[Federal Register Volume 60, Number 107 (Monday, June 5, 1995)]
[Notices]
[Pages 29598-29601]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-13659]
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FEDERAL TRADE COMMISSION
[File No. 932 3040]
APM Enterprises--Minn Inc.; Proposed Consent Agreement with
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 acts and practices and unfair methods of competition, this
consent agreement, accepted subject to final Commission approval, would
require, among other things, a video dating service franchise to
properly and accurately disclose the annual percentage rate (APR) and
other credit [[Page 29599]] terms of financed memberships, as required
by the federal Truth in Lending Act, and would require the franchise to
make refunds to consumers who were misled by the undisclosed finance
charges and APRs.
DATES: Comments must be received on or before August 4, 1995.
ADDRESSES: Comments should be directed to: FTC/Office of the Secretary,
Room 159, 6th St. and Pa. Ave., NW., Washington, DC 20590.
FOR FURTHER INFORMATION CONTACT:
Stephen Cohen, FTC/S-4429, Washington, DC 20580. (202) 326-3222.
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 following consent agreement containing a consent order
to cease and desist, having been filed with an accepted, subject to
final approval, by the Commission, has been placed on the public record
for a period of sixty (60) days. 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)).
Agreement Containing Consent Order To Cease And Desist
In the Matter of APM Enterprises--Minn Inc., a corporation. File
No. 932 3040.
The Federal Trade Commission having initiated an investigation of
certain acts and practices of APM Enterprises--Minn Inc., a
corporation, (hereinafter referred to as proposed respondent) and it
now appearing that proposed respondent is willing to enter into an
agreement containing an order to cease and desist from the use of the
acts and practices being investigated,
It Is Hereby Agreed by and between proposed respondent, its
attorneys, and counsel for the Federal Trade Commission that:
1. APM Enterprises--Minn Inc., doing business as Great Expectations
of Minneapolis (``GE Minneapolis''), is a corporation organized,
existing, and doing business under and by virtue of the laws of the
state of Illinois, with its office and principal place of business
located at 3300 Edinborough Way, Suite 300, Edina, MN 55435.
2. Proposed respondent admits all the jurisdictional facts set
forth in the draft of complaint.
3. Proposed respondent waives:
(a) Any further procedural steps;
(b) The requirement that the Commission's decision contain a
statement of findings of fact and conclusions of law; and
(c) Any right to seek judicial review or otherwise to challenge or
contest the validity of the order entered pursuant to this agreement.
4. This agreement shall not become a part of the public record of
the proceeding unless and until it is accepted by the Commission. If
this agreement is accepted by the Commission, it, together with the
draft of complaint contemplated thereby, will be placed on the public
record for a period of sixty (60) days and information in respect
thereto publicly released. The Commission thereafter may either
withdraw its acceptance of this agreement and so notify proposed
respondent, in which event it will take such action as it may consider
appropriate, or issue and serve its complaint (in such form as the
circumstances may require) and decision, in disposition of the
proceeding.
5. This agreement is for settlement purposes only and does not
constitute an admission by proposed respondent that the law has been
violated as alleged in the draft of complaint, or that the facts
alleged in the draft complaint, other than the jurisdictional facts,
are true.
6. This agreement contemplates that, if it is accepted by the
Commission, and if such acceptance is not subsequently withdrawn by the
Commission pursuant to the provisions of Sec. 2.34 of the Commission's
Rules, the Commission may, without further notice to proposed
respondent, (1) issue its complaint corresponding in form and substance
with the draft of complaint here attached and its decision containing
the following order to cease and desist in disposition of the
proceeding, and (2) make information public in respect thereto. When so
entered, the order to cease and desist shall have the same force and
effect and may be altered, modified, or set aside in the same manner
and within the same time provided by statute for other orders. The
order shall become final upon service. Delivery by the U.S. Postal
Service of the complaint and decision containing the agreed-to order to
proposed respondent's address as stated in this agreement shall
constitute service. Proposed respondent waives any right it may have to
any other manner of service. The complaint may be used in construing
the terms of the order, and no agreement, understanding,
representation, or interpretation not contained in the order or the
agreement may be used to vary or contradict the terms of the order.
7. Proposed respondent has read the proposed complaint and order
contemplated hereby. It understands that once the order has been
issued, it will be required to file one or more compliance reports
showing that it has fully complied with the order. Proposed respondent
further understands that it may be liable for civil penalties in the
amount provided by law for each violation of the order after it becomes
final.
Order
I
It Is Ordered that:
A. Respondent GE Minneapolis, its successors and assigns, and its
officers, agents, representatives, and employees, directly or through
any corporation, subsidiary, division, or other device, in connection
with the offering of credit, do forthwith cease and desist from failing
to accurately calculate and disclose the annual percentage rate, as
required by Sections 107(a) and (c) of the Truth in Lending Act, 15
U.S.C. Secs. 1606 (a) and (c), and Sections 226.18(e) and 226.22 of
Regulation Z, 12 CFR 226.18(e) and 226.22;
B. Respondent GE Minneapolis, its successors and assigns, and its
officers, agents, representatives, and employees, directly or through
any corporation, subsidiary, division, or other device, in connection
with the offering of credit, do forthwith cease and desist from failing
to segregate the disclosures required by the TILA from all other
information provided in connection with the transaction, including from
the itemization of the amount financed, as required by Section
128(b)(1) of the TILA, 15 U.S.C. 1638(b)(1), and Section 226.17(a) of
Regulation Z, 12 CFR 226.17(a);
C. Respondent GE Minneapolis, its successors and assigns, and its
officers, agents, representatives, and employees, directly or through
any corporation, subsidiary, division, or other device, in connection
with the offering of credit, do forthwith cease and desist from failing
to make all disclosures in the manner, form, and amount required by
Sections 122 and 128(a) of the TILA, 15 U.S.C. Secs. 1632 and 1638(a),
and Sections 226.17 and 226.18 of Regulation Z, 12 CFR 226.17 and
226.18;
D. Respondent GE Minneapolis, its successors and assigns, and its
officers, agents, representatives, and employees, directly or through
any corporation, subsidiary, division, or other device, in connection
with the offering of credit, [[Page 29600]] do forthwith cease and
desist from failing to comply with the TILA, 15 U.S.C. Sec. 1601 et
seq., and Regulation Z, 12 CFR Part 226.
II
Refund Program
It Is Further Ordered that:
A. Within thirty (30) days following the date of service of this
order, respondent shall:
1. Determine to whom respondent disclosed on the original TILA
disclosure an annual percentage rate that was miscalculated by more
than one quarter of one percentage point below the annual percentage
rate determined in accordance with Section 226.22 of Regulation Z, 12
CFR 226.22, or that disclosed a finance charge that was miscalculated
by more than one dollar below the finance charge determined in
accordance with Section 226.4 of Regulation Z, 12 CFR 226.4, so that
each such person will not be required to pay a finance charge in excess
of the finance charge actually disclosed or the dollar equivalent of
the annual percentage rate actually disclosed, whichever is lower, plus
a tolerance of one quarter of one percentage point;
2. Calculate a lump sum refund and a monthly payment adjustment, if
applicable, in accordance with Section 108(e) of the TILA, 15 U.S.C.
Sec. 1607(e);
3. Mail a refund check to each eligible consumer in the amount
determined above, along with Attachment 1; and
4. Provide the Federal Trade Commission with a list of each such
consumer, the amount of the refund, the number of payments refunded,
the amount of adjustment for future payments and the number of future
payments to be adjusted.
B. No later than fifteen (15) days following the date of service of
this order, respondent shall provide the Federal Trade Commission with
the name and address of three independent accounting firms, with which
it, its officers, employees, attorneys, agents, and franchisees have no
business relationship. Staff for the Division of Credit Practices of
the FTC shall then have the sole discretion to choose one of the firms
(``independent agent'') and so advise respondent;
C. Within thirty (30) days following the date of adjustments made
pursuant to this section, respondent shall direct the independent agent
to review a statistically-valid sample of refunds. Respondent shall
provide the Federal Trade Commission with a certified letter from the
independent agent confirming that respondent has complied with Part
II.A. of this order;
D. All costs associated with the administration of the refund
program and payment of refunds shall be borne by the respondent.
III
It Is Further Ordered that respondent, its successors and assigns,
shall maintain for at least five (5) years from the date of service of
this order and, upon thirty (30) days advance written request, make
available to the Federal Trade Commission for inspection and copying
all documents and other records necessary to demonstrate fully its
compliance with this order.
IV
It Is Further Ordered that respondent, its successors and assigns,
shall distribute a copy of this order to any present or future officers
and managerial employees having responsibility with respect to the
subject matter of this order and that respondent, its successors and
assigns, shall secure from each such person a signed statement
acknowledging receipt of said order.
V
It Is Further Ordered that respondent, for a period of five (5)
years following the date of service of this order, shall promptly
notify the Commission at least thirty (30) days prior to any proposed
change in its corporate structure such as dissolution, assignment, or
sale resulting in the emergence of a successor corporation, the
creation or dissolution of subsidiaries or affiliates, or any other
change in the corporation that may affect compliance obligations
arising out of the order.
VI
It Is Further Ordered that respondent shall, within one hundred and
eighty (180) days of the date of service of this order, file with the
Commission a report, in writing, setting forth in detail the manner and
form in which it has complied with this order.
Attachment 1
Dear Great Expectations Customer: As part of our settlement with
the Federal Trade Commission for alleged violations of the Truth in
Lending Act, we are sending you the enclosed refund check in the
amount of $______. The refund represents the amount you were
overcharged as a result of errors made by Great Expectations in
calculating or disclosing the annual percentage rate or finance
charge.
[In addition, your future monthly payments have been reduced.
Starting immediately, your monthly payments will be ______.]
We regret any inconvenience this may have caused you.
Great Expectations
Analysis of Proposed Consent Order To Aid Public Comment
The Federal Trade Commission has accepted an agreement to a
proposed consent order from respondent APM Enterprises--Minn, Inc.
(``GE Minneapolis'').
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.
The complaint alleges that GE Minneapolis, as a creditor under the
Truth in Lending Act (``TILA''), has violated the TILA and its
implementing Regulation Z. Specifically, the TILA requires creditors to
make clear and consistent disclosures of the credit terms in a financed
transaction. GE Minneapolis failed to accurately calculate and disclose
the annual percentage rate (``APR''), which resulted in some consumers
paying more in interest charges than the franchise disclosed. The
complaint further alleges that this practice is unfair or deceptive in
violation of the Federal Trade Commission Act.
Additionally, the complaint alleges that GE Minneapolis failed to
accurately disclose the itemization of the amount financed, which
assists consumers in understanding whether they are being charged a
prepaid finance charge or whether any of the proceeds are being
distributed to third parties, and has failed to separate the
itemization from all other information provided in connection with the
transaction. Also, GE Minneapolis failed to provide a descriptive
explanation of the financing terms. For example, GE Minneapolis failed
to explain that the APR is ``the cost of your credit as a yearly rate''
and that the finance charge is ``the dollar amount the credit will cost
you.'' GE Minneapolis also failed to provide a description of the
amount financed, the total of payments, and the total sales price.
Additionally, the complaint alleges that GE Minneapolis failed to
conspicuously disclose the finance charge. The purpose of the required
disclosure is to make this term apparent to consumers.
Finally, the complaint alleges that GE Minneapolis failed to
identify the creditor in each transaction and failed to provide the
total sales price. [[Page 29601]]
The consent agreement would prohibit GE Minneapolis from failing to
accurately calculate and disclose the APR and any other terms required
by the TILA.
The consent agreement includes a refund program requiring GE
Minneapolis to make adjustments to the account of any consumer to whom
it disclosed an APR or finance charge that was lower than the amount
the consumer actually was required to pay.
The consent agreement would also require GE Minneapolis to maintain
records of its compliance with the consent agreement, distribute copies
of the agreement to its employees, and advise the Federal Trade
Commission of any changes in its corporate structure.
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 in any
way their terms.
Donald S. Clark,
Secretary.
[FR Doc. 95-13659 Filed 6-2-95; 8:45 am]
BILLING CODE 6750-01-M
