[Federal Register Volume 61, Number 66 (Thursday, April 4, 1996)]
[Notices]
[Pages 15071-15074]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-8331]
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FEDERAL TRADE COMMISSION
[File No. 922-3312]
Budget Rent A Car Systems, Inc.; Consent Agreement With Analysis
To Aid Public Comment
AGENCY: Federal Trade Commission.
ACTION: 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 the Lisle, Illinois-based auto
rental company, if it resumes collecting ``loss of turnback'' fees, to
clearly disclose to customers who do not purchase a ``loss damage
waiver'' that they are liable for damage or loss in excess of the
actual cost of repairs to damaged vehicles. It will also require Budget
to pay $75,000 in consumer redress. The consent agreement settles
allegations that Budget sought to collect ``loss of turnback'' fees--
the amount Budget lost because damaged vehicles could not be resold to
the manufacturer at a price higher than retail--from customers who had
not purchased ``loss damage waivers,'' without disclosing the
customers' purported liability for these charges in advance. Budget
also allegedly misrepresented that its rental contracts entitled the
company to make these ``loss of turnback'' collections.
DATES: Comments must be received on or before June 3, 1996.
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:
Randy Brook, Seattle Regional Office, Federal Trade Commission, 915
Second Avenue, Suite 2806, Seattle, WA 98174. 206-220-6350. Robert
Schroeder, Seattle Regional Office, Federal Trade
[[Page 15072]]
Commission, 915 Second Avenue, Suite 2806, Seattle, WA 98174. 206-220-
6350.
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
The Federal Trade Commission having initiated an investigation of
certain acts and practices of proposed respondent Budget Rent A Car
Systems, Inc., a corporation, and it now appearing that proposed
respondent is willing to enter into an agreement containing an order to
cease and desist from the acts and practices being investigated.
It is hereby agreed by and between Budget Rent A Car Systems, Inc.,
by its duly authorized officer and its attorney, and counsel for the
Federal Trade Commission that:
1. Proposed respondent is a Delaware corporation with its principal
office and place of business located at 4225 Naperville Road, Lisle,
Illinois 60532-3662.
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. All rights 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 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
complaint, 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 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 of facts, other than
jurisdictional facts, or of violations of law as alleged in the draft
of complaint.
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: (a) 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 (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 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 draft complaint and the
following order. Proposed respondent 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
Definitions
For purposes of this order:
A. ``Turnback'' means any preset price, premium, bonus, or formula
that could result in respondent receiving more than the vehicle's fair
market value upon repurchase by the vehicle's original vendor,
financer, or their designee.
B. ``Fair market value'' means the vehicle's price as listed in an
industry-wide and generally accepted publication or directory of used
car values, or the resale price received in a commercially reasonable
sale.
C. ``LDW'' means any option that respondent offers that limits or
eliminates a renter's liability to respondent for loss of or damage to
the respondent's vehicle during the pendency of the rental agreement.
D. ``Insurance'' means the renter's own standard vehicle insurance,
and any alternative, supplemental, or secondary coverage the renter
possesses that provides coverage for rented vehicles including, but not
limited to, the coverage currently furnished by many credit card
companies.
I
It is ordered that respondent, its successors and assigns, and its
officers, agents, representatives, and employees, directly or through
any partnership, corporation, subsidiary, division, or other device, in
connection with the promoting, offering for rental, or rental of any
vehicle, in or for any rental location where it seeks loss of turnback
or turnback value in any form for vehicles rented in that location, in
or affecting commerce, as ``commerce'' is defined in the Federal Trade
Commission Act, does forthwith cease and desist from:
A. Failing to disclosure, clearly and prominently, in connection
with any representation relating to the renter's liability for loss of
or damage to a rental vehicle, including any representation about LDW,
that in the event of loss of or damage to a vehicle for which LDW was
declined, respondent may charge the renter between $x and $y [specify
range of dollar amounts Budget may seek] more than the cost of repairs
or the fair market value of the vehicle, that many insurance companies
will not pay this charge, and that the renter will have to pay it. This
paragraph applies specifically to, but is not limited to, Budget's
rental contracts and to any representation relating to the price or
terms of LDW made through respondent's inputs in the ``company-specific
location'' part of third-party, computerized reservation systems, such
as ``Apollo,'' ``PARS,'' ``Sabre,'' or ``System One.''
Provided, however, that if respondent uses a ``short-form'' rental
contract or other document or electronic form of agreement that makes
it impractical to place the required disclosure within the
[[Page 15073]]
document or form, respondent shall devise other means to ensure that
each renter receives the substance of the disclosure before entering
into the rental agreement. The other means could include, but are not
limited to, a separate disclosure document to be signed or initialed by
the renter.
B. Failing to post at each Budget rental location a sign or placard
clearly and prominently containing the following language:
If you decline LDW and the rental car is damaged or stolen, we
may charge you between $x and $y [specify range of dollar amounts
Budget may seek] more than the cost of repairs or the fair market
value of the vehicle. Many insurance companies will not pay this. If
yours doesn't, you will have to pay it.
The sign or placard shall be of a size, and posted in a manner,
reasonably calculated to elicit prospective renters' attention.
C. Failing to disclose, in a clear and prominent manner in any
communication seeking payment of any charge for loss of or damage to a
rental vehicle, any part of the charge that is attributable to loss of
turnback including, but not limited to, instances where the vehicle is
totaled or stolen and respondent is seeking compensation based in whole
or part on any turnback amount. This disclosure shall include an
explanation of what loss is turnback means and how it was calculated.
II
It is further ordered that respondent, its successors and assigns,
and its officers, agents, representatives, and employees, directly or
through any partnership, corporation, subsidiary, division, or other
device, in connection with the promoting, offering for rental, or
rental of any vehicle, in or for any rental location where it seeks
loss of turnback or turnback value in any form for vehicles rented in
that location, in or affecting commerce, as ``commerce'' is defined in
the Federal Trade Commission Act, does forthwith cease and desist from
misrepresenting, in any manner, directly or by implication:
(1) the obligation of the renter to make any payment as the result
of the loss of or damage to a rental vehicle; and
(2) the value of a vehicle that has been lost or damaged.
III
It is further ordered that no provision of this order is intended
to preempt any state law, regulation, or administrative interpretation
that may limit or prevent respondent from collecting loss of turnback
from a renter.
IV
It is further ordered that respondent shall pay into an inter-
bearing escrow account designated by the Commission, under the control
of the Commission's designated agent, the sum of $75,000 on or before
five days from the date of service of this order. This shall fully
satisfy all monetary claims asserted by the Commission in the complaint
filed herein against this respondent and shall be used to provide
redress to consumers who made a payment to respondent and to pay any
attendant expenses of administration. If the Commission determines, in
its sole discretion, that redress to consumers is wholly or partially
impracticable, any funds not so used shall be deposited into the United
States Treasury. No portion of respondent's payment shall be deemed a
payment of any fine, penalty, or punitive assessment. Respondent shall
be notified as to how funds are disbursed but shall have no right to
contest the manner of distribution chosen by the Commission.
V
It is further ordered that respondent shall, for three years from
the date of service upon it of this order, distribute, or cause to be
distributed, a copy of this order to all present and future division,
regional, branch, and subrogation managers who have management
responsibilities relating to the collection of collision or theft
damages from renters.
VI
It is further ordered that respondent shall, for three years from
the date of service of this order, maintain and upon request make
available to the Federal Trade Commission for inspection and copying
all documents relating to compliance with this order.
VII
It is further ordered that respondent shall, for 10 years from the
date of service of this order, notify the FTC in writing at least 30
days prior to the effective date of any proposed change in its
corporate structure, such as dissolution, assignment, or sale resulting
in the emergence of successor corporations, the creation or dissolution
of subsidiaries, or any other changes in the corporation that may
affect compliance obligations arising out of this order.
VIII
It is further ordered that respondent shall, within 60 days from
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.
IX
It is further ordered that this order will terminate twenty years
from the date of its issuance, or twenty years from the most recent
date that the United States or the Federal Trade Commission files a
complaint (with or without an accompanying consent decree) in federal
court alleging any violation of the order, whichever comes later;
provided, however, that the filing of such a complaint will not affect
the duration of:
A. Any paragraph in this order that terminates in less than twenty
years; and
B. This order if the complaint is filed after the order has
terminated pursuant to this paragraph.
Provided further, that if the complaint is dismissed or a federal
court rules that the respondent did not violate any provision of the
order, and the dismissal or ruling is either not appealed or upheld on
appeal, then the order will terminate according to this paragraph as
though the complaint was never filed, except that the order will not
terminate between the date the complaint is filed and the later of the
deadline for appealing the dismissal or ruling and the date the
dismissal or ruling is upheld on appeal.
Analysis of Proposed Consent Order To Aid Public Comment
The Federal Trade Commission has accepted an agreement to a
proposed consent order from Budget Rent A Car Corporation (``Budget'').
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.
This matter concerns claims for loss or damages that Budget makes
against renters who declined to pay extra for loss damage waiver (LDW)
when they rented a vehicle. LDW is also called collision damage waiver
(CDW).
The Commission's complaint charges Budget with unfair and deceptive
practices in connection with making loss or damage claims. According to
the complaint, Budget failed to disclose to the renters that if there
was more than superficial damage to the rented vehicle, Budget might
assess charges (called ``loss of turnback'') as much as several
[[Page 15074]]
thousand dollars more than the actual cost of repairs; that if the car
was lost or stolen, Budget might seek reimbursement for an amount
greater than the vehicle's fair market value; that the renter's own
insurance company would likely not cover the added charge or above
market value premium; and that the renter would have to pay the excess
charge.
The complaint also alleges that Budget deceived consumers when it
tried to collect for loss of turnback by misrepresenting that its
rental contracts entitled it to make that collection.
The consent order contains provisions designed to remedy the
violations charged and to prevent Budget from engaging in similar
deceptive and unfair acts and practices in the future.
Part I of the order requires that Budget make clear disclosures to
potential renters about liability for damage or loss in excess of the
actual cost of repairs or fair market value. The disclosures must
appear in promotional materials, on signs in Budget rental locations,
and in any communications seeking these excess charges. The disclosure
requirements only apply to Budget locations where Budget seeks these
excess charges.
Part II of the order prohibits misrepresentations about the
obligation of a renter to make any payment as a result of the loss of
or damage to a rental vehicle or about its value after damage or loss.
Part III of the order makes clear that the order does not preempt
any more restrictive provision of state or local law regarding
collecting excess charges.
Part IV of the order requires Budget to pay $75,000 in consumer
redress.
Part of the order requires Budget to distribute copies of the order
to relevant officers and employees, and Part VI imposes various record
keeping requirements.
Part VII of the order requires Budget to notify the Commission of
any changes in corporate structure that might affect compliance with
the order. Part VIII requires that Budget file with the Commission a
compliance report detailing the manner in which it complied with the
order.
Part IX of the order terminates the order twenty years from the
date of its issuance, or twenty years from the date a complaint is
filed in federal court alleging any violation of the order, whichever
comes later.
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 any of
their terms.
Donald S. Clark,
Secretary.
[FR Doc. 96-8331 Filed 4-3-96; 8:45 am]
BILLING CODE 6750-01-M