[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
