impractical to place the required disclosure within the

[[Page 15073]]
document or form, respondent shall devise other means to ensure that 
each renter receives the substance of the disclosure before entering 
into the rental agreement. The other means could include, but are not 
limited to, a separate disclosure document to be signed or initialed by 
the renter.
    B. Failing to post at each Budget rental location a sign or placard 
clearly and prominently containing the following language:

    If you decline LDW and the rental car is damaged or stolen, we 
may charge you between $x and $y [specify range of dollar amounts 
Budget may seek] more than the cost of repairs or the fair market 
value of the vehicle. Many insurance companies will not pay this. If 
yours doesn't, you will have to pay it.

The sign or placard shall be of a size, and posted in a manner, 
reasonably calculated to elicit prospective renters' attention.
    C. Failing to disclose, in a clear and prominent manner in any 
communication seeking payment of any charge for loss of or damage to a 
rental vehicle, any part of the charge that is attributable to loss of 
turnback including, but not limited to, instances where the vehicle is 
totaled or stolen and respondent is seeking compensation based in whole 
or part on any turnback amount. This disclosure shall include an 
explanation of what loss is turnback means and how it was calculated.
II
    It is further ordered that respondent, its successors and assigns, 
and its officers, agents, representatives, and employees, directly or 
through any partnership, corporation, subsidiary, division, or other 
device, in connection with the promoting, offering for rental, or 
rental of any vehicle, in or for any rental location where it seeks 
loss of turnback or turnback value in any form for vehicles rented in 
that location, in or affecting commerce, as ``commerce'' is defined in 
the Federal Trade Commission Act, does forthwith cease and desist from 
misrepresenting, in any manner, directly or by implication:
    (1) the obligation of the renter to make any payment as the result 
of the loss of or damage to a rental vehicle; and
    (2) the value of a vehicle that has been lost or damaged.
III
    It is further ordered that no provision of this order is intended 
to preempt any state law, regulation, or administrative interpretation 
that may limit or prevent respondent from collecting loss of turnback 
from a renter.
IV
    It is further ordered that respondent shall pay into an inter-
bearing escrow account designated by the Commission, under the control 
of the Commission's designated agent, the sum of $75,000 on or before 
five days from the date of service of this order. This shall fully 
satisfy all monetary claims asserted by the Commission in the complaint 
filed herein against this respondent and shall be used to provide 
redress to consumers who made a payment to respondent and to pay any 
attendant expenses of administration. If the Commission determines, in 
its sole discretion, that redress to consumers is wholly or partially 
impracticable, any funds not so used shall be deposited into the United 
States Treasury. No portion of respondent's payment shall be deemed a 
payment of any fine, penalty, or punitive assessment. Respondent shall 
be notified as to how funds are disbursed but shall have no right to 
contest the manner of distribution chosen by the Commission.
V
    It is further ordered that respondent shall, for three years from 
the date of service upon it of this order, distribute, or cause to be 
distributed, a copy of this order to all present and future division, 
regional, branch, and subrogation managers who have management 
responsibilities relating to the collection of collision or theft 
damages from renters.
VI
    It is further ordered that respondent shall, for three years from 
the date of service of this order, maintain and upon request make 
available to the Federal Trade Commission for inspection and copying 
all documents relating to compliance with this order.
VII
    It is further ordered that respondent shall, for 10 years from the 
date of service of this order, notify the FTC in writing at least 30 
days prior to the effective date of any proposed change in its 
corporate structure, such as dissolution, assignment, or sale resulting 
in the emergence of successor corporations, the creation or dissolution 
of subsidiaries, or any other changes in the corporation that may 
affect compliance obligations arising out of this order.
VIII
    It is further ordered that respondent shall, within 60 days from 
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.
IX
    It is further ordered that this order will terminate twenty years 
from the date of its issuance, or twenty years from the most recent 
date that the United States or the Federal Trade Commission files a 
complaint (with or without an accompanying consent decree) in federal 
court alleging any violation of the order, whichever comes later; 
provided, however, that the filing of such a complaint will not affect 
the duration of:
    A. Any paragraph in this order that terminates in less than twenty 
years; and
    B. This order if the complaint is filed after the order has 
terminated pursuant to this paragraph.
    Provided further, that if the complaint is dismissed or a federal 
court rules that the respondent did not violate any provision of the 
order, and the dismissal or ruling is either not appealed or upheld on 
appeal, then the order will terminate according to this paragraph as 
though the complaint was never filed, except that the order will not 
terminate between the date the complaint is filed and the later of the 
deadline for appealing the dismissal or ruling and the date the 
dismissal or ruling is upheld on appeal.

Analysis of Proposed Consent Order To Aid Public Comment

    The Federal Trade Commission has accepted an agreement to a 
proposed consent order from Budget Rent A Car Corporation (``Budget'').
    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.
    This matter concerns claims for loss or damages that Budget makes 
against renters who declined to pay extra for loss damage waiver (LDW) 
when they rented a vehicle. LDW is also called collision damage waiver 
(CDW).
    The Commission's complaint charges Budget with unfair and deceptive 
practices in connection with making loss or damage claims. According to 
the complaint, Budget failed to disclose to the renters that if there 
was more than superficial damage to the rented vehicle, Budget might 
assess charges (called ``loss of turnback'') as much as several

[[Page 15074]]
thousand dollars more than the actual cost of repairs; that if the car 
was lost or stolen, Budget might seek reimbursement for an amount 
greater than the vehicle's fair market value; that the renter's own 
insurance company would likely not cover the added charge or above 
market value premium; and that the renter would have to pay the excess 
charge.
    The complaint also alleges that Budget deceived consumers when it 
tried to collect for loss of turnback by misrepresenting that its 
rental contracts entitled it to make that collection.
    The consent order contains provisions designed to remedy the 
violations charged and to prevent Budget from engaging in similar 
deceptive and unfair acts and practices in the future.
    Part I of the order requires that Budget make clear disclosures to 
potential renters about liability for damage or loss in excess of the 
actual cost of repairs or fair market value. The disclosures must 
appear in promotional materials, on signs in Budget rental locations, 
and in any communications seeking these excess charges. The disclosure 
requirements only apply to Budget locations where Budget seeks these 
excess charges.
    Part II of the order prohibits misrepresentations about the 
obligation of a renter to make any payment as a result of the loss of 
or damage to a rental vehicle or about its value after damage or loss.
    Part III of the order makes clear that the order does not preempt 
any more restrictive provision of state or local law regarding 
collecting excess charges.
    Part IV of the order requires Budget to pay $75,000 in consumer 
redress.
    Part of the order requires Budget to distribute copies of the order 
to relevant officers and employees, and Part VI imposes various record 
keeping requirements.
    Part VII of the order requires Budget to notify the Commission of 
any changes in corporate structure that might affect compliance with 
the order. Part VIII requires that Budget file with the Commission a 
compliance report detailing the manner in which it complied with the 
order.
    Part IX of the order terminates the order twenty years from the 
date of its issuance, or twenty years from the date a complaint is 
filed in federal court alleging any violation of the order, whichever 
comes later.
    The purpose of this analysis is to facilitate public comment on the 
proposed order. It is not intended to constitute an official 
interpretation of the agreement and proposed order, or to modify any of 
their terms.
Donald S. Clark,
Secretary.
[FR Doc. 96-8331 Filed 4-3-96; 8:45 am]
BILLING CODE 6750-01-M