Derby Construction Inc., et al.

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“DERBY CONSTRUCTION ING, ET AL.

CONSENT ORDER, ETC. JIN: ‘REGARD TO THE ALLEGED VIOLATION OF THE ‘FEDERAL TRADE COMMISSION’ AND THE TRUTH IN LENDING ACTS: Docket 0-2316. Complaint, ‘Nov. 18, 1972—Decision, Nov. 13, 1972 Consent order requiring a Providence, Rhode Island, real estate company, among ° other: things to cease. violating the Truth in Lending Act by failing: to. disclose-to consumers, in connection. with the extension of. consumer credit; such information as required by Regulation Z. of the said. Act. ~ Comeranyr Pursuant to the provisions of the Truth in. Lending Act and: the | implementing regulation thereunder, and the Federal Trade Commission Act, and:by virtue of the authority vested in it by said Acts, the Federal: Trade Commission having reason to believe that Derby | Construction Inc., a corporation, and Howard A. Brynes,: individually and as an officer ‘of said corporation, hereinafter referred to as respondents, have violated the provisions of said Acts and implementing’: regulation, and it appearing to the Commission that a proceeding by it in respect thereof would be in the public interest, hereby issues its complaint stating its charges in that respect as follows: ParacrarH 1. Respondent Derby Construction Inc., is a corporation, organized, existing and doing business under and by virtue of the laws of the State of Rhode Island and Providence Plantations with its principal office and place of business located at 1859A Broad Street, Providence, Rhode Island.

Respondent Howard A. Brynes is an officer of the corporation. He formulates, directs, and controls the policies, acts and practices of the corporation including the acts and practices hereinafter set forth. His address is the same as that of the corporate respondent. Par. 2. Respondents are now, and for some time in the past have been engaged in the advertising, offering for sale, and sale of real estate to the public.

Par. 3. In the ordinary course and conduct of their business as aforesaid, respondents regularly extend consumer credit, as “consumer credit” is defined in Regulation Z, the implementing regulation of the Truth in Lending Act, duly promulated by the Board of Governors of the Federal Reserve System.

Par. 4. Subsequent to July 1, 1969, respondents in the ordinary course and conduct of their business as aforesaid and in connection with 780 FEDERAL ‘TRADE COMMISSION DECISIONS Complaint 81 FTC.

their extension of consumer credit. to customers who have purchased real estate from respondents, have caused and are causing customers to execute promissory notes hereinafter referred to as the “Promissory Note” secured by a second mortgage on real estate used or expected to be used. on their principal residence. Prior to this extension of credit by respondents to customers who purchase the real estate, such customers enter into a first mortgage transaction involving the real estate with another third party creditor. _Respondents-provide customers with no consumer credit: cost ‘disclosures other than on the promissory note. By and through the use of the promissory note, respondents :

1. Fail to furnish the customer with a duplicate of the instrument containing the disclosures required by Section 226.8 or a statement by ‘which the disclosures are made at the time those disclosures are made,.as prescribed by Section 226.8(a) of Regulation Z. 2.. Fail.to make.the disclosures required by Section 226.8 of Regulation Z clearly, conspicuously. and in a meaningful sequence, as required by Section 226.6(a) of Regulation Z. .

3. Fail. to use the term “annual percentage rate” to describe the. annual percentage rate of finance charge determined in accordance with Section 226.5.as required by Section 226.8 (b) (2) of Regulation 2. 4. Fail to disclose the number of payments scheduled to repay the indebtedness and fail, in some instances, to identify the payments which are more than twice the amount of an otherwise regularly scheduled equal payment by the term “balloon payment” as required by Section 226.8(b) (3) of Regulation Z.

5. Fail to describe the type of any security interest held or to be retained or acquired by the creditor in connection with the extension of credit and a clear identification of the property to which the security interest relates as required by Section 226.8(b) (5) of Regulation Z.

6. Fail to use the term “amount financed” to describe the amount of credit extended as required by Section 226.8(d) (1) of Regulation Z. 7. Fail to disclose the “finance charge” as required by Section 226.8 (d) (3) of Regulation Z.

Par. 5. By and through the use of respondents’ promissory note in the ordinary course and conduct of their business as aforesaid, a security interest, as “Security Interest” is defined in Section 226.2(z) of Regulation Z is or will be retained or acquired in real property which is used or expected to be used as the principal residence of the respondents’ customers, Pursuant to Section 226.9(a) of Regulation Z, the customer therefore has the right to rescind such credit trans- DERBY CONSTRUCTION INC., ET AL. 731 779 Decision and Order , action. Having retained or acquired such a security interest, respondents :

1. Fail to provide each customer who is an owner of such property with two copies of a notice of their right to rescind, in the form and manner prescribed in Sections 226.9(b). and 226 9(£) of Regulation Z and in some instances fail to provide. each customer with any copies of such notice.

Par. 6. In the ordinary course of their business as ‘aforesaid, respondents cause to be published advertisements offering real property for sale, as “advertisement” is defined in Regulation Z. These advertisements aid, promote, or assist, directly or indirectly, the aforesaid extensions of consumer credit which respondents provide to their customers. By and through the use of the advertisements, respondents state that no. down payment is necessary in connection with their. extension of consumer credit, without disclosing, in the terminology prescribed by Section 226.8 of. Regulation Z, the following additional items required by 996.10(d) (2) of Regulation Z: . 1. The cash price or the amount of the loan.as applicable; 2. The ‘number,. amount, and: due dates or period: of repayment scheduled to pay the indebtedness if the credit is extended ; 3. The amount of the finance charge expressed as.an annual percentage rate ;

4. Thesum of the payments.

Par. 7. Pursuant to Section 103(q) of the Truth in Lending Act, respondents’ aforesaid failures to comply with the provisions of Regulation Z constitute violations of that Act and, pursuant to Section 108 thereof, respondents hereby violated the Federal Trade Commission Act.

Decision AND ORDER The Federal Trade Commission having initiated an investigation of certain acts and practices of the respondents named in the caption hereof, and the respondents having been furnished thereafter with a copy of a draft of complaint which the regional office proposed to present to the Commission for its consideration and which, if issued by the Commission, would charge respondents with violation of the Truth in Lending Act and the implementing regulation promulgated thereunder, and the Federal Trade Commission Act; and The respondents and counsel for the Commission having thereafter executed an agreement containing a consent order, an admission by the respondents of all the jurisdictional facts set forth in the aforesaid draft of complaint, a statement that the signing of said agreement is for settlement purposes only and does not constitute an admission by 782 FEDERAL ‘TRADE “COMMISSION DECISIONS Decision ‘and “Order 81 ETC.

yespondents: that the ‘law has béen “violated ‘as ‘alleged 4 Yn ‘such complaint, and waivers 3 and other Provisions @ as Tequired by the Commission” s rules; and | ‘The Commission having thereafter consider ed the matter and hav- ‘ing’ determined that ‘it had reason to believe that the. respondents “have violated the said Act, and that complaint should issue stating its. charges in that respect, and having thereupon accepted the executed “consent agreement and placed such agreement on the public record for a period of thirty’ ( 30) days, now in ‘further conformity with the procedure prescribed in Section 2. 34(b) of its rules, the Commission hereby i issues its complaint, makes the following j jur isidictional find- _ings, and enters the following order.

1. Respondent Derby Construction, Inc., is a corporation organized, existing, and doing business under and hy virtue of the laws of the : State of Rhode Island ‘and’ Providence Plantations with its office and ‘principal place of business located at 13594 Broad Street, Providence, Rhode Island.

Respondent ‘Howard A. Brynes i is an officer of said corporation. He “formulates, directs, and controls the policies, acts and practices of said corporation, ‘and his principal office and place, of business i is located at the above stated address. © 2. The Federal Trade Commission has jurisidiction of the subject matter of this proceeding and of the respondents, and the proceeding is in the public interest.

ORDER It is ordered, That respondents Derby Construction, Inc., a corporation, its successors and assigns, and its officers, and Howard A. Brynes, individually and as an officer of said corporation, and respondents’ agents, representatives, and employees, directly or through any corporation, subsidiary, division or other device, in connection with any. extension of consumer credit or any advertisement to aid, promote, or assist directly or indirectly any extension of consumer credit, as “consumer credit” and “advertisement” are defined in Regulation Z (12 C.F.R. § 226) of the Truth in Lending Act (Pub. L. 90-821, 15 U.S.C. 1601 e¢ seg.), do forthwith cease and desist from: 1. Failing to furnish the customer with a duplicate of the in-, strument containing the disclosures required by Section 226.8 or a statement by which the required disclosures are made at the time those disclosures are made as required by Section 226.8 (a) of Regulation Z.

2. Failing to make all disclosures required by Regulation Z “DERBY: CONSTRUCTION ING, BT AL. 783 Decision and Order clearly; conspicuously, and in meaningful ‘Sequence, as required by Section 226.6:(a) of Regulation Z.

’ 8. Failing to use the term “Annual Percentage Rate” to describe the annual. percentage rate of finance charge determined in accordance with Section 226.5 and required by Section 226. 8(P) (2) of Regulation Z. :

4. Failing to. disclose the number of payments scheduled to repay the indebtedness, and failing to describe payments which: are more than twice the amount of an otherwise scheduled ‘equal payment.by the term “Balloon Payment” as required by Section 226.8 (b) (3) of Regulation Z.

5. Failing to describe the type of any security interest held or to be retained or acquired by the creditor in connection with the extension of credit, and failing to clearly identify the property to which the security interest relates as required by Section 226.8 (b) (5) of Regulation Z.

6. Failing to use the term “Amount Financed” to describe the amount of credit extended as required by Section 226.8 (ad) (1) of © Regulation Z.

7. Failing to disclose the “Finance Charge” as required by Section 226.8 (d) (3) of Regulation Z.

8. Failing in any transaction in which respondents retain or acquire a security interest in real property which is used or is expected to be used as the principal residence of the customer to comply with all requirements regarding the right of rescission set forth in Section 226.9 of Regulation Z. 9. Representing, directly or by implication, in any advertisement, the amount of the down payment required or that no down payment is required, the amount of any installment payment, the dollar amount of any finance charge, the number of installments or periods of repayment, or that there is no charge for credit, unless all of the following items are stated, in terminology prescribed under Section 226.8 of Regulation Z, as required by Section 226.10 of Regulation Z.

(i) The cash price or the amount of the loan as applicable (ii) The amount of the down payment required or that no down payment is required, as applicable (ili) The number, amount, and due dates or period of payments scheduled to repay the indebtedness if credit is extended (iv) The amount of the finance charge expressed as an annual percentage rate (v) The sum of the payments Decision and.Order 81 F.T.C.

10. Failing in any consumer credit transaction. or. advertisements to make all disclosures, determined. in accordance with Sections 226.4 and 226.5. of Regulation. Z, in the manner, form and - amount required by Sections 226.6, 296. 45 226. 8, 226.9, 226.10 of Regulation Z.

11. Failing within sixty (60) days after service of this order, _. to deliver notice of the right to rescind, in the number, manner and form set forth in Section 226.9 (b)-of. ‘Regulation Z, to each customer who purchased property from respondents. on or after -. July 1, 1969 and has not received such notice, in any credit trans- -action in which the respondents through a consumer. credit: agreement have retained or acquired or. will. retain or acquire a security interest in real. property: which is used or expected to be used as a customer’s principal place of residence... .. T t is further ordered, That a copy. of-this order to: cease 9 and desist be delivered to all present and future personnel. of respondents’ engaged in the consummation. of. any extension. of consumer credit or -In-any. aspect of preparation, creation, or placing.of advertising, and that respondents secure a signed. statement acknowledging receipt of said order from each such person.

It is further ordered, That. respondents notify. the: Commission at least thirty (380) days prior to any proposed change in the corporate respondent, such as dissolution, assignment, or sale, resultant in the emergence of a successor corporation, the creation or dissolution of subsidiaries, or any other change in the corporation which may affect compliance obligations arising out of this order. It is further ordered, That the individual respondent named herein promptly notify the Commission of the discontinuance of his present business or employment and of his affiliation with a new business or employment which may affect compliance obligations arising.out. of this order. Such notice shall include respondent’s address or business and a statement as to the nature of the employment in which. he is engaged as well as a description of his duties and responsibilities. lt is further ordered, That respondents shall, within sixty (60) days after service upon them of this order, file with the Commission a report in writing, setting forth in detail the manner and form in which they have complied with this order.

UNIVERSAL FIGURE FORM OF YOUNGSTOWN - 785 Complaint