[Federal Register Volume 64, Number 235 (Wednesday, December 8, 1999)]
[Notices]
[Pages 68687-68689]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-31795]


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FEDERAL TRADE COMMISSION

[File Nos. 992 3082; 992 3078; 992 3081; 992 3080; 992 3116; and 992 
3079]


Dunphy Nissan, Inc., et al.; Marty Sussman Organization, Inc., et 
al.; Norristown Automobile Co., Inc., et al.; Northeast Auto Outlet, 
Inc., et al.; Pacifico Ardmore, Inc., et al.; and Pacifico Ford, Inc., 
et al.; Analysis To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreements.

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SUMMARY: The consent agreements in these six 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 January 31, 2000.

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

FOR FURTHER INFORMATION CONTACT: Sally Pitofsky, FTC/S-4429, 600 
Pennsylvania Ave., NW, Washington, D.C. 20580. (202) 326-3318.

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 agreements 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 complaints. Electronic copies of the full 
text of the consent agreement packages can be obtained from the FTC 
Home Page (for December 2, 1999), 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, 600 Pennsylvania Avenue, NW, 
Washington, D.C. 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. Ave., NW, 
Washington, D.C. 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 
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 Orders To Aid Public Comment

    Summary: The Federal Trade Commission has accepted separate

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agreements, subject to final approval, from respondents Dunphy Nissan, 
Inc. and Serge Naumovsky (``Dunphy''); Norristown Automobile Co., Inc. 
and William Milliken (``Norristown''); Northeast Auto Outlet, Inc. and 
Arthur Micchelli (``Northeast''); Pacifico Ardmore, Inc. and Kerry J. 
Pacifico (``Pacifico Ardmore''); Pacifico Ford, Inc. and Kerry T. 
Pacifico (``Pacifico Ford''); and Marty Sussman Organization, Inc. and 
Martin E. Sussman (``Sussman'') (together ``respondents''). The persons 
named in these actions are named individually and as officers of their 
respective corporations.
    The proposed consent orders have been placed on the public record 
for sixty (60) days for receipt 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 agreement or make final the agreements' proposed 
orders.

I. Complaint Allegations

A. FTC Act Violations

    The complaints against the respondents allege that their automobile 
lease advertisements violate 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. Section 
5 of the FTC Act prohibits false, misleading, or deceptive 
representations or omissions of materials 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. 1601-1667e; 12 CFR part 213; 12 CFR part 
226.
    The complaints against respondents allege that their lease 
advertisements represent that consumers can lease the advertised 
vehicles at the terms prominently stated in the advertisements, 
including but not necessarily limited to the monthly payment amount and 
the downpayment amount. These lease advertisements, according to the 
complaints, have failed to disclose, and/or failed to disclose 
adequately, additional terms pertaining to the lease offer, such as the 
total amount due at lease inception. The complaints allege that this 
information does not appear at all or appears in fine print in the 
advertisements and that the information would be material to consumers 
in deciding whether to visit respondents' dealerships and/or whether to 
lease an automobile from respondents. These practices, according to the 
complaints, constitute deceptive practices in violation of Section 5(a) 
of the FTC Act.
    The complaints against Dunphy and Northeast also allege that these 
respondents misrepresent that consumers can purchase the advertised 
vehicles for the monthly payment amounts prominently stated in the 
advertisements. According to the complaints, the monthly payment 
amounts prominently stated in the advertisements are components of 
lease offers and not credit offers. These practices, according to the 
complaints, constitute deceptive practices in violation of Section 5(a) 
of the FTC Act.
    The complaint against Dunphy further alleges that Dunphy 
misrepresents that the amount stated as ``down'' or ``downpayment'' is 
the total amount consumers must pay at lease inception to lease the 
advertised vehicles. According to the complaint, however, consumers are 
required to pay additional fees beyond the amount stated as ``down'' or 
``downpayment,'' including but not limited to the first month's 
payment, a security deposit, and/or a bank fee. This practice, 
according to the complaint, constitutes a deceptive practice in 
violation of Section 5(a) of the FTC Act.
    The complaint against Northeast also alleges that Northeast 
misrepresents that the offer to double consumers' downpayments up to 
$4,000 applied to the lease or credit offers advertised. According to 
the complaint, the offer to double consumers' downpayments up to $4,000 
was not available with the advertised lease or credit offers. This 
practice, according to the complaint, constitutes a deceptive practice 
in violation of Section 5(a) of the FTC Act.
    The complaints against Dunphy, Northeast, Norristown, and Pacifico 
Ardmore allege that their credit advertisements represent that 
consumers can purchase the advertised vehicles at the terms prominently 
stated in the advertisements, including but not necessarily limited to 
the sales price and/or downpayment amount. According to the complaints, 
these credit advertisements fail to disclose additional terms 
pertaining to the credit offer, such as the terms of repayment and the 
annual percentage rate. Such information is alleged to be material to 
consumers in deciding whether to visit respondents' dealerships and/or 
whether to purchase an automobile from respondents. These practices, 
according to the complaints, constitute deceptive practices in 
violation of Section 5(a) of the FTC Act.

B. CLA and Regulation M Violations

    The complaints allege that all respondents violated the CLA and 
Regulation M. The complaints allege that respondents' lease ads state a 
monthly payment amount and/or downpayment amount, but fail to disclose, 
and/or fail to disclose clearly and conspicuously, one or more of the 
following required terms: that the transaction advertised is a lease; 
the total amount due prior to or at consummation, or by delivery, if 
delivery occurs after consummation and that such amount: (1) excludes 
third-party fees that vary by state or locality, such as taxes, 
licenses, and registration fees, and discloses that fact or (2) 
includes third-party fees based on a particular state or locality and 
discloses that fact and the fact that such fees may vary by state or 
locality; whether or not a security deposit is required; the number, 
amounts, and timing of scheduled payments; and that an extra charge may 
be imposed at the end of the lease term where the liability of the 
consumer is based on the difference between the residual value of the 
leased property and its realized value at the end of the lease term.
    According to the complaints, the lease disclosures in respondents' 
lease advertisements are not clear and conspicuous because they appear 
in fine print and/or in an inconspicuous location. These practices, 
according to the complaints, violate the advertising requirements of 
the CLA and Regulation M.
    The complaints also allege that respondents' lease advertisements 
state a downpayment amount more prominently than the disclosure of the 
total amount due at lease signing. According to the complaints, these 
practices violate Regulation M.

C. TILA and Regulation Z Violations

    The complaints against Dunphy, Norristown, Northeast, Pacifico 
Ardmore, and Pacifico Ford allege that these respondents violated the 
TILA and Regulation Z. According to the complaints, these respondents 
state a monthly amount and/or a downpayment amount as terms for 
financing the purchase of the advertised vehicles, but fail to disclose 
the following items of information required by Regulation Z: the annual 
percentage rate and the terms

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of repayment. In addition, the complaints against all respondents 
allege that their credit ads do not properly state the finance charge 
as the annual percentage rate, as required by Regulation Z.

II. Proposed Orders

    The proposed orders prohibit respondents from disseminating 
advertisements that state the amount of any payment due at inception 
(excluding the monthly payment amount) or the fact that any or no 
inception payment is due without also disclosing with ``equal 
prominence'' the total amount a consumer must pay at lease signing or 
delivery. This requirement parallels an identical requirement found in 
Regulation M.
    The proposed orders also prohibit respondents from disseminating 
advertisements that state the amount of any payment or that any or no 
initial payment is required at lease signing or delivery, if delivery 
occurs after consummation, without disclosing clearly and conspicuously 
all of the terms required by Regulation M, as follows: that the 
transaction advertised is a lease; the total amount due at lease 
signing or delivery; whether or not a security deposit is required; the 
number, amounts, and timing of scheduled payments; and that an extra 
charge may be imposed at the end of the lease term in a lease in which 
the liability of the consumer at the end of the lease term is based on 
the anticipated residual value of the vehicle. This requirement is 
intended to enjoin the respondents from deceptively advertising only 
the most attractive portions of its lease offers by requiring clear and 
conspicuous disclosure of the information necessary for consumers to 
make informed decisions about advertised lease offers. This paragraph 
parallels the advertising disclosure requirements from the CLA and 
Regulation M. The proposed orders also prohibit respondents from 
violating the CLA and Regulation M.
    In addition, the proposed order for Dunphy prohibits Dunphy from 
misrepresenting the costs of leasing, including the total due at lease 
inception. The proposed orders for respondents Dunphy and Northeast 
prohibit these respondents from misrepresenting that advertised terms 
apply to a cash or credit offer, when, in fact, the terms apply to an 
offer to lease the advertised vehicle. The proposed order for Northeast 
also prohibits Northeast from misrepresenting the availability of any 
advertised offer.
    With respect to credit advertisements, the proposed orders prohibit 
respondents from stating the amount or percentage of any downpayment, 
the number of payments or period of repayment, the amount of any 
payment, or the amount of any finance charge, without disclosing 
clearly and conspicuously all of the terms required by Regulation Z, as 
follows: the amount or percentage of the downpayment; the terms of 
repayment; and the correct annual percentage rate, using that term or 
the abbreviation ``APR.'' If the annual percentage rate may be 
increased after consummation of the credit transaction, that fact must 
also be disclosed.
    The proposed orders also prohibit respondents from stating a rate 
of finance charge without stating the rate as an ``annual percentage 
rate'' or ``APR.'' The proposed orders also prohibit all respondents 
from violating the TILA or Regulation Z.
    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.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 99-31795 Filed 12-1-99; 8:45 am]
BILLING CODE 6750-01-M