[Federal Register Volume 61, Number 199 (Friday, October 11, 1996)] [Notices] [Pages 53378-53379] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 96-26106] ======================================================================= ----------------------------------------------------------------------- FEDERAL TRADE COMMISSION [File No. 962-3247] Budget Marketing, Inc.; Analysis to Aid Public Comment AGENCY: Federal Trade Commission. ACTION: Proposed Consent Agreement. ----------------------------------------------------------------------- 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 prohibit, among other things, the Des Moines, Iowa-based telemarketer of magazine subscriptions and 11 of its dealers from misrepresenting that they are selling magazines and the cost and conditions of the subscriptions they are selling. The settlement also prohibits the companies from threatening and harassing consumers to collect bills, failing to honor offers to allow cancellation, and violating the Electronic Funds Transfer Act. A related federal court decree would require the firms to pay a $395,000 civil penalty and $25,000 in court costs. A draft complaint accompanying the consent agreement alleges that the respondents misrepresented the costs and conditions of subscription agreements and illegally deducted charges electronically from consumers' bank accounts without consumer authorization. DATES: Comments must be received on or before December 10, 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: Justin Dingfelder, Federal Trade Commission, S-4302, 6th and Pennsylvania Ave, NW, Washington, DC 20580. (202) 326-3017. 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 complaint. An electronic copy of the full text of the consent agreement package can be obtained from the FTC Home page, 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. 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, subject to final approval, an agreement containing a consent order from Budget Marketing, Inc. (BMI), one of its officers, and some of its major dealers. 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 proposed consent order is part of a proposed settlement of a civil penalty action that was filed against BMI and its dealers in Federal District Court in Des Moines, Iowa in December 1988 (Civil No. 88-1698-E). The District Court consent decree that will be filed to settle that matter provides for the payment of a total of $395,000 in civil penalties (plus $25,000 in court costs) by BMI and some of its dealers. The decree also contains an injunction ordering the defendants in that action to obey this proposed consent order. The consent decree will dissolve the Consent Decree and Permanent Injunction entered in United States v. Budget Marketing, Civil No. 80-419-E (S.D. Iowa) on October 10, 1980, and replace it with the proposed decree. BMI and its dealers are engaged in the sale by subscription, of magazines and other publications throughout the United States. This matter concerns various sales and collection practices engaged in by BMI and the named dealers to sell, by telephone, magazine subscription contracts and to collect payments for its services. The Commission's proposed complaint alleges that BMI and its dealers, among other things, have misrepresented the terms and conditions of contracts; misrepresented the identity of solicitors or firms they are representing; misrepresented the savings which will be accorded or made available to purchasers; misrepresented the action or results of any action which may be taken to effect payment of alleged indebtedness. The proposed complaint also charges respondents with violating the Electronic Fund Transfer Act (EFTA) (15 U.S.C. 1693 et seq.) by not obtaining the requisite authorization in writing as proscribed by Section 205.10(b) of Regulation E, 12 C.F.R. Sec. 205. The proposed consent order contains provisions designed to prevent respondents from engaging in similar acts and practices in the future. Part I of the proposed consent order contains a number of prohibitions. Paragraph (a) prohibits respondents from failing to comply with Regulation E requiring authorization by the consumer in writing only for preauthorized electronic fund transfers from a consumer's account and from failing to comply with the Official Commentary to 12 C.F.R. Sec. 205.10, Question 10-18.6. Paragraph (b) prohibits respondents from making representations, directly or indirectly, that its representatives who are, in fact, calling to secure subscriptions are conducting or participating in any survey or contest; performing services for educational, charitable or social organizations; or giving products or services for free or as a gift. Paragraph (c) prohibits the respondents from failing to identify that the purpose of their contacts is to sell products or services. Paragraph (d) prohibits respondents from representing that the price covers only the cost of mailing or misrepresenting the savings to be accorded to the purchaser. Paragraph (e) prohibits respondents from representing that a subscription contract can be cancelled at the purchaser's option, unless it can be cancelled, while paragraph (f) requires respondents to cancel upon request if such a misrepresentation has been made to the purchaser. Paragraph (g) prohibits respondents from misrepresenting the [[Page 53379]] terms of payments to prospective purchasers. Paragraph (h) prohibits respondents from failing to reveal orally, prior to the customer's entering into a contract, and in writing on the subscription form, the names, number of issues, total cost, installment payments, method of payments and the right to rescind the sale within three business days of receipt of the sales agreement. Paragraph (i) prohibits respondents from representing that a purchase agreement is any other kind of document other than a contract or agreement. Paragraph (j) prohibits respondents from failing to identify the nature and legal import of any document that the consumer is required to execute. Paragraph (k) prohibits respondents from engaging in any unfair or deceptive practice in order to effect payment. Paragraph (1) prohibits respondents from cancelling any subscription contract for any reason other than a breach by the subscriber or a request by the subscriber; Paragraph (m) prohibits respondents from failing to provide to each consumer a copy of the subscription contract showing either the date it was mailed to the consumer or the date the consumer signed the contract and the name, address and telephone number of the seller or the service company used by the seller, Paragraph (n) prohibits respondents from failing to provide a sheet separable from the written sales agreement which can be used as a notice of cancellation. Paragraph (o) prohibits respondents from failing to cancel a sales agreement where the request is received fourteen (14) calendar days from the date the agreement was mailed or delivered to the purchaser and from refunding any payment received within thirty (30) days after cancellation. Paragraph (p) prohibits respondents from failing to furnish those PDS customers who use payment coupons, with specific information on the coupon payment book including the total coupons in the book, the total dollar amount of all such coupons, and the seller's address and telephone number. Paragraph (q) prohibits the respondents from failing to offer the right to substitute magazines on a pro rata dollar-for-dollar basis or extending subscription periods on magazines already selected, in the event of the discontinuance of publication or availability of magazines already subscribed for by the customer. Paragraph (r) prohibits respondents from failing to cancel, at the subscriber's sole option, any portion of a contract whenever any misrepresentation prohibited by the order has been made. Finally, Paragraph (s) prohibits respondents from furnishing the means and instrumentalities to others by which the public may be misled in the manner or as to the things prohibited by this order. Part II of the proposed consent order required BMI and its dealers to distribute copies of the order to each of the present and future dealers, employees and other representatives; to secure from such persons a statement indicating their intention to be bound by the order; to institute a program of continuing surveillance to reveal whether such persons are conforming to the order and to discontinue dealing with any such persons who are revealed to be engaging in practices prohibited by the order. Part III of the proposed consent order requires BMI to notify the Commission at least thirty (30) days prior to the effective date of any proposed change in the corporate respondent. Part IV of the proposed consent order requires the individually named respondents to notify the Commission at least thirty (30) days prior to the sale or discontinuance of the entities through which they have been engaging in the sale of subscription contracts or of the creation of any additional businesses or entry into any new business engaged in the telemarketing of products or services. Part V of the proposed consent order vacates the Decision and Order in Docket No. 8831, issued on August 3, 1972, insofar as it applies to the respondents in this matter. 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 any way their terms. Donald S. Clark, Secretary. [FR Doc. 96-26106 Filed 10-10-96; 8:45 am] BILLING CODE 6750-01-M