[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
