[Federal Register Volume 62, Number 19 (Wednesday, January 29, 1997)]
[Notices]
[Pages 4290-4291]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-2206]
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FEDERAL TRADE COMMISSION
[File No. 932-3019]
Pre-Paid Legal Services, Inc.; 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, Pre-Paid to pay
$165 to any consumer who purchased certain living trusts and who has
not already received a refund and does not live in a state with which
Pre-Paid has already settled. In addition, Pre-Paid, would be
prohibited from making misrepresentations about living trusts and would
be required to make certain disclosures with regard to legal challenges
that can be made against living trusts; the possibility of probate for
certain estates regardless of whether living trusts are used; and the
transfer of consumers' assets into the trusts. The agreement settles
allegations that the Pre-Paid made numerous false statements about the
benefits and appropriateness of living trusts, in general, and about
living trusts it sold, in particular.
DATES: Comments must be received on or before March 31, 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: Janice Charter, Federal Trade
Commission, Denver Regional Office, 1961 Stout Street, Suite 1523,
Denver, CO 80294. (303) 844-2272. Elizabeth Palmquist, Federal Trade
Commission, Denver Regional Office, 1961 Stout Street, Suite 1523,
Denver, CO 80294. (303) 844-2272.
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
[[Page 4291]]
Commission Actions section of the FTC Home Page (for January 16, 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 agreed to accept, subject to final
approval, a proposed consent order settling charges that Pre-Paid Legal
Services, Inc., violated Section 5 of the Federal Trade Commission Act.
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 the sale of living trusts to senior citizens
through membership in the American Association for Senior Citizens
(``AASC'). The respondent covered by the proposed order is Pre-Paid
Legal Services, Inc., the company responsible for furnishing to and
preparing the living trusts for AASC.
The complaint alleges that the respondent violated Section 5 of the
Federal Trade Commission Act by making numerous misrepresentations
about the advantages of living trusts over other forms of estate
planning. Specifically, the complaint alleges that respondent has
misrepresented that (1) the use of a living trust avoids all
administrative costs; (2) at death, a living trust ensures that assets
are distributed immediately or almost immediately; (3) a living trust
cannot be challenged; (4) living trusts are prepared by local
attorneys; (5) a living trust protects against catastrophic medical
costs; (6) a living trust is the appropriate estate planning device for
every consumer; and (7) there are no disadvantages to a living trust.
The proposed consent order contains provisions which are designed
to remedy the alleged violations and to prevent the respondent from
engaging in similar acts and practices in the future. The proposed
order would prohibit the respondent from making the misrepresentations
alleged in the complaint and set forth above. Additionally, the order
would require the respondent to disclose to prospective purchasers that
living trusts may be challenged on similar grounds as wills and that
they may not be appropriate in all instances.
Under the order, the respondent also would be required to provide
four affirmative disclosures in situations where the statements would
be true. (1) Some states have created a mechanism for ``informal
probate'' of an estate if the estate meets certain criteria, which
significantly reduces the time involved in probate. This disclosure
would be required in states where informal probate is available. (2) If
the transfer of an individual's assets into the living trust is not
included in the price of creating the living trust, that fact must be
disclosed. (3) If it is the sole responsibility of the purchaser of the
living trust to transfer assets into the trust, that fact must be
disclosed. (4) In some states, but not in others, creditors have a
longer period of time to file claims against a living trust than
against a probated estate. This fact would have to be disclosed in such
states.
The proposed order would require the respondent to distribute the
proposed order to its officers, agents, and all personnel who
participate in any way with respondent's sales activities relating to
living trusts. Additionally, the order would require the respondent to
notify the Commission of any changes in its corporate structure and to
retain for three years all materials that it relies upon in making
representations covered by the order. Finally, the respondent is
required to file one or more compliance reports detailing its
compliance with the order.
The proposed order also requires the respondent to offer partial
refunds to any AASC member who has not previously received a refund
from either the respondent or AASC.
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, nor to modify in
any way their terms. The proposed consent order has been entered into
for settlement purposes only and does not constitute an admission by
the respondent that the law has been violated as alleged in the
complaint.
Donald S. Clark,
Secretary.
[FR Doc. 97-2206 Filed 1-28-97; 8:45 am]
BILLING CODE 6750-01-P