[Federal Register Volume 64, Number 146 (Friday, July 30, 1999)]
[Notices]
[Pages 41429-41432]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-19519]


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FEDERAL TRADE COMMISSION

[File No. 9323074]


Fleet Finance Inc., et al.; Analysis To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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SUMMARY: The consent agreement in this matter settles 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 
complaint that accompanies the consent agreement and the terms of the 
consent order--embodied in the consent order--that would settle these 
allegations.

DATES: Comments must be received on or before September 28, 1999.

ADDRESSES: Comments should be directed to: FTC/Office of the Secretary, 
Room 159, 600 Pennsylvania Avenue, NW, Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT: Carole L. Reynolds or Thomas E. Kane, 
FTC/S-4429, 601 Pennsylvania Avenue, NW, Washington, DC 20580, (202) 
326-3230 or (202) 326-2304.

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 complaint. An electronic copy of the full text of 
the consent agreement package can be obtained from the FTC Home Page 
(for July 26, 1999), on the World Wide Web, at ``http://www.ftc.gov/os/
actions97.htm.'' A paper copy can be obtained from the FTC Public 
Reference Room, Room H-130, 600 Pennsylvania Avenue, NW, Washington, DC 
20580, either in person or by calling (202) 326-3627.
    Public comment is invited. Comments should be directed to: FTC/
Office of the Secretary, room 159, 600 Pennsylvania Avenue, NW, 
Washington, DC 20580. Two paper copies of each comment should be filed, 
and should be accompanied, if possible, by a 3\1/2\ inch diskette 
containing an electronic copy of the comment. Such comments or views 
will be considered by the Commission and will be available for 
inspesction 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 an agreement, subject to 
final

[[Page 41430]]

approval, to a proposed consent order from Fleet Finance, Inc., Home 
Equity U.S.A, Inc. (Rhode Island), and Home Equity U.S.A., Inc. 
(Delaware) (collectively referred to as ``respondents'').
    The proposed order would settle charges that Fleet Finance, Inc., 
incorporated in Delaware (``Fleet Finance''), and a related, now-
defunct corporation, Fleet Finance, Inc., which was incorporated in 
Rhode Island, violated the Truth in Lending Act (``TILA''), and its 
implementing Regulation Z, and the Federal Trade Commission Act (``FTC 
Act''). The TILA and Regulation Z require creditors to provide 
consumers with written disclosures of the costs and terms of consumer 
credit transactions and also establish various substantive protections 
for consumers, including the right of recission in certain mortgage 
transactions. Section 5 of the FTC Act prohibits, inter alia, deceptive 
acts or practices in or affecting commerce.
    The proposed 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 Fleet Finance \1\ has extended consumer 
credit transactions in which Fleet Finance acquired or retained a 
security interest in the consumers' principal dwellings and failed to 
provide the consumers with the right to rescind the credit transactions 
by: (a) Failing to provide consumers with notices of the right to 
rescind; (b) waiving consumers' right to rescind, and disbursing funds, 
pursuant to rescission waivers that were insufficient; and (c) failing 
to take actions terminating the security interest and returning any 
money and property given by the consumers when consumers exercise their 
right to rescind. According to the complaint, these practices violate 
Sections 125(a), (b) and (d) of the TILA, 15 U.S.C. 1635(a), (b), and 
(d); and Sections 226.23(a), (b), (c), (d) and (e) of Regulation Z, 12 
CFR 226.23(a), (b), (c), (d) and (e); and constitute deceptive acts or 
practices in violation of Section 5(a) of the FTC Act, 15 U.S.C. 45(a). 
The complaint also alleges that Fleet Finance purchased consumer loan 
transactions through assignments in which Fleet Finance acquired or 
retained security interests in the consumers' principal dwellings that 
failed in these same ways to provide the consumers with the right to 
rescind the credit transactions. The complaint alleges that, based on 
Fleet Finance's assignee liability in Section 131 of the TILA, 15 
U.S.C. 1641, such purchases violate these same sections of the TILA and 
Regulation Z; and constitute deceptive acts or practices in violation 
of Section 5(a) of the FTC Act, 15 U.S.C. 45(a).
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    \1\ Fleet Finance is the entity charged in the complain as 
engaging in specified violations of the TILA, Regulation Z and the 
FTC Act. Fleet Finance, as well as successor corporations, Home 
Equity U.S.A., Inc. (Rhode Island) and Home Equity U.S.A., Inc. 
(Delaware), are respondents in the Agreement Containing Consent 
Order.
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    The complaint alleges that, in extending consumer credit 
transactions, Fleet Finance also has failed to provide consumers with 
all TILA disclosures of the costs and terms of credit and/or to provide 
all TILA disclosures prior to consummation of credit transactions. 
According to the complaint, these failures violate Sections 121 and 128 
of the TILA, 15 U.S.C. 1631 and 1638; and Sections 226.17 and 226.18 of 
Regulation Z, 12 CFR 226.17 and 226.18 of Regulation Z, 12 CFR 226.17 
and 226.18; and constitute deceptive acts or practices in violation of 
Section 5(a) of the FTC Act, 15 U.S.C. 45(a). The complaint also 
alleges that Fleet Finance has purchased consumer credit transactions 
through assignments that failed to provide all the TILA disclosures of 
the costs and terms of credit and/or failed to provide all the 
disclosures prior to consummation of credit transactions. According to 
the complaint, based on Fleet Finance's assignee liability in Section 
131 of the TILA, 15 U.S.C. 1641, such purchases violate Sections 121 
and 128 of the TILA, 15 U.S.C. 1631 and 1638, and Sections 226.17 and 
226.18 of Regulation Z, 12 CFR 226.17 and 226.18; and constitute 
deceptive acts or practices in violation of Section 5(a) of the FTC 
Act, 15 U.S.C. 45(a).
    The complaint further alleges that Fleet Finance, in consumer 
credit transactions that it extended, has failed to provide or failed 
to provide accurately certain TILA disclosures, including but not 
limited to the annual percentage rate; the number, amount, and timing 
of payments scheduled to repay the obligation; and the total of 
payments. These failures allegedly violate Sections 107 and 128 of the 
TILA, 15 U.S.C. 1606 and 1638; and Sections 226.18(e), (g) and (h) and 
2226.22 of Regulation Z, 12 CFR 226.18(e), (g) and (h) and 226.22; and 
constitute deceptive acts or practices in violation of Section 5(a) of 
the FTC Act, 15 U.S.C. 45(a). The complaint also alleges that Fleet 
Finance purchased consumer credit transactions through assignments that 
failed to provide or failed to provide accurately the TILA disclosures 
listed above in this paragraph. The complaint alleges that, based on 
Fleet Finance's assignee liability in Section 131 of the TILA, 15 
U.S.C. 1641, such purchases violate Section 128 of the TILA, 15 U.S.C. 
1638, and Sections 226.18(a), (g) and (h) of Regulation Z, 12 CFR 
226.18(a), (g), and (h); and constitute deceptive acts or practices in 
violation of Section 5(a) of the FTC Act, 15 U.S.C. 45(a).
    The complaint also alleges that, in consumer credit transactions it 
extended, Fleet Finance has failed to retain TILA disclosures, TILA 
notices of the right to rescind, promissory notes and/or other evidence 
of the terms and conditions of consumer credit transactions for two 
years after the date disclosures are required to be made or action is 
required to be taken concerning the transaction. The compliant alleges 
that these acts and practices violate Section 226.25(a) of Regulation 
Z, 12 CFR 226.25(a). The complaint further alleges that Fleet Finance 
has purchased consumer credit transactions through assignments that 
failed to retain the documents and other evidence described above in 
this paragraph. According to the complaint, based on Fleet Finance's 
assignee liability in Section 131 of the TILA, 15 U.S.C. 1641, such 
purchases violate Section 226.25(a) of Regulation Z, 12 CFR 226.25(a).
    To remedy the violations charged and to prevent respondents from 
engaging in similar acts and practices in the future, the proposed 
order contains a consumer redress program and injunctive provisions. 
The order requires respondents to pay $1.3 million for the redress 
program and administrative costs. Specific aspects of the redress 
program are contained in Appendix A to the proposed order. The program 
applies to certain consumers whose mortgage loans were originated or 
purchased by Fleet Finance, or Fleet Finance incorporated in Rhode 
Island (``Fleet Finance (RI)''), during January 1, 1990-December 31, 
1993. It covers certain consumers whose mortgage loans, inter alia, 
were either paid off to or written off by Fleet Finance, Fleet Finance 
(RI), or Fleet Financial Group, Inc. (``FFG''), a parent corporation, 
except by foreclosure (``eligible consumers'' or ``ECs''), or were paid 
off by foreclosure by Fleet Finance, Fleet Finance (RI), or FFG 
(``eligible foreclosed consumers'' or ``EFCs''), or who contact an 800-
number set up

[[Page 41431]]

under the proposed order and who provide information showing they are, 
in essence, ECs or EFCs (``qualified consumers'' or ``QCs'').\2\
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    \2\ See proposed order, definition nos. 10-11. Such consumers 
must meet definition nos. 9(a) and 9(c), or definition nos. 10(a) 
and 10(c). Such consumers need not meet definition nos. 9(b) or 
10(b), which require consumers' names to be reflected in certain 
records.
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    With ten business days after service of the order, respondents will 
deliver to the independent agent that will conduct the redress program 
two lists of the ECs and EFCs in their records.\3\ The independent 
agent will then add those consumers, who are not on such lists, that 
the Division of Enforcement of the Commission's Bureau of Consumer 
Protection (``DOE'') specifies are ECs or EFCs and provides to the 
independent agent (i.e., consumers who have contacted Commission staff 
in the past several years regarding such loans). The independent agent 
will mail to all consumers on the two enhanced lists a letter 
substantially identical to the letter attached as Appendix B to the 
order (``Appendix B letter'') and a claim form substantially identical 
to the form attached as Appendix C to the order (``Claim Form''). 
Consumers receiving the Appendix B letter and the Claim Form will have 
sixty days from the date of their Appendix B letter to return their 
Claim Form to the independent agent.
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    \3\ If, before the date of service of the order, respondents 
have provided final copies of such lists, they will submit a sworn 
statement to that effect and need not provide additional lists after 
the order is served.
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    As noted above, the order also permits consumers who learn about 
this settlement and think they might fall within the definitions of 
either an ``eligible consumer'' or an ``eligible foreclosed consumer'' 
(even though they are not on the two enhanced lists) to call an 800-
number staffed by the independent agent within sixty days after the 
date of the order.\4\ The independent agent will inform the consumers 
that they must submit to the independent agent, within ninety days 
after the date of the order, documents showing that they meet the 
definition of an EC or an EFC (even though they are not on the two 
enhanced lists). Within 120 days after the date of the order, the 
independent agent will review any documents submitted, decide which 
consumers, if any, qualify for a redress payment, and submit to DOE a 
list of those consumers for that Division's approval. If the 
independent agent is unable to decide whether a particular consumer 
qualifies, the independent agent will forward the consumer's documents 
to DOE, who will make the determination.
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    \4\ The ``date of the order'' refers to the date when the order 
is served on respondents, which will not occur until after the end 
of the sixty-day comment that begins today.
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    After receiving the list of consumers whom DOE has deemed 
``qualified consumers,'' the independent agent will calculate, and 
submit to DOE for approval, the amount of redress that, according to 
the independent agent, should go to each consumer (``proposed 
amount''). This proposed amount will be the same for each consumer who 
receives a redress payment. The independent agent will calculate the 
proposed amount by dividing the ``total available redress'' by the 
number of consumers permitted to receive a redress payment. The ``total 
available for redress'' will be the $1.3 million paid by respondents, 
minus: the amount of the independent agent's estimated fees; $10,000 to 
be reserved for contingencies; and an additional amount, if the 
independent agent deems it appropriate, to be reserved to pay the 
redress fund's tax liabilities.\5\ The number of consumers permitted to 
receive a redress payment will be the total of (1) those consumers who 
were sent an Appendix B letter and submitted a Claim Form, and (2) 
those consumers who were deemed qualified consumers under Paragraph 
VIII of Appendix A. The amount of the redress payment to each consumer 
will not exceed $1000. In addition, no consumer will receive more than 
one payment, regardless of the number of transactions he or she may 
have had that were either extended or purchased by Fleet Finance or 
Fleet Finance (RI).\6\
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    \5\ See Appendix A, Par. IX.
    \6\ If all consumers permitted to receive a redress payment have 
received the $1000 maximum and funds remain after payment of 
administrative costs, the remaining funds will be paid to the United 
States Treasury.
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    After DOE reviews the proposed amount, makes any necessary 
corrections, and informs the independent agent of the approved amount, 
the independent agent will mail checks in the approved amount to all 
consumers permitted to receive a redress payment. Along with each 
check, the independent agent will mail a letter substantially identical 
to the letter attached to the order as Appendix D and the Commission's 
consumer education pamphlet pertaining to home equity loans. Consumers 
will have ninety days after their checks are mailed to cash them.\7\
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    \7\ The independent agent will redeposit the funds from any 
undeposited checks into the redress fund. If DOE determines that the 
redress fund has enough money to merit a second-round distribution 
to consumers, DOE will instruct the independent agent to conduct 
such a distribution. If a second-round distribution is not feasible, 
the independent agent will pay the funds from the undeposited checks 
to the Treasury instead.
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    Those consumers who are not deemed ``qualified consumers'' by DOE 
will receive a letter substantially identical to the letter attached to 
the order as Appendix E. The independent agent will maintain a toll-
free number for consumers covered by the order that will be included on 
all appendix B, D, and E letters.
    The order prohibits respondents from communicating with ECs or EFCs 
concerning the redress program, except for refer consumers to the 800-
number provided by the independent agent, until the Commission staff 
has notified respondents that the redress program has been completed.
    The proposed order prohibits respondents from misrepresenting the 
following in connection with any extension of consumer credit or 
advertisement to promote any extension of credit: the annual percentage 
rate; the number, amount, and timing of payments scheduled to repay the 
obligation and the total of payments; the right to rescind the credit 
transaction; or any term or condition of financing for any consumer 
credit transaction. The injunctive provisions also require respondents 
to make all the disclosures required by the provisions of the TILA, as 
amended, and Regulation Z and the Regulation Z Commentary, as amended, 
that govern transaction, such as the annual percentage rate, the total 
of payments, and the number, amount, and timing of scheduled payments.
    In connection with rescindable credit transactions under Regulation 
Z, as amended, the proposed order prohibits respondents from: (1) 
Failing to deliver to consumers two copies of a proper Notice of Right 
to Rescind, as required by Regulation Z, as amended; (2) modifying or 
waiving a consumer's right to rescind the transaction unless the 
consumer gives the applicable respondent a dated written statement that 
describes a bona fide personal financial emergency, specifically 
modifies or waives the right to rescind the credit transaction, and 
bears the signature of all consumers entitled to rescind the credit 
transactions, as required by Regulation Z, as amended; (3) disbursing 
any money (other than to escrow), performing any service, or delivering 
any material unless and until (a) time has expired for receipt of the 
rescission notice and the applicable respondent has not received notice 
of the rescission from the consumer, (b) consumers entitled to waive 
their right to rescind do so during the three-day

[[Page 41432]]

rescission period, or (c) after midnight of the third business day 
following the later of consummation of the credit transaction, delivery 
of the rescission notice, or delivery of all material disclosures 
required by the TILA and Regulation Z, as amended, the applicable 
respondent obtains a signed written statement from all consumers 
entitled to rescind the credit transaction stating that three business 
days have passed since the later of consummation of the credit 
transaction, delivery of the rescission notice of delivery of all 
material disclosures, and no consumer has rescinded the credit 
transaction; and (4) failing to take all actions necessary to terminate 
the security interest created under the consumer's credit transaction 
and return any money that the consumer has given in connection with the 
credit transaction when the consumer exercises his or right to rescind, 
as required by Regulation Z, as amended.
    The proposed order also prohibits respondents from failing to make 
all disclosures, and in the manner, required by the TILA and Regulation 
Z, as amended, and from failing in any other manner to meet the 
requirements of the TILA and Regulation Z, as amended, including but 
not limited to 15 U.S.C. 1615, as amended.
    The proposed order also prohibits respondents from purchasing any 
consumer credit transaction in which the disclosures required by 
Sections 121, 122, 125, and 128 of the TILA, 15 U.S.C. 1631, 1632, 
1635, and 1638, as amended, violate, on their face, any provisions of 
the TILA, Regulation Z and the Commentary, as amended, by, for example, 
inaccuracies or incompleteness or absence of disclosures required by 
the TILA, Regulation Z, and the Regulation Z Commentary.
    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 its 
terms in any way.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 99-19519 Filed 7-29-99; 8:45 am]
BILLING CODE 6750-01-M