[Federal Register Volume 61, Number 199 (Friday, October 11, 1996)]
[Notices]
[Pages 53378-53379]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-26106]


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FEDERAL TRADE COMMISSION

[File No. 962-3247]


Budget Marketing, Inc.; 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 or deceptive acts or practices and unfair methods of 
competition, this consent agreement, accepted subject to final 
Commission approval, would prohibit, among other things, the Des 
Moines, Iowa-based telemarketer of magazine subscriptions and 11 of its 
dealers from misrepresenting that they are selling magazines and the 
cost and conditions of the subscriptions they are selling. The 
settlement also prohibits the companies from threatening and harassing 
consumers to collect bills, failing to honor offers to allow 
cancellation, and violating the Electronic Funds Transfer Act. A 
related federal court decree would require the firms to pay a $395,000 
civil penalty and $25,000 in court costs. A draft complaint 
accompanying the consent agreement alleges that the respondents 
misrepresented the costs and conditions of subscription agreements and 
illegally deducted charges electronically from consumers' bank accounts 
without consumer authorization.

DATES: Comments must be received on or before December 10, 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:
Justin Dingfelder, Federal Trade Commission, S-4302, 6th and 
Pennsylvania Ave, NW, Washington, DC 20580. (202) 326-3017.

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 above-captioned 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. The following Analysis to Aid 
Public Comment describes the terms of the consent agreement, and the 
allegations in the accompanying complaint. An electronic copy of the 
full text of the consent agreement package can be obtained from the FTC 
Home page, on the World Wide Web, at ``http://www.ftc.gov/os/actions/
htm.'' A paper copy can be obtained from the FTC Public Reference Room, 
Room H-130, Sixth Street and Pennsylvania Avenue, N.W., Washington, 
D.C. 20580. 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)).

Analysis of Proposed Consent Order to Aid Public Comment

    The Federal Trade Commission has accepted, subject to final 
approval, an agreement containing a consent order from Budget 
Marketing, Inc. (BMI), one of its officers, and some of its major 
dealers.
    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 proposed consent order is part of a proposed settlement of a 
civil penalty action that was filed against BMI and its dealers in 
Federal District Court in Des Moines, Iowa in December 1988 (Civil No. 
88-1698-E). The District Court consent decree that will be filed to 
settle that matter provides for the payment of a total of $395,000 in 
civil penalties (plus $25,000 in court costs) by BMI and some of its 
dealers. The decree also contains an injunction ordering the defendants 
in that action to obey this proposed consent order. The consent decree 
will dissolve the Consent Decree and Permanent Injunction entered in 
United States v. Budget Marketing, Civil No. 80-419-E (S.D. Iowa) on 
October 10, 1980, and replace it with the proposed decree.
    BMI and its dealers are engaged in the sale by subscription, of 
magazines and other publications throughout the United States. This 
matter concerns various sales and collection practices engaged in by 
BMI and the named dealers to sell, by telephone, magazine subscription 
contracts and to collect payments for its services. The Commission's 
proposed complaint alleges that BMI and its dealers, among other 
things, have misrepresented the terms and conditions of contracts; 
misrepresented the identity of solicitors or firms they are 
representing; misrepresented the savings which will be accorded or made 
available to purchasers; misrepresented the action or results of any 
action which may be taken to effect payment of alleged indebtedness. 
The proposed complaint also charges respondents with violating the 
Electronic Fund Transfer Act (EFTA) (15 U.S.C. 1693 et seq.) by not 
obtaining the requisite authorization in writing as proscribed by 
Section 205.10(b) of Regulation E, 12 C.F.R. Sec. 205.
    The proposed consent order contains provisions designed to prevent 
respondents from engaging in similar acts and practices in the future. 
Part I of the proposed consent order contains a number of prohibitions. 
Paragraph (a) prohibits respondents from failing to comply with 
Regulation E requiring authorization by the consumer in writing only 
for preauthorized electronic fund transfers from a consumer's account 
and from failing to comply with the Official Commentary to 12 C.F.R. 
Sec. 205.10, Question 10-18.6. Paragraph (b) prohibits respondents from 
making representations, directly or indirectly, that its 
representatives who are, in fact, calling to secure subscriptions are 
conducting or participating in any survey or contest; performing 
services for educational, charitable or social organizations; or giving 
products or services for free or as a gift. Paragraph (c) prohibits the 
respondents from failing to identify that the purpose of their contacts 
is to sell products or services. Paragraph (d) prohibits respondents 
from representing that the price covers only the cost of mailing or 
misrepresenting the savings to be accorded to the purchaser. Paragraph 
(e) prohibits respondents from representing that a subscription 
contract can be cancelled at the purchaser's option, unless it can be 
cancelled, while paragraph (f) requires respondents to cancel upon 
request if such a misrepresentation has been made to the purchaser. 
Paragraph (g) prohibits respondents from misrepresenting the

[[Page 53379]]

terms of payments to prospective purchasers. Paragraph (h) prohibits 
respondents from failing to reveal orally, prior to the customer's 
entering into a contract, and in writing on the subscription form, the 
names, number of issues, total cost, installment payments, method of 
payments and the right to rescind the sale within three business days 
of receipt of the sales agreement. Paragraph (i) prohibits respondents 
from representing that a purchase agreement is any other kind of 
document other than a contract or agreement. Paragraph (j) prohibits 
respondents from failing to identify the nature and legal import of any 
document that the consumer is required to execute. Paragraph (k) 
prohibits respondents from engaging in any unfair or deceptive practice 
in order to effect payment. Paragraph (1) prohibits respondents from 
cancelling any subscription contract for any reason other than a breach 
by the subscriber or a request by the subscriber; Paragraph (m) 
prohibits respondents from failing to provide to each consumer a copy 
of the subscription contract showing either the date it was mailed to 
the consumer or the date the consumer signed the contract and the name, 
address and telephone number of the seller or the service company used 
by the seller, Paragraph (n) prohibits respondents from failing to 
provide a sheet separable from the written sales agreement which can be 
used as a notice of cancellation. Paragraph (o) prohibits respondents 
from failing to cancel a sales agreement where the request is received 
fourteen (14) calendar days from the date the agreement was mailed or 
delivered to the purchaser and from refunding any payment received 
within thirty (30) days after cancellation. Paragraph (p) prohibits 
respondents from failing to furnish those PDS customers who use payment 
coupons, with specific information on the coupon payment book including 
the total coupons in the book, the total dollar amount of all such 
coupons, and the seller's address and telephone number. Paragraph (q) 
prohibits the respondents from failing to offer the right to substitute 
magazines on a pro rata dollar-for-dollar basis or extending 
subscription periods on magazines already selected, in the event of the 
discontinuance of publication or availability of magazines already 
subscribed for by the customer. Paragraph (r) prohibits respondents 
from failing to cancel, at the subscriber's sole option, any portion of 
a contract whenever any misrepresentation prohibited by the order has 
been made. Finally, Paragraph (s) prohibits respondents from furnishing 
the means and instrumentalities to others by which the public may be 
misled in the manner or as to the things prohibited by this order.
    Part II of the proposed consent order required BMI and its dealers 
to distribute copies of the order to each of the present and future 
dealers, employees and other representatives; to secure from such 
persons a statement indicating their intention to be bound by the 
order; to institute a program of continuing surveillance to reveal 
whether such persons are conforming to the order and to discontinue 
dealing with any such persons who are revealed to be engaging in 
practices prohibited by the order.
    Part III of the proposed consent order requires BMI to notify the 
Commission at least thirty (30) days prior to the effective date of any 
proposed change in the corporate respondent.
    Part IV of the proposed consent order requires the individually 
named respondents to notify the Commission at least thirty (30) days 
prior to the sale or discontinuance of the entities through which they 
have been engaging in the sale of subscription contracts or of the 
creation of any additional businesses or entry into any new business 
engaged in the telemarketing of products or services.
    Part V of the proposed consent order vacates the Decision and Order 
in Docket No. 8831, issued on August 3, 1972, insofar as it applies to 
the respondents in this matter.
    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 in any 
way their terms.
Donald S. Clark,
Secretary.
[FR Doc. 96-26106 Filed 10-10-96; 8:45 am]
BILLING CODE 6750-01-M