Stereo Tape Cartridge Club; consumer credit regulations wil apply

No. 352. Stereo Tape Cartridge Club; consumer credit regulations wil apply. The Commission issued an advisory opinion in response to an application from a businessman who proposed to organize a stereo tape cartridge club.

The Commission wrote the applicant:

You state that the idea of the club is to allow club members to exchange ten tape cartridges per month. A membership will cost $480, to be paid in 30 monthly installments of $16 each. That meets the definition of consumer credit which is credit offered or extended to a person primarily for personal family, household, or agricultural purposes and for which a finance charge is imposed or which is repayable in mOTe than four installments. Enclosed for your guidance is a copy of the Federal Reserve press release of February 7, 1969, containing Regulation Z issued under the Truth In Lending Act. "lith some exceptions, the Federal Trade Commission has the principal enforcement duties. The Commission points out that all relevant provisions must be complied with by anyone extending or arranging for consumer credit. A potential club member in your prografY is entitled to full disclosure of all financial arrangements, including the fact that a third party may hold the promissory note for collection, In addition to your straight retail memberships , you contemplate a ' cooperative ' membership to be offered in return for certain promotional cooperation. The Commission invites your attention to the enclosed copy of the Commission s Guides Against Deceptive Pricing, effective since January 8 , 1964. You wil note that it might be an actionable deceptive practice prohibited by law to identify a commodity as having a certain retail value unless that is a price at ,\,hich identical commodities have in fact been sold in substantial quantities. No conclusion of legality or ilegality is possible in the instant matter on the basis of the brief information you have submitted. Further, you are advised that it might also be an actionable deceptive practice prohibited by law to fail to fully inform a potential club member not only about all financial arrangements and the accurate retail value of the cartridge player but also about the nature and function of the player; is the player a self-contained playing machine or does it need an amplifier and speakers to render performance? For postal regulations, you should consult your local postmaster. (File No. 6937124 Released July 3 1969)