G.E.C.H., Inc.; Proposed Consent Agreement With Analysis To Aid Public Comment

FEDERAL TRADE COMMISSION

[File No. 932 3040]

G.E.C.H., 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 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 financed 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 20580.

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 and 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 G.E.C.H., Inc., a corporation. File No. 932

3040.

The Federal Trade Commission having initiated an investigation of

certain acts and practices of G.E.C.H., Inc., a corporation,

(hereinafter sometimes 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 and counsel

for the Federal Trade Commission that:

1. G.E.C.H., Inc., doing business as Great Expectations of Cherry

Hill (``GE Cherry Hill''), is a corporation organized, existing, and

doing business under and by virtue of the laws of the state of New

Jersey with its office and principal place of business located at One

Cherry Hill, Suite 600, Cherry Hill, NJ 08002.

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. [[Page 29604]]

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 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 statue 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 Cherry Hill, 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 TILA, 15 U.S.C. 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 Cherry Hill, 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. 1632 and 1638(a), and

Sections 226.17 and 226.18 of Regulation Z, 12 CFR 226.17 and 226.18;

C. Respondent GE Cherry Hill, 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 comply with the TILA, 15 U.S.C. 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.

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. Within thirty (30) days following the date of adjustments made

pursuant to this section, respondent shall direct Ira M. Goldberg,

Esquire, to review a statistically-valid sample of refunds. Respondent

shall provide the Federal Trade Commission with a certified letter from

Mr. Goldberg confirming that respondent has complied with Part II. A.

of this order;

C. 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 Member: Some time ago, the Federal Trade

Commission staff notified us that we had made some inadvertent

errors in filling out certain Truth in Lending Act disclosure forms,

which is the form you signed containing primarily the terms by which

you agreed to pay for your Great Expectations membership over some

period of time. After receiving the FTC notification, we went back

and recomputed your finance charge and determined that we had

miscalculated or improperly disclosed that charge, or the annual

percentage rate. We [[Page 29605]] are therefore enclosing a refund

check payable to your order in the amount of $______ which

represents the amount you were inadvertently overcharged.

[In addition, your future monthly payments have been

recalculated and, starting immediately, your monthly payments will

be $______.]

We hope that your experience with Great Expectations has been a

positive one and hope that you will feel free to notify us if there

is anything we can do for you. We regret any inconvenience this may

have caused you.

Very truly yours,

[signed]

Analysis of Proposed Consent Order To Aid Public Comment

The Federal Trade Commission has accepted an agreement to a

proposed consent order from respondent G.E.C.H., Inc. (``GE Cherry

Hill'').

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 the GE Cherry Hill, 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 Cherry Hill 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 Cherry Hill 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.

Finally, the complaint alleges that GE Cherry Hill failed to

identify the creditor in each transaction, and failed to provide the

total payments and the total sales price.

The consent agreement would prohibit GE Cherry Hill from failing to

accurately calculate and disclose the APR and any other terms by the

TILA.

The consent agreement includes a refund program requiring GE Cherry

Hill 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 Cherry Hill 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. 95-13655 Filed 6-2-95; 8:45 am]

BILLING CODE 6750-01-M