Jerry's Ford Sales, Inc., et al.; Proposed Consent Agreement With Analysis to Aid Public Comment

FEDERAL TRADE COMMISSION

[File No. 932-3340]

Jerry's Ford Sales, Inc., et al.; 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 and deceptive acts and practices and unfair methods of

competition, this consent agreement, accepted subject to final

Commission approval, would require, among other things, three

corporations in Annandale, Virginia and Leesburg, Virginia and their

President and CEO, individually and as an officer of the three

corporations, in any advertisement to promote any extension of consumer

credit, to cease and desist from misrepresenting the terms of financing

the purchase of a vehicle, including whether there may be a balloon

payment and the amount of any balloon payment. The order would also

require the respondents, in any advertisement to promote any extension

of consumer credit, to cease and desist from failing to state all terms

required by Sections 226.24(b) and 226.24(c) of Regulation Z. The order

would also require the respondents, in any advertisement to aid,

promote or assist any consumer lease, to cease and desist from failing

to state all terms required by Section 213.5(c) of Regulation M.

DATES: Comments must be received on or before August 8, 1995.

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: Carole Reynolds, FTC/S-4429,

Washington, D.C. 20580. (202) 326-3230.

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 of 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 Jerry's Ford Sales, Inc.: John's Ford Inc. dba

Jerry's Leesburg Ford; Jerry's Chevrolet Geo Oldsmobile, Inc.;

corporations, and Jerry C. Cohen, individually and as an officer of

the corporations.

[Docket No. 932-3340]

The agreement herein, by and between Jerry's Ford Sales, Inc.,

John's Ford, Inc. dba Jerry's Leesburg Ford, and Jerry's Chevrolet Geo

Oldsmobile, Inc., corporations, by their duly authorized officer, and

Jerry C. Cohen, individually and as an officer of the corporations

(hereinafter sometimes referred to as ``proposed respondents'' or

``respondents''), and counsel for the Federal Trade Commission, is

entered into in accordance with the Commission's Rule governing consent

order procedures. In accordance therewith the parties hereby agree

that:

1. Jerry's Ford Sales, Inc. is a corporation organized, existing,

and doing business under and by virtue of the laws of the State of

Delaware, with its principal office and place of business located at

6510 Little River Turnpike, Annandale, Virginia 22003. Proposed

respondent admits all the jurisdictional facts set forth in the draft

complaint.

2. John's Ford, Inc. dba Jerry's Leesburg Ford is a corporation

organized, existing, and doing business under and by virtue of the laws

of the Commonwealth of Virginia, with its principal office and place of

business located at 847 East Market Street, Leesburg, Virginia 22075.

Proposed respondent admits all the jurisdictional facts set forth in

the draft complaint.

3. Jerry's Chevrolet Geo Oldsmobile, Inc., is a corporation

organized, existing, and doing business under and by virtue of the laws

of the Commonwealth of Virginia, with its principal office and place of

business located at 325 East Market Street, Leesburg, Virginia 22075.

Proposed respondent admits all the jurisdictional facts set forth in

the draft complaint.

4. Jerry C. Cohen is an individual and an officer and director of

the aforenamed corporate respondents. He formulates, directs and

controls the acts and practices of the aforenamed corporate

respondents, including the acts and practices hereinafter set forth.

His business address is 6510 Little River Turnpike, Annandale, Virginia

22003. Proposed respondent admits all the jurisdictional facts set

forth in the draft complaint.

5. Proposed respondents waive:

a. Any further procedural steps;

b. The requirement that the Commission's decision contain a

statement of findings of fact and conclusions of law;

c. All rights to seek judicial review or otherwise to challenge or

contest the validity of the order entered pursuant to this agreement;

and

d. All claims under the Equal Access to Justice Act.

6. This agreement shall not become 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

the 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 the proposed respondents, 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.

7. This agreement is for settlement purposes only and does not

constitute [[Page 30547]] an admission by proposed respondents that the

law has been violated as alleged in the draft of the complaint or that

the facts alleged in the draft complaint, other than the jurisdictional

facts, are true.

8. This agreement contemplates that, if it is accepted by the

Commission, and if such acceptance is not subsequently withdrawn by the

Commission's Rules, the Commission may, without further notice to the

proposed respondents, (a) issue its complaint corresponding in form and

substance with the draft of the complaint and its decision containing

the following order to cease and desist in disposition of the

proceeding and (b) 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 respondents' addresses as stated in this agreement shall

constitute service. Proposed respondents waive any right they 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.

9. Proposed respondents have read the proposed complaint and order

contemplated hereby. Proposed respondents understand that once the

order has been issued, they will be required to file one or more

compliance reports showing that they have fully complied with the

order. Proposed respondents further understand that they 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 respondent Jerry's Ford Sales, Inc., John's

Ford, Inc. dba Jerry's Leesburg Ford, Jerry's Chevrolet Geo Oldsmobile

Inc., corporations, their successors and assigns and their officers,

and Jerry C. Cohen, individually and as an officer of the corporate

respondents, and respondents' agents, representatives, and employees,

directly or through any corporation, subsidiary, division, or any other

device, in connection with any advertisement to promote directly or

indirectly any extension of consumer credit, as ``advertisement,'' and

``consumer credit'' are defined in the TILA and Regulation Z, do

forthwith cease and desist from:

A. Misrepresenting in any manner, directly or by implication, the

terms of financing the purchase of a vehicle, including but not limited

to whether there may be a balloon payment and the amount of any balloon

payment.

B. Stating a rate of finance charge without stating the rate as an

``annual percentage rate'' or the abbreviation ``APR,'' using that

term, and failing to calculate the rate in accordance with Regulation

Z. If the annual percentage rate may be increased after consummation,

the advertisement shall state that fact. The advertisement shall not

state any other rate, except that a simple annual rate or periodic rate

that is applied to an unpaid balance may be stated in conjunction with,

but not more conspicuously than, the annual percentage rate.

(Sections 144 and 107 of the TILA, 15 U.S.C. 1664 and 1606, and

Sections 226.24(b) and 226.22 of Regulation Z, 12 CFR 226.24(b) and

226.22, as more fully set out in Sections 226.24(b) and 226.22 of

the Federal Reserve Board's Official Staff Commentary to Regulation

Z, 12 CFR 226.24(b) and 226.22, respectively.)

C. Stating any number or amount of payment(s) required to repay the

debt, without stating accurately, clearly and conspicuously, all of the

terms required by Regulation Z, as follows:

(1) The amount or percentage of the downpayment;

(2) The terms of repayment, including the amount of any balloon

payment, and

(3) The 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.

Section 144 of the TILA, 15 U.S.C. 1664, and Section 226.24(c) of

Regulation Z, 12 CFR 226.24(c), as more fully set out in Section

226.24(c) of the Federal Reserve Board's Official Staff Commentary

to Regulation Z, 12 CFR 226.24(c).)

D. 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 stating, clearly and

conspicuously, all of the terms required by Regulation Z, as follows:

(1) The amount or percentage of the downpayment;

(2) The terms of repayment, and

(3) The 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.

(Section 144 of the TILA, 15 U.S.C. 1664, and Section 226.24(c) of

Regulation Z, 12 CFR 226.24(c).)

E. Failing to state only those terms that actually are or will be

arranged or offered by the creditor, in any advertisement for credit

that states specific credit terms, as required by Regulation Z.

(Section 144 of the TILA, 15 U.S.C. 1664, and Section 226.24(a) of

Regulation Z, 12 CFR 226.24(a).)

F. Failing to comply in any other respect with Regulation Z and the

TILA.

(Regulation Z, 12 C.F.R. 226, as amended, and the TILA, 15 U.S.C.

1601-1667, as amended.)

II

It is ordered that respondents Jerry's Ford Sales, Inc., John's

Ford, Inc. dba Jerry's Leesburg Ford, Jerry's Chevrolet Geo Oldsmobile,

Inc., corporations, their successors and assigns and their officers,

and Jerry C. Cohen, individually and as an officer of the corporate

respondents, and respondents' agents, representatives, and employees,

directly or through any corporation, subsidiary, division, or any other

device, in connection with any advertisement to aid, promote or assist

directly or indirectly any consumer lease, as ``advertisement,'' and

``consumer lease'' are defined in the CLA and Regulation M, do

forthwith cease and desist from:

A. Stating the amount of any payment, the number of required

payments, or that any or no downpayment or other payment is required at

consummation of the lease, unless all of the following items are

disclosed, clearly and conspicuously, as applicable, as required by

Regulation M:

(1) That the transaction advertised is a lease;

(2) The total amount of any payment such as a security deposit or

capitalized cost reduction required at the consummation of the lease,

or that no such payments are required;

(3) The number, amounts, due dates or periods of scheduled

payments, and the total of such payments under the lease;

(4) A statement of whether or not the lessee has the option to

purchase the leased property and at what price and time (the method of

determining the price may be substituted for disclosure of the price),

and

(5) A statement of the amount or method of determining the amount

of [[Page 30548]] any liabilities the lease imposes upon the lessee at

the end of the term and a statement that the lessee shall be liable for

the difference, if any, between the estimated value of the leased

property and its realized value at the end of the lease term, if the

lessee has such liability.

(Section 184 of the CLA, 15 U.S.C. 1667c, and Section 213.5(c) of

Regulation M, 12 CFR 213.5(c).)

B. Stating that a specific lease of any property at specific

amounts or terms is available unless the lessor usually and customarily

leases or will lease such property at those amounts or terms, as

required by Regulation M.

(Section 184 of the CLA, 15 U.S.C. 1667c, and Section 213.5(a) of

Regulation M, 12 CFR 213.5(a).)

C. Failing to comply in any other respect with Regulation M and the

CLA.

(Regulation M, 12 CFR 213, and the CLA, 15 U.S.C. 1667-1667e, as

amended.)

III

It is further ordered that respondents, their successors and

assigns shall distribute a copy of this order to any present or future

officers, agents, representatives, and employees having responsibility

with respect to the subject matter of this order and that respondents,

their successors and assigns shall secure from each such person a

signed statement acknowledging receipt of said order.

IV

It is further ordered that respondents, their successors and

assigns shall promptly notify the Commission at least thirty (30) days

prior to any proposed change in the corporate entity such as

dissolution, assignment, or sale resulting in the emergence of a

successor corporation, the creation or dissolution of subsidiaries, or

any other change in the corporation which may affect compliance

obligations arising out of the order.

V

It is further ordered that for five years after the date of service

of this order respondents, their successors and assigns shall maintain

and upon request make available all records that will demonstrate

compliance with the requirements of this order.

VI

It is further ordered that respondents, their successors and

assigns shall, within sixty days (60) 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 they have complied with

this order.

Analysis of Proposed Consent Order to Aid Public Comment

The Federal Trade Commission has accepted an agreement to a

proposed consent order from respondents Jerry's Ford Sales, Inc.,

John's Ford, Inc. dba Jerry's Leesburg Ford, Jerry's Chevrolet Geo

Oldsmobile, Inc., and Jerry C. Cohen, individually and as an officer of

the corporations.\1\

\1\ In this Analysis to Aid Public Comment, Jerry's Ford Sales,

Inc. and John's Ford, Inc. dba Jerry's Leesburg Ford are referred to

collectively as ``respondent Jerry's Ford.'' Jerry's Chevrolet Geo

Oldsmobile, Inc. is referred to as ``respondent Jerry's Chevy.''

Jerry C. Cohen is referred to as ``respondent Cohen.''

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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 respondents Jerry's Ford and Cohen have

disseminated or caused to be disseminated advertisement that state an

initial low monthly payment and in fine print, inter alia, state an

initial number of payments and another amount variously described as

``optional final payment,'' ``optional final price,'' of ``COP.'' The

complaint alleges that these advertisements misrepresent that the

remaining obligation is optional and fail to disclose that the

financing to be signed at purchase requires the consumer to make a

substantial balloon payment at the conclusion of the initial payments,

which is a mandatory obligation, and have therefore engaged in an

unfair and deceptive act or practice, in violation of Section 5(a) of

the Federal Trade Commission Act. The complaint also alleges that these

advertisements state an initial number and amount of payments required

to repay the indebtedness and another amount variously described as

``optional final payment,'' ``optional final price,'' or ``COP,'' but

fail to accurately state the terms of repayment, by failing to disclose

that the additional amount required is a final payment and by

inaccurately stating that the final amount is optional when, in fact,

it is mandatory based on the financing to be signed at purchase, in

violation of the TILA and Section 226.24(c) of Regulation Z.

The complaint also alleges that respondents Jerry's Ford and Cohen

have disseminated or caused to be disseminated advertisements that

state a rate of finance charge without stating that rate as an ``annual

percentage rate,'' using that term or the abbreviation ``APR,'' and

have failed to calculate that rate in accordance with Regulation Z, in

violation of the TILA and Sections 226.22 and 226.24(b) of Regulation

Z, and have also engaged in an unfair and deceptive act or practice, in

violation of Section 5(a) of the FTC Act.

The complaint also alleges that respondents Jerry's Chevy and Cohen

have disseminated or caused to be disseminated advertisements that

state an initial, low monthly payment and an initial number of payments

but fail to disclose that the financing to be signed at purchase

requires the consumer to make a substantial final balloon payment, and

have therefore engaged in an unfair and deceptive act or practice, in

violation of Section 5(a) of the FTC Act. The complaint also alleges

that these advertisements state an initial number and amount of

payments required to repay the indebtedness, but fail to accurately

state the terms of repayment, by failing to disclose the amount of the

final balloon payment required at the end of the initial payments,

based on the financing to be signed at purchase, in violation of the

TILA and Section 226.24(c) of Regulation Z.

The complaint also alleges that respondents Jerry's Ford, Jerry's

Chevy and Cohen have disseminated or caused to be disseminated

advertisements that state the amount of percentage of any downpayment,

the number of payments of period of repayment, or the amount of any

payment, but fail to state all of the terms required by Regulation Z,

as follows: The amount or percentage of the downpayment, the terms of

repayment, and the annual percentage rate, using that term or the

abbreviation ``APR,'' in violation of the TILA and Section 226.24(c) of

Regulation Z.

The complaint also alleges that respondents Jerry's Ford, Jerry's

Chevy and Cohen have disseminated or caused to be disseminated

advertisements that state the amount of any payment, the number of

required payments, or that any or no downpayment or other payment is

required at consummation of the lease, but fail to state all of the

terms required by Regulation M, as applicable and as follows: That the

transaction advertised is a lease; the total amount of any payment such

as a security deposit or capitalized cost reduction required at the

consummation of the lease or that no such payments are required; the

[[Page 30549]] number, amount, due dates or periods of scheduled

payments, and the total of such payments under the lease; and a

statement of whether or not the lessee has the option to purchase the

leased property and at what price and time (the method of determining

the price may be substituted for disclosure of the price), in violation

of the CLA and Section 213.5(c) of Regulation M.

The proposed order prohibits respondents Jerry's Ford, Jerry's

Chevy and Cohen, in any advertisement to promote any extension of

consumer credit, from misrepresenting in any manner, directly or by

implication, the terms of financing the purchase of a vehicle,

including but not limited to whether there may be a balloon payment and

the amount of any balloon payment.

The proposed order also prohibits respondents Jerry's Ford, Jerry's

Chevy and Cohen, in any advertisement to promote any extension of

consumer credit, from stating a rate of finance charge without stating

the rate as an ``annual percentage rate,'' using that term or the

abbreviation ``APR,'' and from failing to calculate the rate in

accordance with Regulation Z.

The proposed order also requires respondents Jerry's Ford, Jerry's

Chevy and Cohen, in any advertisement to promote any extension of

consumer credit, whenever the number or amount of payments required to

repay the debt are stated, to accurately, clear and conspicuously,

state all of the terms required by Regulation Z, as follows: the amount

or percentage of the downpayment; the terms of repayment, including the

amount of any balloon payment, and the annual percentage rate.

The proposed order also requires respondents Jerry's Ford, Jerry's

Chevy and Cohen, in any advertisement to promote any extension of

consumer credit, whenever the number or amount of payments required to

repay the debt are stated, to accurately, clearly and conspicuously,

state all of the terms required by Regulation Z, as follows: The amount

or percentage of the downpayment, the terms of repayment, and the

annual percentage rate. The proposed order also requires respondents

Jerry's Ford, Jerry's Chevy and Cohen to state only those terms that

actually are or will be arranged or offered by the creditor, in any

credit advertisement.

The proposed order also requires respondents Jerry's Ford, Jerry's

Chevy and Cohen, in any advertisement to aid, promote or assist any

consumer lease, whenever the amount of any payment, the number of

required payments, or that any or no downpayment or other payment is

required at consummation of the lease is stated, to state, clearly and

conspicuously, all of the terms required by Regulation M, as applicable

and as follows: That the transaction advertised is a lease; the total

amount of any payment such as a security deposit or capitalized cost

reduction required at the consummation of the lease, or that no such

payments are required; the number, amounts, due dates or periods of

scheduled payments, and the total of such payments under the lease; a

statement of whether or not the lessee has the option to purchase the

leased property and at what price and time (the method of determining

the price may be substituted for disclosure of the price), and a

statement of the amount or method of determining the amount of any

liabilities the lease imposes upon the lessee at the end of the term

and a statement that the lessee shall be liable for the difference, if

any, between the estimated value of the leased property and its

realized value at the end of the lease term if the lessee has such

liability. The proposed order also requires respondents in any lease

advertisement to state that a specific lease of any property at

specific amounts or terms is available only if the lessor usually and

customarily leases or will lease such property at those amounts or

terms.

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 an

way their terms.

Benjamin I. Berman,

Acting Secretary.

[FR Doc. 95-14138 Filed 6-8-95; 8:45 am]

BILLING CODE 6750-01-M