[Federal Register Volume 62, Number 199 (Wednesday, October 15, 1997)]
[Notices]
[Pages 53638-53640]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-27228]


=======================================================================
-----------------------------------------------------------------------

FEDERAL TRADE COMMISSION

[File No. 952 3200; et al.]


Suntrup Ford, Inc.; Analysis to Aid Public Comment, et al.

    In the matter of:

File No. 952 3201
    Suntrup Buick-Pontiac-GMC Truck, Inc.; Thomas Suntrup; Analysis 
to Aid Public Comment
File No. 952 3204
    Lou Fusz Automotive Network, Inc.; Louis J. Fusz, Jr.; Analysis 
to Aid Public Comment
File No. 952 3207
    Beuckman Ford, Inc.; Fred J. Beuckman, III; Analysis to Aid 
Public Comment
File No. 952 3202
    Frank Bommarito Oldsmobile, Inc.; Frank J. Bommarito; Analysis 
to Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreements.

-----------------------------------------------------------------------

SUMMARY: The consent agreements in these matters settle alleged 
violations of federal law prohibiting unfair or deceptive acts or 
practices or unfair methods of competition. The attached Analysis to 
Aid Public Comment describes both the allegations in the draft 
complaints that accompany the consent agreements and the terms of the 
consent orders--embodied in the consent agreements--that would settle 
these allegations.

DATES: Comments must be received on or before December 15, 1997.

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:
David Medine, Federal Trade Commission, S-4429, 6th St. and 
Pennsylvania Ave., N.W., Washington, D.C. 20580 (202) 326-3224.

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 consent 
orders to cease and desist, having been filed with and accepted, 
subject to final approval, by the Commission, have 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 agreements, 
and the allegations in the accompanying complaints. Electronic copies 
of the full text of the consent agreement packages can be obtained from 
the Commission Actions section of the FTC Home Page (for October 7, 
1997), on the World Wide Web, at ``http://www.ftc.gov/os/
actions97.htm.'' Paper copies can be obtained from the FTC Public 
Reference Room, Room H-130, Sixth Street and Pennsylvania Avenue, N.W., 
Washington, D.C. 20580, either in person or by calling (202) 326-3627. 
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 agreements to proposed 
consent orders from respondents Lou Fusz Automotive Network, Inc. and 
Louis J. Fusz, Jr. (``respondents Lou Fusz''); Frank Bommarito 
Oldsmobile, Inc. and Frank J. Bommarito (``respondents Frank 
Bommarito''); Suntrup Ford, Inc., Suntrup Buick-Pontiac-GMC Truck, 
Inc., and Thomas Suntrup (``respondents Suntrup''); and Beuckman Ford, 
Inc. and Fred J. Beuckman, III (``respondents Beuckman''). \1\ The 
persons named in these actions are named individually and as officers 
of their respective corporations.
---------------------------------------------------------------------------

    \1\ These entities and persons are collectively referred to as 
``respondents.''
---------------------------------------------------------------------------

    The proposed consent orders have 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 
agreements and the comments received and will decide whether it should 
withdraw from the

[[Page 53639]]

agreement or make final the agreements' proposed orders.
    The complaints allege that each of the respondents' automobile 
lease advertisements have violated the Federal Trade Commission Act 
(``FTC Act''), the Consumer Leasing Act (``CLA''), and Regulation M. 
The complaints also allege that respondents' credit advertisements have 
violated the Truth in Lending Act (``TILA'') and Regulation Z, and, in 
the case of respondents Frank Bommarito, the FTC Act. Section 5 of the 
FTC Act prohibits false, misleading, or deceptive representations or 
omissions of material information in advertisements. In addition, 
Congress established statutory disclosure requirements for lease and 
credit advertising under the CLA and the TILA, respectively, and 
directed the Federal Reserve Board (``Board'') to promulgate 
regulations implementing such statutes--Regulations M and Z 
respectively. See 15 U.S.C. Secs. 1601-1667e; 12 C.F.R Part 213; 12 
C.F.R Part 226.\2\
---------------------------------------------------------------------------

    \2\ On September 18, 1996, the Board issued revisions to 
Regulation M. 61 FR 52,246 (Oct. 7, 1996) (``1996 revisions to 
Regulation M''). The advertising requirements of the October 1996 
revisions are to be codified at Section 213.7 of Regulation M, 12 
C.F.R 213.7. Subsequently, on September 30, 1996, Congress passed 
revisions to the CLA Title II, Section 2605 of the Omnibus 
Consolidated Appropriations Act for Fiscal Year 1997, Pub. L. No. 
104-208, 110 Stat. 3009, 3009-473 (Sept. 30, 1996) (``revised 
CLA''). On April 1, 1997, the Board implemented these statutory 
changes in another rulemaking. 62 FR 15,346 (Apr. 1, 1997) (``1997 
revisions to Regulation M''). These changes are also to be codified 
at Section 213.7 of Regulation M, 12 C.F.R 213.7. On April 4, 1997, 
the Board adopted a final revised Official Staff Commentary to 
Regulation M, 62 FR 16,053 (Apr. 4, 1997) (``Commentary''). The 
amendments to the CLA and the revisions to Regulation M and the 
Commentary are optionally effective immediately and become 
mandatorily effective on October 1, 1997.
---------------------------------------------------------------------------

    The complaints against respondents Lou Fusz, Bommarito, and Suntrup 
allege that their lease advertisements have misrepresented the true 
amounts consumers owe at lease inception. The complaints allege that 
these companies' ads represented, based on prominent statements of ``0 
Down,'' ``No Money Down,'' and ``No Payment til April/March'' 
respectively, that consumers can lease the advertised vehicles without 
incurring monetary obligations at lease inception. This representation 
is false, according to the complaints, because consumers must pay 
substantial fees, such as a significant downpayment, a security 
deposit, first month's payment, and/or other fees to lease the 
advertised vehicles. The complaints also allege that all respondents 
(including respondents Beuckman), based on their prominent statements 
about inception fees and/or prominent statements about a low monthly 
payment, have failed to disclose adequately significant inception fees 
in their advertisements. These practices, according to the complaints, 
constitute deceptive acts or practices in violation of Section 5(a) and 
the FTC Act.
    The complaints further allege that all respondents' lease 
advertisement have violated the CLA and Regulation M. The complaints 
allege that respondents' ads state that amount of any payment, the 
number of required payments, or that any or no downpayment or other 
payment is required at consummation of the lease (``triggering'' terms 
under these laws), but fail to properly state all of the ``triggered'' 
terms, as applicable and as follows: that the transaction advertised is 
a lease; the total amount of any payment such as a security deposit or 
capitalized cost reduction required at the consummation of the lease or 
that no such payments are required; the number, amount, due dates or 
period of scheduled payments, and the total of such payments under the 
lease; a statement of whether or not the lessee has the option to 
purchase the leased property and at what price and time (the method of 
determining the price may be substituted for disclosure of the price); 
and a statement of the amount or method of determining the amount of 
any liabilities the lease imposes upon the lessee at the end of the 
term. These practices, according to the complaints, violate the 
advertising requirements of the CLA and Regulation M.
    These aforementioned violations cite the version of both the CLA 
and Regulation M in effect at the time the ads ran. Respondents' 
alleged practices of failing to properly disclose inception fees would 
also violate the revised CLA, the 1996 revisions to Regulation M, and 
the 1997 revisions to Regulation M, all of which are currently 
permissibly effective and will be mandatorily effective on October 1, 
1997. As described below, the relief in the proposed consent orders 
enjoin respondents from violating the existing CLA and Regulation M but 
also provide respondents the option of complying with the revised laws 
to satisfy this requirement.
    The complaint against respondents Lou Fusz also alleges that their 
lease advertisements have represented that consumers can lease the 
advertised vehicles at advertised terms, including but not limited to 
the monthly payment amount and the amount stated as ``down.'' This 
representation is false, according to the complaint, because 
respondents have not offered the advertised vehicles at such terms. 
These practices, according to the complaint, constitute deceptive acts 
or practices in violation of Section 5(a) of the FTC Act. These 
practices also violate Section 213.5(a) of Regulation M, 12 C.F.R. 
Sec. 213.5(a), according to the complaint, which requires that 
advertisers make advertised terms ``usually and customarily'' available 
to consumers.
    The complaint against respondents Lou Fusz also alleges that their 
lease advertisements promoting a ``one payment plan have represented 
that consumers can lease the advertised vehicles by making equal 
monthly payments for a specified term. This representation is false, 
according to the complaint, because the ``one payment'' plan requires 
consumers to make all payments owed under the lease agreement at lease 
signing. These practices, according to the complaint, constitute 
deceptive acts or practices in violation of Section 5(a) of the FTC 
Act.
    The complaint against respondents Beuckman also alleges that their 
lease advertisements have represented that consumers can purchase the 
advertised vehicles by financing the vehicles through credit at the 
advertised monthly payment and term. According to the complaint, 
respondents Beuckman failed to disclose adequately that the transaction 
advertised is a lease. Specifically, the complaint alleges that 
respondents Beuckman failed to disclose that the term ``RCL'' is an 
abbreviation for ``Red Carpet Lease'' or to otherwise disclose that the 
advertised monthly payment and term are components of a lease offer. 
These practices, according to the complaint, constitute deceptive acts 
or practices in violation of Section 5(a) of the FTC Act.
    The complaints against all of the respondents allege that their 
credit advertisements have violated the TILA and Regulation Z. The 
complaints allege that respondents' ads state the amount of percentage 
of any downpayment, the number of payments or period of repayment, and/
or the amount of any payment, but fail to properly state the following 
required terms: the amount or percentage of the downpayment, the terms 
of repayment, and/or the annual percentage rate, using that term or the 
abbreviation ``APR,'' in violation of the advertising requirements the 
TILA and Regulation Z. The complaint against respondents Suntrup also 
alleges that their credit advertisements have violated the TILA and 
Regulation Z by stating a rate of finance charge without stating that 
rate as an ``annual percentage rate,'' using that term or the 
abbreviation ``APR,'' in violation of the TILA and Regulation Z.

[[Page 53640]]

    The complaint against respondents Frank Bommarito also alleges that 
their credit advertisements have represented that consumers can 
purchase the advertised vehicles at the terms prominently stated in the 
ad, such as the monthly payment, annual percentage rate (``APR''), and 
amount stated as ``down.'' This representation is false, according to 
the compliant, because consumers must also pay a final balloon payment 
of several thousand dollars to purchase the advertised vehicles. These 
practices, according to the complaints, constitute deceptive acts or 
practices in violation of Section 5(a) of the FTC Act.
    The proposed consent orders contain provisions designed to remedy 
the violations charged and to prevent the respondents from engaging in 
similar acts and practices in the future. Specifically, the proposed 
orders prohibit respondents, in any lease advertisement, from 
misrepresenting the costs of leasing a vehicle, including but not 
limited to the total amount due at lease inception. The proposed orders 
also prohibit respondents, in any lease advertisement, from stating any 
amount due at lease inception or that no such amount is required, not 
including a statement of the periodic payment, unless the advertisement 
also states with ``equal prominence'' the total amount due at lease 
inception. This ``prominence'' requirement for lease inception fees 
also is found in the Board's 1996 and 1997 revisions to Regulation M.
    The proposed orders also require respondents, in any advertisement 
that states the amount of any payment, the number of required payments, 
or that any or no downpayment or other payment is required at 
consummation of the lease, to also state clearly and conspicuously all 
of the terms required by Regulation M, as applicable and as follows: 
that the transaction advertised is a lease; the total amount of any 
payment such as a security deposit or capitalized cost reduction 
required at the consummation of the lease, or that no such payments are 
required; the number, amounts, due dates or periods of scheduled 
payments, and the total of such payments under the lease; a statement 
of whether or not the lessees has the option to purchase the leased 
property and at what price and time (the method of determining the 
price may be substituted for disclosure of the price); and a statement 
of the amount or method of determining the amount of any liabilities 
the lease imposes upon the lessee at the end of the term and a 
statement that the lessee shall be liable for the difference, if any, 
between the estimated value of the leased property and its realized 
value at the end of the lease term if the lessee has such liability. 
For all lease advertisements, the proposed orders permit respondents to 
comply with this provision by utilizing applicable provisions of the 
revised CLA and the 1996 and 1997 revisions to Regulation M. The orders 
set out for each media which provisions of such revised laws are 
applicable.
    The proposed order for respondents Lou Fusz also prohibits these 
respondents from stating specific lease terms unless respondents 
usually and customarily lease or will lease a vehicle at those terms. 
This proposed order also prohibits respondents Lou Fusz from 
misrepresenting the type of transaction advertised, including but not 
limited to the fact that the offer is for a one payment lease.
    The proposed order for respondents Beuckman also prohibits these 
respondents from stating the term ``RCL'' without disclosing clearly 
and conspicuously that such term refers to a lease transaction.
    With regard to respondents' credit advertisements, the proposed 
orders require that any advertisement that states the amount or 
percentage of any downpayment, the number of payments, the amount of 
any payment, or the amount of any finance charge must also state 
clearly and conspicuously all of the terms required by the TILA and 
Regulation Z, as applicable and as follows: the amount or percentage of 
the downpayment; the terms of repayment; and the annual percentage 
rate, using that term or the abbreviation ``APR.'' If the APR may be 
increased after consummation of the credit transaction, that fact must 
also be disclosed. The proposed order for respondents Suntrup also 
prohibits these respondents from stating a rate of finance charge 
without stating the rate as an ``annual percentage rate'' or the 
abbreviation ``APR.''
    The proposed order for respondents Frank Bommarito prohibits these 
respondents, in any credit advertisement, from misrepresenting the 
terms of financing a vehicle, including but not limited to the amount 
of any balloon payment. This proposed order also prohibits respondents 
Frank Bommarito from stating the amount of any payment or the amount or 
percentage of any downpayment or amount ``down'' if any advertisement 
unless these respondents also state the amount of any final balloon 
payment prominently and in close proximity to the most prominent of the 
above statements.
    The proposed orders also prohibit all respondents from failing to 
comply in any other respect with the CLA and Regulation M and the TILA 
and Regulation Z. The proposed order permits respondents to comply with 
other requirements of existing Regulation M, 12 C.F.R. Sec. 213 by 
utilizing the 1996 and 1997 revisions to Regulation M, as amended.
    The purpose of this analysis is to facilitate public comment on the 
proposed orders, and it is not intended to constitute an official 
interpretation of the agreements and proposed orders or to modify in 
any way their terms.
Donald S. Clark,
Secretary.
[FR Doc. 97-27228 Filed 10-14-97; 8:45 am]
BILLING CODE 6750-01-M