Felson Builders, Inc., et al.; Proposed Consent Agreement With Analysis to Aid Public Comment

FEDERAL TRADE COMMISSION

[File No. 932 3286]

Felson Builders, 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 acts and practices and unfair methods of competition, this

consent agreement, accepted subject to final Commission approval, would

require, among other things, three California firms and an officer to

comply with the full disclosure requirements of the Truth in Lending

Act and Regulation Z, its implementing regulation, in advertising

credit terms.

dates: Comments must be received on or before May 1, 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: Jeffrey Klurfeld, San Francisco

Regional Office, Federal Trade Commission, 901 Market St., Suite 570,

San Francisco, CA 94103. (415) 744-7920.

supplementary information: Pursuant to section 6(f) of the Federal

Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Sec. 2.34 of the

Commission 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

Sec. 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: Felson Builders, Inc., a corporation; Diamond

Crossing Associates, L.P., a limited partnership, dba D.C. Funding;

Elmhurst Partners, L.P., a limited partnership, dba Elmhurst

Funding; and Joseph L. Felson, individually and as an officer of

Felson Builders, Inc. File No. 932-3286.

[[Page 10862]] The Federal Trade Commission having initiated an

investigation of certain acts and practices of Felson Builders, Inc., a

corporation; Diamond Crossing Associates, L.P., a limited partnership,

dba D.C. Funding; Elmhurst Partners, L.P. a limited partnership, dba

Elmhurst Funding; Joseph L. Felson, individually and as an officer of

Felson Builders, Inc., and it now appearing that Felson Builders, Inc.,

a corporation; Diamond Crossing Associates, L.P., a limited

partnership, dba D.C. Funding; Elmhurst Partners, L.P., a limited

partnership, dba Elmhurst Funding; and Joseph L. Felson, individually

and as an officer of Felson Builders, Inc., hereinafter sometimes

referred to as proposed respondents, are 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 Felson Builders, Inc., by its

duly authorized officer; Diamond Crossing Associates, L.P., by its duly

authorized officer; Elmhurst Partners, L.P., by its duly authorized

officer; and Joseph L. Felson, individually and as an officer of Felson

Builders, Inc., and their attorneys, and counsel for the Federal Trade

Commission that:

1. (a) Proposed respondent Felson Builders, Inc., is a corporation

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

of the State of California.

(b) Proposed respondent Diamond Crossing Associates, L.P., is a

limited partnership organized, existing and doing business under and by

virtue of the laws of the State of California.

(c) Proposed respondent Elmhurst Partners, L.P., is a limited

partnership organized, existing and doing business under and by virtue

of the laws of the State of California,.

(d) Each of the above proposed respondents has its principal place

of business at 1290 B Street, Suite 210, Hayward, California 94541.

(e) Proposed respondent Joseph L. Felson is an officer of proposed

respondents Felson Builders, Inc. He formulates, directs and controls

the acts and practices of said proposed respondent, and his principal

place of business is the same as that of said proposed respondent.

2. Proposed respondents admit all the jurisdictional facts set

forth in the draft of complaint here attached.

3. 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.

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 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.

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

constitute an admission by proposed respondents that the law has been

violated as alleged in the draft of the complaint here attached, or

that the facts as alleged in the draft complaint, other than

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

respondents, (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

respondents' address 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.

7. 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 respondents Felson Builders, Inc., a

corporation, its successors and assigns, and its officers; Diamond

Crossing Associates, L.P., a limited partnership, dba D.C. Funding, its

successors and assigns, and its offices; Elmhurst Partners, L.P., a

limited partnership, dba Elmhurst Funding, its successors and assigns,

and its officers; and Joseph L. Felson, individually and as an officer

of Felson Builders, Inc.; and respondents' agents, representatives and

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

or other device, in connection with any extension of consumer credit,

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

directly or indirectly, any extension of consumer credit, as ``consumer

credit'' and ``advertisement'' are defined in Regulation Z (12 CFR part

226) to the Truth in Lending Act (``TILA'') (15 U.S.C. 1601-1667e, as

amended) do forthwith cease and desist from:

1. Failing to furnish consumers with the disclosures, as required

by Section 128 of the TILA, 15 U.S.C. 1638, and by Secs. 226.17(a) and

226.18 of Regulation Z, 12 CFR 226.17(a) and 226.18.

2. Failing to furnish consumers prior to the consummation of a

consumer credit transaction with the disclosures, as required by

Section 128 of the TILA, 15 U.S.C. 1638, and by Secs. 226.17(b) and

226.18 of Regulation Z, 12 CFR 226.17(b) and 226.18.

3. 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, 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 [[Page 10863]] 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 Sec. 236.24(c) of

Regulation Z, 12 CFR 226.24(c))

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

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

``APR,'' as required by 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.

(Sec. 144 of the TILA, 15 U.S.C. 1664, and Sec. 226.24(b) of

Regulation Z, 12 CFR 226.24(b))

5. Failing to comply in any other respect with the Truth in Lending

Act, 15 U.S.C. 1601-1667e, as amended, or its implementing regulation,

Regulation Z, 12 CFR part 226, as amended.

II

It is further ordered that respondents distribute a copy of this

order to all their operating divisions, if any, and to all present or

future personnel, agents or representatives having sales, advertising,

or policy responsibilities with respect to the subject matter of this

order, and that respondents secure from each such person a signed

statement acknowledging receipt of said order.

III

It is further ordered that respondents notify the Commission at

least thirty (30) days prior to any proposed change in any respondent

which is a corporation or limited partnership, such as dissolution,

assignment or sale resulting in the emergence of a successor

corporation or limited partnership, the creation or dissolution of

subsidiaries, or any other change in the corporation or limited

partnership which may affect compliance obligations arising out of the

order.

IV

It is further ordered that, for a period of five (5) years

following service upon him of this order, the individual respondent

named herein shall notify the Commission of the discontinuance of his

present business or employment and of his affiliation with any new

business or employment involved in the advertising and/or extension of

``consumer credit,'' as that term is defined in the Truth in Lending

Act and its implementing Regulation Z, no later than thirty (30) days

after such discontinuance and affiliation has occurred. Such notice

shall include the respondent's current business address and telephone

number and a statement as to the nature of the business or employment

in which he is engaged, as well as a description of his duties and

responsibilities and financial interest in the business.

V

It is further ordered that for five (5) 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 the respondents herein shall within

sixty (60) days after service upon them 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, subject to

final approval, to a proposed consent order from respondents Felson

Builders, Inc., a California corporation; Diamond Crossing Associates,

L.P., a limited partnership, dba D.C. Funding; Elmhurst Partners, L.P.,

a limited partnership, dba Elmhurst Funding; and Joseph L. Felson,

individually and as an officer of the corporation.

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 and take other appropriate action or make

final the agreement's proposed order.

The complaint alleges that respondents Diamond Crossing Associates,

L.P., and Elmhurst Partners, L.P. have failed to furnish consumers the

disclosures required by Regulation Z, the implementing regulation of

the Truth in Lending Act, in violation of Secs. 226.17(a) and 226.18 of

Regulation Z, and that respondents' practice constitutes an unfair and

deceptive act or practice in violation of section 5 of the Federal

Trade Commission Act.

The complaint also alleges that respondents Felson Builders, Inc.,

Diamond Crossing Associates, L.P., Elmhurst Partners, L.P., and Joseph

L. Felson, individually and as an officer of Felson Builders, Inc.,

have disseminated or caused to be disseminated advertisements that

state 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, 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, including the amount of any

balloon payment, and the annual percentage rate, using that term or the

abbreviation ``APR.'' The complaint alleges this practice to be in

violation of Secs. 226.24(c) of Regulation Z, and that it constitutes

an unfair and deceptive act or practice in violation of section 5 of

the Federal Trade Commission Act.

Finally, the complaint alleges that respondents Felson Builders,

Inc., Diamond Crossing Associates, L.P., Elmhurst Partners, L.P., and

Joseph L. Felson, individually and as an officer of Felson Builders,

Inc., have disseminated or caused to be disseminated advertisements

that failed to state the rate of a finance charge as an ``annual

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

required by Regulation Z, in violation of Sec. 226.24(b) of Regulation

Z.

The proposed order requires respondents to furnish consumers with

the disclosures required by Regulation Z, in connection with

respondents' extension of consumer credit.

The proposed order also requires respondents to furnish consumers,

prior to the consummation of a consumer credit transaction, with the

disclosures required by Regulation Z, in connection with respondents'

extension of consumer credit.

Finally, the proposed order requires respondents in any

advertisements to promote any extension of consumer credit, whenever

the amount or percentage of the downpayment, the number of payments or

period of repayment, the amount of any payment, or the amount of any

finance charge is stated, to state clearly and conspicuously, 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,''

using that term or the abbreviation ``APR.''

The purpose of this analysis is to facilitate public comment on the

proposed order. It is not intended to constitute an official

interpretation of [[Page 10864]] the agreement and proposed order or to

modify in any way their terms.

Donald S. Clark,

Secretary.

[FR Doc. 95-4865 Filed 2-27-95; 8:45 am]

BILLING CODE 6750-01-M