The Money Tree, Inc.; Vance R. Martin; Analysis To Aid Public Comment

FEDERAL TRADE COMMISSION

[File No. 932-3023]

The Money Tree, Inc.; Vance R. Martin; 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 or deceptive acts or practices and unfair methods of

competition, this consent agreement, accepted subject to final

commission approval, would require, among other things, the Georgia-

based money lender and its president to send a notice to all of its

current customers offering them the opportunity to cancel the credit-

life, credit-disability, and accidental death and disbursement

insurance coverages written on their loans, and to receive cash refunds

or credits. The agreement also prohibits Money Tree and Martin from

requiring consumers to sign statements that credit-related insurance or

auto club memberships are voluntarily purchased if these extras are, in

fact, required to obtain the loan. The complaint accompanying the

consent agreement alleges that Money Tree required consumers to

purchase credit-related insurance and auto club memberships (thus

substantially increasing the cost of their loans) but failed to

disclose to consumers the true cost of their credit, in violation of

the Truth in Lending Act and the Federal Trade Commission Act.

DATES: Comments must be received on or before April 21, 1997.

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:

David Medicine, Federal Trade Commission, S-4429, 6th and Pennsylvania

Ave, NW, Washington, DC 20580. (202) 326-3025.

Rolando Berrele, Federal Trade Commission, S-4429, 6th and Pennsylvania

Ave, NW, Washington, DC 20580. (202) 326-3211.

Thomas Kane, Federal Trade Commission, S-4429, 6th and Pennsylvania

Ave, NW, Washington, DC 20580. (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 accompanying compliant. An electronic copy of the

full text of the consent agreement package can be obtained from the

Commission Actions section of the FTC Home Page (for February 4, 1997),

on the World Wide Web, at ``http://www.ftc.gov/os/actions/htm.'' A

paper copy can be obtained from the FTC Public Reference Room, Room H-

130, Sixth Street and Pennsylvania Avenue, N.W., Washington, D.C.

20580, either in person or by calling (202) 326-3627. 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)).

Analysis of Proposed Consent Order To Aid Public Comment

The Federal Trade Commission has accepted an agreement, subject to

final

[[Page 7233]]

approval, to a proposed consent order from The Money Tree, Inc.

(``Money Tree''), and Vance R. Martin, individually and as an officer

of Money Tree (collectively referred to as ``respondents'').

The proposed order would settle charges that Money Tree, which also

does business as Money To Lend, Inc. and Money To Lend, violated the

Truth in Lending Act (``TILA'') and its implementing Regulation Z. The

proposed order would also resolve allegations that Money Tree and Vance

R. Martin violated the Federal Trade Commission Act (``FTC Act'') and

the Fair Credit Reporting Act (``FCRA''). The TILA and Regulation Z

require creditors to provide consumers with written disclosures of the

costs and credit terms associated with loans. Section 5 of the FTC Act

prohibits unfair or deceptive acts or practices in or affecting

commerce. The FCRA requires creditors to provide applicants who are

denied credit due to information contained in a credit report with a

notice containing the name and address of the credit reporting agency

that supplied the report.

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 Money Tree required consumers to

purchase credit-life insurance, credit-disability insurance, accidental

death and dismemberment insurance and/or an auto club membership

(collectively referred to as ``extras'') in connection with its loans,

but (1) failed to include the costs of these extras in the finance

charge and annual percentage rate (``APR'') disclosed to consumers, and

(2) wrongfully included the premiums and fees in the amount financed,

causing customers to pay interest on the premiums and fees for these

extras. These practices, according to the complaint, violate sections

106, 107, and 128 of the Truth in Lending Act (``TILA''), 15 U.S.C.

Secs. 1605, 1606, and 1638, as amended, respectively, and sections

226.4, 226.4(d), 226.22, and 226.18 (b), (d), and (e) of Regulation Z,

12 C.F.R. Secs. 226.4, 226.4(d), 226.22, and 226.18(b), (d) and (e),

respectively.

The complaint further alleges that respondents violated section 5

of the FTC Act, 15 U.S.C. Sec. 45(a), by inducing consumers to execute

documents stating that they voluntarily chose the extras when, in fact,

the extras were mandatory to obtain a loan. Finally, the complaint

alleges that respondents violated section 615(a) of the FCRA, 15 U.S.C.

Sec. 1681m(a), by denying credit to consumers either wholly or partly

because of information in a report from a consumer reporting agency but

failing to: (a) advise the applicant, at the time the applicant was

informed of such adverse action, that the adverse action was based in

whole or in part on information contained in a consumer report; and (b)

supply the applicant with the name and address of the consumer

reporting agency making the report.

The proposed order contains injunctive provisions designed to

remedy the violations charged and to prevent respondents from engaging

in similar acts and practices in the future. Specifically, the order

would require that Money Tree: (1) make all disclosures in accordance

with the TILA; (2) include in the finance charge and the APR disclosed

to consumers the costs of extras that consumers are required to

purchase in connection with their loans; and (3) exclude from the

amount financed disclosed to consumers the costs of extras that

consumers are required to purchase in connection with their loans.

The proposed order would also prohibit respondents from referring

to the availability of any extra without at the same time disclosing

orally: (1) that the consumer has already been approved for the loan,

(2) the amount of the loan, (3) that the extras are optional, (4) that

the consumer's decision about the extras does not affect the amount of

their loan or whether the consumer will receive a loan, (5) the amount

of the premium or fee for each extra, and (6) that Money Tree will add

premiums and fees for the extras to the consumer's loan amount. The

proposed order would further require respondents to provide future

customers with a separate document that states, inter alia, that the

consumer has already been approved for the loan and that the consumer

should not sign the form unless they want to buy one of the extras. The

proposed order would also require that respondents: (a) advise rejected

applicants that they have been denied credit in whole or in part

because of information in a consumer report; and (b) give rejected

applicants the name and address of the consumer reporting agency making

the report.

The proposed order would provide Money Tree customers with an

opportunity to receive refunds. Under the proposed order, Money Tree

must offer its customers an opportunity to cancel the credit-life

insurance, credit-disability insurance, and accidental death and

dismemberment insurance written on their loans and obtain cash refunds

or credits to their accounts.

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 its terms.

Donald S. Clark,

Secretary.

[FR Doc. 97-3911 Filed 2-14-97; 8:45 am]

BILLING CODE 6750-01-M