Beneficial Corporation

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IN THE MATTER OF BENEFICIAL CORPORATION, ET AL.

ORDER, OPINION, ETC., IN REGARD TO ALLEGED VIOLATION OF THE FEDERAL TRADE COMMISSION ACT Docket fI.1';. Grm/plaint, A1J. IO 1973 - Decision, July 1.5, 1.97;) Order requiring a Wilmington, Del., seller of persollal income tax preparation servires ami its wholly-owned subsidiary located in Morristown, N,J" among other things to cease misrf presenting the terms and conditions of its guarantees, using the term "instant Lax refund " and misusing confidential information obtained from taxpayer customers. Appearmtces For the Commission: David C, ix and Robert D- FriedTnan. For the respondents: Edgar T. Higgins Morristown, N-L Hogan & Hai' tson Wash., D.

COMPLAINT Pursuant to the provisions of the Federal Trade Commission Act and by virtue of the authority vested in it by said Act, the Federal Trade Commission, having reason to believe that Beneficial Corporation and Beneficial Management Corporation, corporations, hereinafter referred to as respondents, have violated the provisions of said Act 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: P ARAG!(AI'II 1. Respondent Beneficial Corporation is a corporation organized, existing and doing business under and by virtue of the laws of the State of Delaware, with its principal office and place of business located at 1300 Market St. in the city of Wilmington, State of Delaware. Respondent Beneficial Managernent Corporation is a corporation organized, existing and doing business under and by virtue of the laws of the State of New Jersey with its principal office and place of business located at 200 South St., in the city of Morristown, State of New Jersey. It is a wholly-owned subsidiary of, and is managed directed and controlled by, respondent Beneficial Corporation. PAR, 2, Respondents are now, and for some time last past have been engaged in the advertising, offering for sale ahd sale of personal income tax preparation services and the extension of consumer credit to the general public.

Respondents sell their aforesaid produds and services directly and Complaint Rf; F, through various corporate subsidiaries and affiliates, hereinafter referred to for convenience as respondents' representatives. PAR. 3. In the course and conduct of their business as aforesaid respondents now cause, and for some time last past have caused monie, contracts, business forms and other commercial paper and printed materials in connection with said income tax preparation and personal Joan and consumer financing services to be sent by United States mail from respondents' prlce of business in the State of New Jersey to their local offices and subsidiaries and purchasers of respondents products and services located in various other States of the United States, and maintain and at an times mentioned herein have maintained a substantial course of trade in said services in commerce as "commerce" is defined in the Federal Trade Commission Act. PAR. 4. In the course and conduct of their business, respondents and their representatives have disseminated, and caused the dissemination , certain advertisements concerning the said income tax preparation services by various means in commerce, as "commerce" is defined in the Federal Trade Commission Act for the purpose of inducing and which were likely to induce, directly or indirectly, the purchase of said income tax preparation services and the extension of consumer credit. PAR. 5. For the purpose of disseminating such advertisements respondents and their representatives have employed television and radio commercial broadcasts, newspaper and periodical insertions direct mail literature and point of sale promotional materials. Typical of the statements and representations in said advertisements, but not all inclusive thereof, are the following: 1. Radio and Television:

a) This year have your tax returns prepared a better way * * * by computer * * * at Beneficial Finance, With Beneficial's Income Tax Service for as little as $5 * * * you get maximum deductions * * * 100% accuracy * * * Plus you can get an Instant "Tax Refund." The instant you qualify for a loan-you get your refund * * * in cash-instantly, So have your taxes done at Beneficia! Finance, and get your Instant "Tax Refund, b) Where are the smart people having their tax returns prepared this year ? At Beneficial Finance, That' s right, Beneficial Finance - with its new, fuBy computerized Income Tax Service, You get ail the deductions you re entitle!! to - and since your return is figured by computer, it's guaranteed accurate, Now * * * here s the big news: At Beneficial nd only at Beneficial, you can get an Instant "Tax Refund," The instant you sign your return and qualify for an on-the-spot loan, Beneficial advances you the full amount. of your refund. So there s no waiting all those weeks and weeks for your check from the Government. It's the Instant "Tax Refund" at Beneficial Finance. c) If you haven t done your income taxes yet * * * if you re worried about all those new forms and regulations * * * if like so many of us you just can t get down to all that figure work on your tax return- let Beneficial Finance take the load off your mind! For as little as $5, Beneficial's Income Tax Service wil do your return by comput.er. It couldn t be simpler: BeneficiaJ's computer figures out your maximum deductions and prepares your return with 100("!i accuracy. And, if you have a refund coming, you can get BENEFICIAL CORP., ET AL. 121 119 Complaint it right away with Benf'ficial's Instant "Tax Refund" the instant you qualify for a loan you gd your refund in cash-instantly! Just look in the white pages of your phone book for the Beneficial office near you. And, call up or come in " * * today 2. Newspaper and direct mail.

a) New Income Tax Service offers INSTANT "TAX REFUND"*- Beneficial Finance offers a complete tax preparation service, fully computerized to give you maximum deductions. Accuracy is 100% guaranteed, (Beneficial pays any penalty or interest ifit makes an error!) If you have a refund coming. you don t have to wait weeb rot a Cov..rnment check. The inHt:lnt you Hign your return and qualify roran otl-the. pot loan you get your refund- in cash.instantly. Only at Beneficial. This year, let Beneficial prepare your tax returns! $5 and up, And if you want cash to pay your taxes, or for any good reason, remember: your good for more at Beneficial. Offices everywhere *- * * open alj year, Phone or come in '" * * now! A void the rm;h, b) It' s a fact: 7 out of every 10 taxpayers who have their returns prepared by Beneficial's Income Tax Service get refunds, c) BENEFICIAL INCOME TAX SERVICE * * * for as little as $5 '" * * fully computerized to give you maximum deductions and guaranteed 100% accuracy. * * * especially designed for the typical American family, Then, there are the pitfalls, hazards, and worries about overpayment; underpayment; delays in getting refunds; being questioned or audited, making mistakes; the Internal Revenue Service computer; adding, substracting, multiplying, and dividing, misunderstanding complicated instructions, and coming to grips with the problem itself. That' why smart people-smart taxpayers-wil rely on tax experts to prepare their income tax returns this year. And foremost among tax experts are the men at Beneficial. Beneficial is completely familar with-and understands-the new tax forms and tax requirements, Beneficial's Managers-experts in money matters - are accustomed to extremely accurate figure work and are therefore, exceptionally competent with tax returns.

Beneficial stands behind and guarantees the accuracy of every tax return it prepares- If Beneficial makes any errors that cost you penalty or interest of any kind, we wil pay the penalty or interest.

PAR. 6. By and through the use of the above-quoted statements and representations, and others of similar import and meaning, but not expressly set out herein, respondents and their representatives have represented, and are now representing, directly or by implication, that: I. Respondents wil provide taxpayers who have ,their returns prepared by respondents and to whom a refund is owed by the Internal Complaint RG F, Revenue Service with an "instant refund" at the time their returns are prepared, 2. Respondents will reimburse the taxpayer for any payments the taxpayer may be required to make in addition to his initial tax payment if such additional payments result from an error made by respondents and their representatives in the preparation of the tax return. 3, Respondents' and their representatives' tax preparing personnel are specially trained and unusually competent in the preparation of tax returns and the giving of tax advice, and that they have the ability and capacity to prepare and give advice concerning complex and detailed income tax returns.

4. The percentage of respondents' tax preparation customers who receive refunds is demonstrably greater than the percentage of the tax paying public at large who receive refunds. PAR. 7. In truth and in fact:

1. Respondents instant tax refund" is not a refund but a personal loan and the recipient of the loan is required to pay finance charges and other costs for such loan.

2. Respondents and their representatives do not reimburse the taxpayer for all payments he is required to make in addition to his initial tax payment if such additional payments result from an error made by respondents and their representatives in the preparation of the tax return.

3, Respondents' and their representatives ' tax preparing personnel are not specially trained and unusually competent in the preparation of tax returns and the giving of tax advice, and they do not have the ability and capacity to prepare and give advice concerning complex and detailed income tax returns.

4. The percentage of respondents' tax preparation customers who receive refunds is not demonstrably greater than the percentage of the taxpaying public at large who reccive refunds. Therefore, the statements and representations set forth in Paragraphs Five and Six hereof were, and are, false, misleading and deceptive.

PAR. 8. In the further course and conduct of their business respondents and their representatives enter into a relationship with their tax preparation customers which is impliedly represented as, and is inherently, confidential and private in nature. As a result of the aforesaid relationship, respondents and their representatives are provided and receive certain information from their tax preparation customers, Respondents and their representatives retain a copy of each income tax return prepared by them and a copy of a financial profile which is filled out for each customer on the basis of information BENEFICIAL CORP., ET AL. 12;\ 119 Complaint provided by the customer ostensibly for respondents' use in the preparation of th(' customer s tax return, Both the aforesaid copy of the tax return and the financial profile contain private and confidential data of buth a personal and financial nature for each of respondents' tax preparation customers, During the initial interview with the customer and at various times subsequent thereto, respondents and their representatives review the information on the retained copy of the customer s tax return and financial profile, and make a determination as to whether to solicit the customer for some type of consumer financing offered by respondents, On the basis of such determination, respondents and their representatives solicit the tax preparation customer, either orally and in person or by mail or telephone, for the purpose of inducing the customer to accept an extension of consumer credit in the nature of a personal loan or otherwise, Respondents use, and have used, the aforesaid infmmation gathered as a result of the preparation by respondents and their representatives of their customers' income tax returns in the manner hereinabove described without the prior knowledge and consent of said customers and respondents have failed to disclose such use and intended use to their customers, PAR. 9. The aforesaid acts and practices of respondents, and the special relationship created by respondents with their customers as described in Paragraph Eight hereof, has had, and now has, the capacity and tendency to mislead respondents' customers into the erroneous and mistaken belief that the information they provided respondents wil only be used for the purpose of preparation of their income tax returns and wil remain confidential Therefore, the respondents' failure to disclose the use of the aforesaid information for purposes other than the preparation of their customers' tax returns is false, misleading and deceptive, Furthermore, respondents' use of the aforesaid information for purposes other than the preparation of their customers' tax returns without the prior knowledge and consent of their customers is contrary , and in substantial disregard of, the special relationship between respondents and their customers as described in Paragraph Eight hereof, and is, and was, unfair.

PAR. 10. In the course and conduct of their business, and at all times mentioned herein, respondents and their representatives have been in substantial competition, in commerce, with corporations, firms and individuals in the sale of income tax preparation services of the same general kind and nature.

PAR. 11. The use by respondents and their representatives of the 124 FEDERAL 'made COMMISSION DECISIONS Complaint S() F, aforesaid false, misleading and deceptive statements and representations, and unfair acts and practices, has had, and now has, the capacity and tendency to mislead members of the public into the erroneous and mistaken belief that said statements and representations were and are true and into the purchase of respondents' and their representatives income tax preparation services by reason of said erroneous and mistaken belief.

PAR. 12. The aforesaid acts and practices of respondents and their representatives as herein alleged, were and are all to the prejudice and injury of the public and of respondents' and their representatives competitors and constituted and now constitute unfair methods of competition in commerce and unfair and deceptive acts and practices in commerce, in violation of Section 5 of the Federal Trade Commission Act.

INITIAL DECISION BY MONTGOMERY K. HYUN ADMINISTRATIVE LAW JUDGE OCTOBER 21, 1974 PRELIMINARY STATEMENT On Apr. 10, 1973, the Federal Trade Commission issued a complaint charging Beneficial Corporation and Beneficial Management Corporation with a violation of Section 5 of the Federal Trade Commission Act (15 D. C. 945) by engaging in certain acts and practices in connection with their income tax preparation business. Paragraphs Four through Seven of the complaint allege that certain advertising claims made by respondents in connection with their income tax preparation business are false, misleading and deceptive. Paragraphs Eight and Nine of the complaint allege that respondents have used income tax information obtained from their tax preparation customers to solicit the latter for consumer loans and that these practices are deceptive and unfair to the consumer. By answer duly filed, respondents denied that any of their challenged acts or practices violated Section 5 of the Federal Trade Commission Act.

Prehearing procedures commenced in May 1973. In January 1974, the case was reassigned to the present administrative law judge, Respondents' two motions to withdraw the matter from adjudication, duly certified to the Commission by the administrative law judges, were denied by the Commission in August 1973 and April 1974. In November 1973, counsel for the parties entered into a Stipulation For Partial Adjudicated Settement, which was filed on Dec. 3, 1973. As a result, all of the advertising issues in the complaint, except Paragraph Six (1) and 119 Complaint Paragraph Seven (1) dealing with respondents Instant Tax Refund" advertising claims, were settled. Evidentiary hearings with respect to the remaining issues were held in April, May and June 1974, in Washington, D.C. Following reception of further evidence upon a motion by respondents, the evidentiary record was closed on July 23 1974, and the parties filed their respective proposed findings and orders, and briefs on Aug. 28 1974.

Any motions not heretofore or herein ruled on specifically or indirectly by necessary effect of the conclusions of this initial decision are hereby denied.

The proposed findings, conclusions and briefs of the parties have been given careful consideration, and to the extent not adopted in this initial decision in the form proposed or in substance, they are rejected as not supported by the evidence or as immaterial. Having considered the entire record in this proceeding and the demeanor of the witnesses, together with the proposed findings conclusions and orders and briefs submitted by the parties, the administrative law judge makes the following findings of fact. FINDINGS OF FACT I. Respondents and Their Business 1. Respondent Beneficial Corporation is a corporation organized existing and doing business under and by virtue ofthe laws ofthe State of Delaware, with its principal office and place of business located at 1300 Market St., in the city of Wilmington, State of Delaware (Ans. par. 1).

2. Respondent Beneficial Corporation wholly owns subsidiaries engaged in the consumer loan business; many of those subsidiaries also operate a tax preparation business. In addition, Beneficial Corporation wholly owns Western Auto Supply Company (a nationwide merchandising company), Spiegel, Inc. (a mail order merchandising company), and various other companies engaged principally in the sales finance and creditor insurance business (CX 18 at p. 3). In 1972, Beneficial Corporation had a net income of approximately $82 millon (CX 18 at p. 6).

3. Respondent Beneficial Management Corporation is a corporation organized, existing and doing business under and by virtue of the laws . Referenr" to the recurd are made parenlhein usinl' the fotlowinll abbreviatiuns: ex - C"Hlmissiun F.xhibit RX - Respundent5' Exhibit 'fr. Transcript of the testimony CPF - Compl..int Cm.lsel's Prnpuse!! Fimtin,p: RPf . Resp"mlents l'ruposed Firulin!,s CR, Complaif\t Counsel' s Rrier RU - Respondents Hr;('f.

12(-j FEDERAL TRADE COMMISSIO:- DECISIONS Complaint HG F.

of the State of Delaware, with its principal office and place of business locat.ed at 200 South Street, in the city of Morristown, State of New Jersey. It is a wholly-owned subsidiary of respondent Beneficial Corporation and provides various accounting, auditing, management services, including the formulation of advertising and sales policies, for the subsidiaries of Beneficial Corporation who operate the local loan and tax preparation offices (Ans. pars. 2; Higgins, 'fr. 204). 4. Respondent Beneficial Corporation through its subsidiaries has for many years been engaged in the consumer loan business and more recently in the tax preparation business. Its subsidiaries, including respondent Beneficial Management Corporation, have formulated and caused the dissemination of advertisements concerning income tax preparation services throughout the United Stat.es. Respondents have maintained a substantial course of trade in the offering of consumer loans and income tax preparation services in commerce, as "commerce is defined in the Federal Trade Commission Act. At all times mentioned in the complaint, respondents have been, and now arc, in substantial competition with individuals, firms and corporations engaged in the offering of consumer loans and income tax preparation services of the same general kind and nature as offered by respondents (Ans., pars. 1-5; CX 18 137; Snyder, Tr. 8). I I. Liability of Respondents 5. Beneficial Corporation is a conglomerate primarily composed of the Beneficial Finance System (a general term used to refer to the Beneficial Corporation subsidiaries which engage in the loan and finance business), Spiegel, Inc., and Western Auto Supply Company (CX at. p. 3; Higgins, Tr. 178; finding 2). 6. On Dec. 31, 1972, there were approximately 1800 subsidiaries in the Beneficial Finance System: 1505 of these in the United States. Each of these U.S. local loan offices are owned and operated by a separate subsidiary of Beneficial Corporation (hereinafter local loan subsidiaries j. Approximately 1300 of these offices offer tax preparation services. With the exception of a few shares of a few subsidiaries, Beneficial wholly owns all of the stock of the local loan subsidiaries in the United States (CX 18 at pp. 8-9; Higgins, Tr. 179, 152). Beneficial Management Corporation, also a wholly-owned subsidiary of Beneficial Corporation furnishes services at cost to the local loan subsidiaries (Ans" par. 2; Higgins, Tr. 204-05).

7. Beneficial Management Corporation of America is a wholly owned subsidiary of Beneficial Corporation. It employs regional and field supervisors throughout the country and is responsible for implementing the procedures which are established by Beneficial Management Corporation (Higgins, Tr. 205-06). BE1\;EFiCIAL CORL. ET AI, 127 J i9 Cn;)lplainl 8. Beneficial Management Corporation formulated and approved all the advertising challenged in the complaint and in conjunction with the Ioc-a.l loan subsidiaries caused its rlisstmination to members of the gen€lal public CAns., par, 2; Snyder, '11' 6-22; findings H)- ;18 infra), 9. Beneficial lVianagerner t Corporation prepared and disseminated to the local loan subsidiaries various memoranda, dire:etives, and other cbcume:nts containing instruc:LJons on the use of tax. information at issue in this case (CX 19-;34 , 68, 41; Ans, to Requests for Admissions , 4; Snyder, 1'1' 24- , 2'1).

10, Beneficial Corporation s local loan subsidiaries disseminated various point Df sale and direct rnai! advertising pieces which were prepared by Beneficial Managanent Corporation. 'The local loan subsidiaries pay for the cost of this advertising (finding 38 infra; 99- 111 124 125, 162, IG , IG4, His; Snyder, Tr 19), 11. Telephone directory advertising is often placed at the request of the local loan subsidiary and is generally paid for by that subsidiary (Snyder Tr. 18; findings 36- infra).

12. The acts and practices relating to use of tax information which are alleged to be unfair and del:eptive in Paragraphs Eight and Nine of' the complaint \Acre: actu8.l1y cummitted by employees of the local loan subsidiaries (CX 25- , 29 , :3G, :38(a)) (findings f)9- infra). l:i, Respondent Beneficial Corporation s whoHy-uv.rned local loan suhsidiaries corn:mitted the unfair and deceptive acts and practices alleged in the complaint (findings 9- supm). 14. Respondent Beneficial Co"poration is the sole stockholder of the local loan subsidiaries and either its board of directors or executive committee select who are to be on the board of directors of the local loan subsidiaries (Higgins, Tr. 196-97).

15. The officers of each of the !l4 J local loan subsidiaries are identical, except for the president who is, in each region, the regional vice president of Beneficial Management Corporation, This pattern existed throughout the period 1969 through 1971 (CX 145(a); Donohue Tl' 225- 27).

16. All of Ule officer:: and direl'ors uf the ion- New York local loan :;1bsidlaries are employees of ( ither Beneficial Management Corporation or Beneficial Management Corporation of America, both wholiy owned subsidiaries of Beneficial Corporation (Higgins. Tr, 198-201; Findings 3 , G, 7 ,uj1YCt), 17. Beneficial Management Corporation Df .l\america L" mploj.'s oetv.'een 75 and 100 persons. Its principal offices are located in the same building as are those of l ponder.t Beneficial Corporabon, in \VihnlngLon, Del. It employs variou:J field ;upervisors and auditor::, and reg-ional personnel and promotional supervisors throughout the coun- 12R FEDERAL TRADE COMMISSION DECISIONS Complaint 86 F.T.C.

try. Its only function is to provide supervision over, and service to, the local loan subsidiaries. It receives all of the funds necessary for its operations from Beneficial Corporation, and generally does not make a profit (Higgins, Tr. 205-20; Donohue, Tr. 245). 18. Mr. Carroll Donohue, who serves as director and vice president and secretary of all the local loan subsidiaries, is not paid a salary by the local loan subsidiaries for performing these services, but is paid by Beneficial Corporation, though he is neither an officer nor director thereof (Donohue, Tr. 220- , 245).

19. All of the local loan subsidiaries rely solely on Beneficial Corporation for the money that they use in the operations. Funds are advanced to the local loan subsidiaries initially as capital contributions or as loans. When a local loan subsidiary needs additional loans, it contacts the treasurer s department of Beneficial Corporation to arrange for the needed financing. The decision whether to advance funds in the form of additional capital contribution or loans is made by the treasurer and comptroller of Beneficial Corporation (Higgins, Tr. 192-93; CX 18 at p. 9; ex 150(Z) (34-50)).

20. The accounting for the local loan subsidiaries in the Beneficial Finance System is handled largely by computer. Beneficial Data Processing Company, a wholly-owned subsidiary of Beneficial Corporation, provides the computer service to handle the basic data relating to the loan and finance business. It operates a terminal and computer system in Morristown, N.J., which has a terminal in every local loan office. It obtains all the funds needed for its operation from Beneficial Corporation (Higgins, Tr. 207-08).

21. Beneficial Corporation in effect provides all the financing needed by the local loan subsidiaries for their operations and maintains a close watch over the financial operations of those subsidiaries (findings 19- supra).

22. Beneficial Corporation operates various plans for the benefit of the employees of the local loan subsidiaries (Higgins, Tr. 208-11; ex 150(n), (Z)(57), (Z) (67), (Z)(2), (Z)(24), 150(m), 150(c); (Z)(13)). 23. Respondent Beneficial Corporation owns and effectively controls the local loan subsidiary corporations Windings 10-21). 24. Respondents obviously endeavor to have the local loan subsidiaries identified in the public mind as part of the "Beneficial Finance System." All of the local loan subsidiaries are called "Beneficial Finance Company of - " (the name of the town in which they are supm; Higgins, Tr. 178-79). The name located) (CX 18 at p. 3; finding 5 Beneficial Finance" is displayed on the outsirle of most of the local loan offices. All of the advertising for respondents' tax service uses the (findings 33-47 infra), and terms "Beneficial" or "Beneficial Finance" BENEFICIAL CORP., ET AL. 129 119 Complaint stresses the fact that a large nationwide organization is the entity offering the income tax preparation service. The tax service is referred to as the "Beneficial Income Tax Service." For example, CX 165(b) states: "Beneficial Income Tax Service - A Service of Beneficial Finance System - over 1700 loan and finance offices coast to coast." 25. There is evidence in the record that consumers are of the belief that they are dealing with a large nationwide company when they patronize a Beneficial local loan subsidiary and that such belief is one of the reasons they choose to have their taxes prepared at Beneficial (Deveny, Tr. 375; McIntire, Tr. 426).

26. The combined effect of respondents' advertising and the names of the local loan subsidiaries is to create the reasonable impression that the local subsidiaries are local representatives of some nationwide controllng "Beneficial" entity. That entity is in fact Beneficial Corporation (findings 24-25).

27. Beneficial Management Corporation functions as a service organization for the local loan subsidiaries of the Beneficial Finance System. Beneficial Management Corporation does not directly engage in loan or income tax preparation business. Among the services it provides are supervision, audit, accounting, advertising, and legal services. It provides these services to the local loan subsidiaries at cost and does not make a profit. AU of the funds for its operation come from Beneficial Corporation, through capitalization and advances of money as needed. Beneficial Management Corporation has never utilized outside sources of capital (Snyder, Tr. 6; Higgins, Tr. 204-05). 28. Some of respondents Instant Tax Refund" advertisements have been copyrighted. These copyrights are held by Beneficial Corporation (CX 113-20).

29. On Apr. 26, 1972, there were 17 members of the board of directors of Beneficial Corporation. Of these 17 members, six worked for Beneficial Corporation or its subsidiaries: Messrs. Benadom, Bowes Burd, Fultz, Higgins and Tucker. The remaining directors were outside directors (Higgins, Tr. 189-90).

30. Beneficial Corporation exercises control over Beneficial Management Corporation primarily through three men who hold key positions in both companies: Edgar T. Higgins, Cecil M. Benadom and Robert A. Tucker (CX 150).

31. The significance of the overlap demonstrated in finding 30 supra lies in the fact that during most of the time period relevant to this case, these individuals constituted a majority of the executive and finance committees of Beneficial Corporation and were the entire executive committee of Beneficial Management Corporation. Much of the formal decision-making responsibility of both corporations is ;

l:)() FEDERAL TRADE COMMISSION DECISIONS Complaint H(i F. exercised hy these committees as opposecl to the entire boards. Therefore, the three top executive offcers of Beneficial Corporation are in a position to control effectively the activities of Beneficial Management Corporation (CX I50(f), (8), (Z)(l6), (51), (G3), (G8), (18-84), (68-87); Higgins, Tr. 190-92; CX 178; finding 11, s"pm). 32. The executive committee of the board of directors of Benefieial Management Corporation approved the decision to ent.er into the tax preparation business and were aware of the advertisement used with regard to Beneficial Income Tax Serviee (Snyder, Tr. 7, 10). III.A.TheStipulationUnfair andfor DeceptivePartial AdjudicatedActs and PractieesSettement 3:1. On Nov. 30 1973, complaint counsel and counsel for respondents entered into a Stipulation for Partial Adjudicated Settement which was filed on Dec. :1, 1973. The effect of this stipulation was to sette all of the advertising issues in the complaint except Paragraph Six (1) and Paragraph Seven (1) which deal with respondents Instant Tax Refund" advertising claims. Counsel stipulated that the cease and desist order provisions set forth in Paragraph Two of the Stipulation for Partial Adjudicated Settement were appropriate relief in the public interest as to the acts and practices which were the subject of the stipulation (see order infra). Counsel also stipulated inter alia the following facts concerning these advertising representations: (A) Subsidiaries of respondent Beneficial Corporation disseminated the following advertisements:

RADIO AND TELEVISION (1) This year have your tax returns prepared a better way * * * by computer * * "' at Beneficial Finance. Wit.h Beneficial's Income Tax Service for ati little as $5 * * * you get maximum deductionti ' 1' * lOQf'Il' accuracy * * * Plus you can get an Instant "Tax Refund," The instant you qualify for a loan-you get your refund * * * in cashintitantly. So have your taxes done at Beneficial Finance. and get your Instant "Tax Refund.

(2) Where are the smart people having their t.ax ret.urns prepared this year? At Beneficial Finance. That's right, Beneficial Finance- with its new, fully computerized Income Tax Service. Y 011 get all the deduct.ions you re entitled to- and since your return is figured by computer, it's guaranteed accurate, Now * * * here s the big news: At Beneficial, and only at Beneficial, you can get an Instant "Tax Refund," The instant. you sign your return and qualify for an on-the-spot loan, Benefieial advances you t.he full amount of YOllr refund, So there s no waiting all those weeks and weeks for your check from the Government. It' s the Instant "Tax Refund" at Beneficial Finance, (:1) If you haven t. done your income taxes yet * * * if you re worried about all those new forms and regulations * .' * if like so many of us you just can t get down to all that. figure work on your tax return- Jet Beneficial Finance take the load off your mind' For as little as $5, Beneficial's Income Tax Service wil do your return by computt r. It. couldn t be simpler: Beneficial's computer figures out. yOllr maximum deductions and prepares your return wit.h 100'71 accuracy, And, if you bve a refund coming, you ca:l get : I Complaint it )'ighi away wit.h Relwficial's Instant. " Tax H_cfund" the instant you qualify for a loan and get .your I'refund- in cash instantly! Just. look in the white pages of your phone book for the Beneficial office Dem' y011. And, call up or come in .:. or. * today. NEWSPAPER AND DIRECT MAIL 0) New Income Tax Service Offers " INSTANT TAX REFUND"';' Beneficial Finance offf'rs a complete tax preparation service, fully computerized to give you maximum dedu('tion,,- Arcuraty is 100% guarant.eed- (Beneficia! pays any pelialty or interest if it makes an error!) "If you have a refund coming, you don t have to wait weeks for a Go\'e nment check. Thl: instant .'Oll sign your r('tum ;jnr! qualify for an (m- the-spot loan, you get your refund- in cash instantly. Only at Beneficial. This year, let Beneficial prepare your tax I'el.urn::! $5 and up And if you want cash to pay your taxes, 01' for any good noason, remf'mber: jtJu re good for more at Beneficial. Offices everywhere * *" * open all year. Phone or come in * *' * now Avoid the rush, (2) Its a fact: 7 out of every 10 taxpayel's who have their returns prepared by Beneficial's Income Tax Service get refunds, (3) REJ'F,FICIAL INCOME TAX SERVICE: * * * for as little as$5 (B) By and through the use of the above-quoted statement and representations, and others of similar import and meaning, respondents and their representatives have represented, and arc now representing, directly or by implication, that:

(1) Respondents will reimburse the taxpayer for any payments the taxpayer may be required to make in addition to his initial tax payment if such additional payments result from an error made by respondents and their representatives in the preparation of the tax return. (2) Respondents' and their representatives ' tax preparing personnel are specially trained and unusually competent in the preparation of tax returns and the giving' of tax advice, and that they have the ability and capacity to prepare and give advice concerning complex and detailed income tax returns.

(:3) The percentage of respondents' tax preparation custumers who receive refunds it) demonstrably greater than the percentage of the taxpaying public at large who receive refunds- (C) In truth and in fact:

(1) Respondents and their representatives do not reimburse the taxpayer for all payments he is required to make in addition to his initial lax payment if such additional payments result from an error made by re::pondents and their representatives in the preparation of the tax return, l:J FJ-DERAL TRADE Cm.lmission DECISIONS Complaint 86 F.

(2) Respondents' and their representatives ' tax preparing personnel are not specially trained and unusually competent in the preparation of tax returns and the giving of tax advice, and they do not have the ability and capacity to prepare and give advice concerning complex and detailed income tax returns.

(3) The percentage of respondents' tax preparation customers who receive refunds is not demonstrably greater than the percentage of the taxpaying public at large who receive refunds. Therefore, the statements and representations set forth above in finding 34 (A) and (B), were and are, false, misleading and deceptive in violation of Section 5 of the Federal Trade Commission Act (Stipulation For Partial Adjudicated Settement).

B. The "Instant Tax Refund" Advertising 34. From 1969 through 1973, Beneficial Management Corporation either formulated or approved all of the advertising material utilized by respondents' income tax preparation business. The advertisements were disseminated by subsidiaries of Beneficial Corporation. All of respondents' advertising introduced into evidence in this case was in fact disseminated (Ans., pars. 2, 4; Snyder, Tr. 8-12; CX 124). There are in evidence advertising schedules showing respondents' radio and television commercials that were run for the income tax seasons 1970 to 1973, and the areas where said commercials were run (CX 84-88; Ross Tr. 79-80).

35. Films with audio, for two of the 1973 television eommercials were shown during the hearings and were introduced into evidence (RX 20A, B). Scripts of these two commercials, accurately reflecting the audio portion of each, were also received into evidence (RX 20D; CX 84J). Tape recordings and their transcripts of two of the 1973 radio commercials were played during the hearings and were introduced into evidence (RX 20C, E, F).

36. Telephone directory advertising of respondents' income tax preparation service was initiated in the second half of 1970, and began appearing in directories published in late 1970 or during 1971. A schedule showing the copy of the telephone directory advertising utilized, and where and when placed, prepared by respondents advertising agency, was received into evidence (RX 89A- T; Ross, Tr. 79-80).

37, The format for newspaper advertisements used during the 1971 tax season in approximately six states was received into evidence (CX 56; Snyder, Tr. 20-21) 38. Beneficial Management Corporation prepares and causes to be printed various point of sale and direct mail advertising pieces, which are then shipped to the local loan offces for dissemination (Snyder, Tr. .. ..

BICNI:FICIAL CORP., ET AL. 133 119 Complaint 19). Examples of these were introduced into evidence (CX 52- , 57, 59 , 95, 100(B-C), 102(B-C), 103(B-H), 104(B-C), 105(A-B), 106(A-B), 107(A-B), 108(A-B), 90- , 97, 98, llo(A-G). 39. In 197:, approximately one-half to three-quarters of the Beneficial loan offices placed two foot by two and one-half foot advertising poster in their windows and a similar size poster in their lobbies (CX 164A-B), copies of both of which were introduced into evidence (Snyder, Tr. 22-23).

40. All of the advertisements utilized by respondents from 1969 through 1973 prominently featured the "Instant Tax Refund" theme. In almost all of the advertisements, this is the dominant message conveyed, the most effective representation made (See advertisements set forth in findings 41- , 55- infra). 41. Prior to February 1970 and prior to 1972, in the case of telephone directory advertisements, respondents Instant Tax Refund" advertising provided no explanation of what the "Instant Tax Refund" actually was. (CX 89(e)) is representative of such telephone directory advertisements placed from 1970 until the summer of 1972 (CX 89A-C):

BENEFICIAL FINANCE SYSTl'M Fully computerized Beneficial Income Tax Service gives you maximum deductions complete accuracy. Exclusive: Instant "Tax Refund" loans. Phone or come in "WHERE TO CALL"

The "Instant Tax Refund" portion of the radio commercial set forth below was run throughout most of the country in 1969 and early 1970 (CX 85B):

Do you have a refund coming- to you or your income taxes this year? Well there s no need to wait weeks for your refund check. Get the money right now - even before you mail your return - with a cash advance from Beneficial. We call it the Instant Tax Refund, a special service of Beneficial Finance. Instant Tax Refund, At Beneficial you re good for more (CX R5F) 42. In the summer of 1972, certain minor changes were made in the copy used in respondents' telephone directory advertisements. The relevant change was the insertion of the word "Plan" between "Instant Tax Refund" and "loans." CX 89P below, is representative of the telephone directory advertisements used in most states from July 1972 until the present (CX 89B):

BENEFICIAL FINANCE COMPANIES BENEFICIAL INCOME TAX SERVICE Fully computerized to give you maximum deductions, complete accuracy. Special: As about "Instant Tax Refund" Plan loans, offces in this area find the offce near you in the Yellow Pages under "Loans," Call or come in today, 43. The radio and television advertisements using the "Instant Tax Refund" theme underwent certain modifications from 1969 until the 1;\4 FEDERAL TRADE C()l1l\JSSJON DECISJONS Complaint H(j I.TC. present. In approximately February 1!)70, the " Instant Tax Refund" representati\Jn was slightly changed In include Lhe mention of' UIi. wm' loan," The portions of the radio and television ('omm('rcia! ; set forth below arc from the transcripts uf commercials using the "Instant. Tax Refund" theme from February 1970 until the end of the 1970 tax season. CX K5(e) was run throughout the country (CX 85(a)). ex S4(b)- (c) was the only television commercial used during this time period. ex 84(a):

Radio ;'1 Now i' here the big /1('\'' ';: At R(-neficia1. :-md only at. Ber,efici,d . you can get. an in: t.ant "TClx H.efunrl " Th", in",.Plant you sign your r('tu!"11 :,nd Qd8.lii':' foe' a' on-t!w-spo( loan, Beneficial advances yO'J tbe rub nnlOHr.t of' ye-cP- nofund. So, ihe,p T'J waiting all those weeks and \\leeks for YO'JI' check from J2 (;uvr'j' nm,' ,,:- It " tli- In;;Lul "Toe Refund" at. Renf'fiC'ial Firan(e ' " " *- (CX S::"C)_ Television *1. With their new, fully-computprized, Feneficia! IncOHW Tax Service. You get , 'f maximum deductions " 'I' '.' low';-, aecur;v:y- Plus, an Instant "Tax Refund." Get. your n'fund, instantly with an on-the-Oipot loan. So this year' have yOLir tax 1'!:tumOi done at Ben"ficial Finance. There s ar. offi"e near you - '" (CX H4(b)-(r:), 44, In late 1970, before the 1971 tax semmn, the " Instant Tax Refund ' representation. in radio and television adv€ltisjng, was again slightly modified. In television commercials, the phrase "qualify for a loan" was added, and in radio commercials, the words "Advances you the full amount of your refund" were changed to " You get your refund - in cash - instantly.'j The television cO 11mercial tnmscnpt set fmth below (CX 84(d)) was run throughout the country during the 1971 tax season, until March 1971 (CX 84(e)). The radio commercial transelipt set forth below (CX 8G(c)) is representative of the " Inst.ant T3. Refund" theme in radio commercials run during this time periort. Radio '" ,. '" Right now, at Beneficjal Finance ""- * * YO'i're good fOj" an In:; ant "Tax Refund, " At Beneficial, you !"p good (":1" mure. VI'hy wait. weeks for yOllr refund rheek from the Government? Get ail Instant "Tax H f\H,d" at Beneficial Financf'. The instant you qualify for an on-thf'-spot \nan, you get your refund - in ca"h - i "tantl.Y, No matter where .'0\1 may bl: borrowing, or had a loan before, can Beneficial eo * *' Get you)' Instant. Tax Refund." See Beneficial * '" '" Get. your Instant "Tax Rf'funrJ" Come to ",..here you re good for more, .Just look in the White Pag"::; of your phone oo"k for the; Bendici offce near yOIJ * (CX 86(('), Televisiun '" * '" Plus you can get an Instant " Tax Refund." T ,,' insUH\t you qm1.lify frp'" a !o,m you get your refunrl '" '" in cash - - instantly S(), have yo,;_ ! l:- dim.. ,,1 Rpl;di,- i;jl Finance, and gel your Instant "Tax Hefund" 'I' ole (eX 8- l(d). 45, The final modification in the radio and television ve .sj(!ns of the Instant T IX Refund" adve ising was rnad!' in March HJ71. Th; word Plan" was added after the phrase '' In:-tant Ta; Refund", and th( phrase ;'Jend you the f'( uivaJent of your rert nd in ca h" \\' as added, , .

BENEFICIAL COHP , ET AI, 1:1S JFJ Complaint. Although the eomrnercials run subsequent to March 1971 vary, the Instant 'Tax Refund" representation remains essentially the same in each (I-liggins, Tr, 507-(8). The portions of the radio and television transcripts set forth below arc representative uf the " Instant Tax Refund" t.heme in c0lT11lE:lci;:ds run subsequent to J\ ch 1971. Eadio "i "J,fl tpn cO B,'neficial' s " Inst.ant Tax Refund" Plan: if you have a refund coming, ;''JI don t ha"e t.o '.';-it \veeks for a Covp.rnment check. The instant. Yf)U qU2.lify for II loan, Up!wficic,J 'Nill lend you the equivalent uf your refund, in cash, Instantly, It.' s the Instant. TC;x Refund" Pj,m - '. e' at Beneficial Finance .1' * .1. (eX R7(h)') Television And the Ben('ficial " Instant. Tax Refund" I-hm, If you have a refund coming, 10anRendit:al wil(CXlend84(f).you tni' ',quivalent n( :\ ou, ref!H1l1 in (';;\.h the instant you qualify for a 4G, Respondents' printed advertisement.s featuring the " I nstant Tax Refund" theme also umlerwent minor modifications from 1969 until 197,1 Beginning in E170, the print advertising was modified by placing an asterisk after the '( Instant Tax Refund" reference and a corresponding asterisk below where respondents purportedly explained the "Instant Tax Refund." ex 56, 57(a) and 60(b) are representative of the '/ Instant Tax Refund" reference with asterisk modification in print advertisements used from 1970 until March 1971: New Income Tax Senliee Off.,)'s INSTANT "TAX HEFt!ND BeneficicJ.l Finance' offers a complete tax preparation servire, fully computerized to give you maxinmm dt dudion . Aeeurary j 100'1 guaranteed. (BenefieiaJ pays any interest or penalty if it rnak2s an prro/") "'If you have a refund con'ling, you don t hav!' to wait week.s for a Gcv",rnment check. 'The ins \It. S'ou sign your lot.ul' anJ qualify for an on, the-spot Joan, you get your refund - in ('osh - - instantly. Only at. Bellcfici ! 'i ., (eX 56). Instant " Tax Rd'und"

"If you have a ,refund C'ming, Y'jU don t have to wait weeks for a Government check. The in tant you ;ign you!' return and qualify for an (m-the-spot Joan, you get your n'fund in eash -- instantly. (CX G7(a), Introducing Instant "Tax H.e-fund"

If yon have a refund coming, you don t have to wait weeks for a Govcrnment cheek. The i1lstant you sign your return and qualify fal' a loan, Beneficial advances you the full amount fJfyouJ" refund. We cedI it the In;:tant. ';Tax Refund." (eX (;O(b), 47, The final modificat.ion of the printed advertising occurred in mid-March 1971. The words "loan" or " plan" were added to the "Instant Tax Refund" reference, and the phrase j;lend you the equivalent of !:u; FEDERAL TRADE COMMISSION ImCISIONS Complaint 86 F.

your refund" was introduced (Higgins, Tr. 507-(8). CX 93(a), set forth below, is representative of the use of the "Instant Tax Refund" slogan in printed advertising from mid-March 1971 to the present: Instant Tax Refund" Plan If you have an income tax refund coming, you don t have to wait weeks for a Government check. The instant you qualify for a Joan, Beneficial wil lend you the equivalent of your refund in cash, instantly, (CX 98(a). 48. Respondents Instant Tax Refund" is an ordinary loan, not distinguishable in any way from any other loan specially or generally advertised or processed in the offce of any consumer finance subsidiary of Beneficial Corporation, in terms of months to repay, amounts of loan available, rates of charge, or otherwise (CX 123; Snyder, Tr. 29).

49. Respondents' early advertisements, which contained no explanation whatever as to the nature of the "Instant Tax Refund" offer had, on their face, the capacity and tendency to mislead the consumer into believing that if he let Beneficial prepare his income tax return and if the return should indicate a refund is due him, then Beneficial would as a special service, give him a cash advance in the amount of his refund. There was nothing in the advertisements to alert the customer that what was being offered was a normal consumer loan with finance charges (finding 14 supra). Respondents' executives admitted that the advertising was unclear; survey reports from their advertising agency showed customers were confused (CX 159(4-5); Ross, Tr. 84-85; ex I55(a); Ross, Tr. 87), and all changes made in the "Instant Tax Refund" advertising was made in an attempt to clarify what the "Instant Tax Refund" was (Snyder, Tr. 53- , 71; Higgins, Tr. 506-07). 50. Respondents' subsequent attempts at explanatory language in their radio, television, and print advertising do not succeed in exposing the true nature of the "Instant Tax Refund" offer (See advertisements set out in findings 42, 45, 47 supm). Read in the context of the whole the "explanatory" language does not adequately explain that what is being offered is a regular consumer loan with finance charges. When considered in its entirety, the message is confusing and misleading. The fact is that the modified advertisements contain two different and conflcting claims. The best that can be said is that the advertisements are susceptible of two meanings: one, that Beneficial offers " Instant Tax Refund," the other, that Beneficial offers a consumer loan to its customer - with conditions that are not revealed - if they qualify for such a loan. The former is clearly deceptive; therefore the advertisement as a whole is misleading. Moreover, the manner in which the attempted explanation is presented adds to the confusion and deception inherent in such advertising. In print, the "explanation" is generally far less prominently featured than BENEFICIAL COBp., ,:T AL. 137 119 Complaint is the "Instant Tax Refund" reference. (See exhibits listed at finding 47 sllpra). In the radio and television advertising, the dominant theme is the "Instant Tax Refund " not the "explanatory" language (CX 84-88).

51. There is, furthermore, substantial evidence in the record in the form of credible consumer testimony to the effect that members of the public were in fact confused, misled and deceived by respondents Instant Tax Refund" advertising, even in its most modified form (CX 158(c); Martin, Tr. 661-6:1, 691; RX 20(d); Flot, Tr. 71:1- , 727, 729-:10 7:5- , 745- , 764-70; CX R7(c); Moyers, Tr. 771- , 778- , 780; CX 80(A-B); Snyder, Tr. 808-09; CX 84(k)).

52. The administrative law judge finds therefore that even as finally modified, respondents Instant Tax Refund" advertising has the tendency and capacity to deceive the public (findings 50- sllpra). IV. Misuse of Tax Information C. Respondents' Conduct Prior to Passage of Section :116 of the Revenue Act of 1971 5:1. Prior to actually doing so, respondents discussed internally for a number of years the possibility of conducting an income tax preparation business in their local loan offces. Discussions on the subject also took place between respondent Beneficial Management Corporation and its advertising agency Al Paul Lefton Co., Inc., with the idea that a tax preparation business in the local loan offices could generate additional loan business, through the sale of loans to tax customers (Snyder, Tr. 6-R; Ross, Tr. 8:1-84).

54. Respondents entered the tax preparation business in 1969, the purpose being to use the tax preparation business as a "feeder" to the loan business. Tax advertising was to enhance and develop the loan business, and great emphasis was placed on converting each tax customer into a loan customer (Higgins, Tr. 50:1, 508-09; Ross, Tr. 114; CX 20, 22, 24- , 34, 38(a)). The loan and tax preparation businesses were and are completely interrelated (Higgins, Tr. 51:1- 15). 55. Respondents' tax preparation business was in fact highly effective in producing new loan business for the local offces (CX 154(19), (22-30); CX 156(a); CX 157(i); CX 127(c); CX 142(a)-(b); CX 143(b); Higgins, Tr. 508-09).

56. Respondents made extensive use of temporary employees to work in their local offices during the tax preparation season. These employees were used primarily to fil out tax interview sheets for tax preparation cm;tomers; they were not required to be experienced in tax matters, nor was much training required to learn to fil out interview sheets (CX :11, 32; Snyder, Tr. :14-35). Both temporary tax employees (if 1;)8 FICDERAL TRADE COMMISSIOK DICCIS10NS Complaint HG FTC.

experienced) and other office personnel would solicit consumers for loans (Snyder, Tr. 34; Taylor, Tr. 161; CX 27, :12, 34). 07. Prior to December 1971, Beneficial Management Corporation prepared and disseminated certain instructions to the local loan subsidiaries of Beneficial Corporation that were engaged in income tax preparation on procedures to be followed in operating the tax business (CX 19- , 30, 38 41: Answer to Requests for Admissions, No. , 3, 4; Snyder, Tr. 24- , 27).

58. Prior to December 1971, the general procedure followed by the local offices in their tax preparation business was as fullows: Employees in the local offices filled out tax interview sheets (CX 10 11) and data sheets (CX 9) when necessary, for each tax customer. This entailed the customer s disclosure of a wide variety of personal and financial information (CX 10, 11, 34(b)). When completed, the sheets contained all the information necessary to complete a customer federal tax return (CX 24, 38(a); Snyder, Tr. 31-32). The interview sheets and data sheets were sent to Programmed Proprietary Systems Inc., a computer service which returned to the local office the completed tax return (CX 80; Snyder, Tr. 32). The customer returned to the office to pick up his completed tax return (CX 30). Copies of the interview sheets, data sheets, and completed Form 1040's were kept in the permanent files of the local offce (CX 2:1, 29, :10). 59. The information furnished for tax preparation purposes gave respondent a valuable sales tool, as respondents realized. As CX 34(b) states:

When you ve cornplded the 1\.x Interview Fonn you ll have in fr'-Jnt Gf you fIearly all the infurmation you need for making a loan. Take advantage of it. What more do you need? The local office did make every attempt to take advantage of the opportunities that uch information provided to sell the customer a loan (CX 20, 22, 24, 27, :14d), 38(a), 41).

60, Respondents did not confine themselves t.o soliciting tax preparation customers for "Instant Tax Refund" loans, but attempted to sell loans for a variety of purposes (CX 25-26; Snyder, Tr. 28-29). They used the information appearing on tax interview sheets to determine the particular type of loan to offer the customers (eX 25- , :18(a)). For example, ex 26 states:

Right on the Tax Interview Form it shows you what banks or loan compani€8 th customer ov,' es. It is an easy matt€r to go on from th€tc and list other debts and show how aU the bill.s can be consolidated, the bank loan can be paid off. the loan company can be paid off, the balance on the ('ai' can be cleared - all with a Sill Consolidation Loan (eX 26).

CX 25 st.ates:

\\-!hen you get through ta!-,ing the tax interview form yell C11n determine - within reasonable limits - - about h(J\V much the taxpayer wjJ have lo pay in t.dKCS. Here s your BENEFICIAL CORP.. ET AL. 1;19 Complaint chance, of course, to sell a loan to pay the Governmpnl the taxes t.he customer owes (Plus BiJ CnDsoJidatiorJ (CX 2.')), 61, Failure to make a sale in the course of the first interview would not end the office s attempts to use the customer s tax information to sell him a loan (findings 62-(4).

62. Employees in the local offices used the information available on the tax interview forms to run credit checks on customers to whom t.hey did not sell loans on the first. int.erview. These customers were then approached again, with a "firm offer of a loan amount" made to them when they returned to the local office to pick up their completed tax returns (CX 27, 34(d)).

6:1. Employees in the local offices used the information available on the tax interview forms to determine credit worthiness of tax customers in order to decide whether to offer them a Beneficial Credit Card. The Beneficial Credit Card is an identification card issued to customers so that they can identify themselves and be able to borrow money at local offices away from their home (CX 27 35; Snyder, Tr. 37). 64. Employees in the local offices used the information on tax interview forms to solicit tax customers for loans or "Credit Cards" by telephone or otherwise long after these customers had concluded their tax business with the local office (CX 29, 35). D. Respondent.s' Conduct Subsequent to Passage of Section 316 of the Revenue Act of 1971 65. Section 3Hi of the Revenue Act of 1971 was passed Dec. 10 1971, and became effective Jan. 1, 1972. Beginning in December 1971 respondents disseminated instructions to employees in the field on new procedures to be followed in soliciting tax customers for loans (CX 126(a)-(f), 127, 129, 1:11 , 132, 1:14 , 1:18, 1:19, 142, 14:1). These included the use of a " BO R-56 Authorization" form by the local offces (CX 126(f)). This was supposedly a consent form, allowing the respondents to solicit thc tax preparation customer for other business of the respondents. The offices were instructed to have each tax customer sign the BORbefore any tax work was done (CX 126(b)). Completed tax forms were placed in a special "Customer Tax Folder" (CX 126(d)). If the customer had signed a BOR- , respondents felt free to solicit him for a loan. Loan Information Sheets" were then filed out, containing such data as bills owed by the customer, bank loans outstanding, loan company loans outst.anding, car loans. All such information was kept in a "Customer Loan Folder " the only source to which the local offce could refer in processing a loan (CX 1:19(i), (k); ex 142(b), (c); CX 12!i(d)). 66. Respondents continued to emphasize the importance of sellng loans to every tax customer, and to the tax preparation relationship 140 FEDERAL TRAm: COMMISSION DECISIONS Com plaint 86 ;' T.C.

as a lead-in to the sale of loans (CX 127(j), (k); 129(d), (f); 130(c); 138(b), (h), (i); 139(f), (k), (m), (u), (z); 140(h); 142, 143). 67. The BOR-56 form fails to disclose clearly to the tax preparation customer respondents' intended use of tax information to solicit him for loans. It is inadequate on its face as a consent form (CX 126(f)). Substantial evidence in the record supports the finding that consumers do not understand the nature of the BOR-56 (Deveny, Tr. 372; Dillard Tr. 392-95; Harp, Tr. 409- , 414-16; Bolt, Tr. 485-87; Flot, Tr. 717, 738- 39).E. Deception (i8. Respondents failed to disclose to tax preparation customers the fact that information given for the purpose of tax preparation would not be kept confidential and used only for that purpose (finding 67). 69. There is substantial evidence in the record that respondents' tax preparation customers consider the information they provide for tax preparation to be private, personal, and confidential, and that they did or would feel taken advantage of by being solicited for loans based on that information without their consent (Dilard, Tr. 397-98; Snyder, Tr. 809- 835-36; Flot, Tr. 724-27; Moyers, Tr. 776- , 793, 797- , 804-06; Mcintire, Tr. 428-29; Heath, Tr. 494-95).

70. Respondents' practices in using tax information to solicit for loans were deceptive (findings 68- supra). F. Respondents' Acts and Practices Were Unfair 71. Existing, established public policy, manifested in federal and state statutes as well as in the ethical codes of professional associations regards individual income tax information as confidential (26 U. e. 96103, Tr. 356; Code 97216, Tr. 351; 26 U.sC. 97213, Tr. 356; 26 u. of Virginia 958-27.4, Tr. 356; California Business and Professions Code 917530. , Tr. 356; ex 81, Tornwall, Tr. 250-55; CX 79, Hechinger, Tr. 130- , 148; Canon 4, Code of Professional Responsibilty of the American Bar Association, Ethical Consideration 4- , Disciplinary Rule 101, Tr. 356).

72. Respondents' failure to respect the confidentiality of individual income tax information by allowing such information to be used to solicit tax customers for loans without their consent offends public policy and constitutes an unfair practice under FTC v. Sperr and Hutchinson Co., 405 U.S. 233 (1972); (findings 65- supra). DISCUSSION Stipulation for Partial Adjudicated Settement and Remaining Issues As a result of the Stipulation for Partial Adjudicated Settlement filed of record by the parties on Dec. 3, 1973, it was agreed that certain advertising issues set forth in Paragraphs Six (2) through (4) and Seven 119 Complaint (2) through (4) of the complaint be settled without further litigation and an agreed-to order contained in the Stipulation may be entered covering the foregoing issues. Thus, the remaining issues to be litigated were: (1) whether respondents' advertising containing the "Instant Tax Refund" slogan is false, misleading and deceptive in violation of Section 5 (Paragraphs Six (1) and Seven (1) of the complaint); (2) whether the unauthorized use of income tax information by respondents for consumer loan purposes is a deceptive act or practice in violation of Section 5 (Paragraphs Eight and Nine of the complaint); and (3) whether such unauthorized use of income tax information by respondents is also unfair to the consumer in violation of Section 5 (Paragraphs Eight and Nine of the complaint). The "Instant Tax Refund" Advertising With respect to the "Instant Tax Refund" advertising which started in 1969 and continues to date, it is convenient to consider separately (1) the pre-February 1970 "Instant Tax Refund" advertisements, which did not employ any explanatory language, and (2) the post-February 1970 "Instant Tax Refund" advertisements, which contain some explanatory language designed to qualify the "Instant Tax Refund" slogan.

A. Pre-February 1970 "Instant Tax Refund" Advertisements We need not dwell long on the first group of advertisements for they patently and indisputably have the capacity and tendency to mislead the consumer into believing that if he lets Beneficial prepare his income tax return and if the return indicates any refund due him, then Beneficial wil, as a special service, give him a cash advance, namely, an Instant Tax Refund." CX 85F, a radio commercial which was run throughout most of the country in 1969 and early 1970, is a striking example of this group (Also finding 41).

It is well settled that the Commission has the authority to draw its own inferences from challenged advertisements. Federal Trade Commission v. Colgate-Palmotive Co. 380 U.S. 374, 391-92 (1965). The Commission and the courts have long held that an advertisement is deceptive if it has the tendency or capacity to deceive the public. Chartes of the Ritz Dist. Corp. v. Federal Trade Commission 143 F. 676 (2d Cir. 1944). And, in making this determination, the Commission looks to the impression the advertisement makes on the gullible and credulous rather than on the trained and experienced. Id. Also see Federal Trade Commission v. Standard Education Society, 302 U. 112 , 116 (1937); Aronberg v. Federal Trade Commission 132 F.2d 165 167 (7th Cir. 1942); Merck Co., Inc. v. Federal Trade Commission 392 F.2d 921 , 926 (6th Cir. 1968); Exposition PTCSS , Inc. v. Federal Trade Commission 295 F.2d 869, 872 (2d Cir. 1961), cet!. denied, 370 j . ,,:y: ;; ,,) ; ,. ) ,,,;,,,, , ..,: ; ) ,;(,,,,, 142 FEUER,AL 'fllADE COIVl Sro;"\ UECIS!Ol\S Complaint: FTC.

;r. S, 917 (1962), Indeed, the eentral purpose of Section 5 is abolish the rule of caveat cmptm' which traditionally defined rights and responsibilities in the world of commerce. Pederal Tyade C\)"fi'fJtiS8ion v. Sterling Dng, Inc. :117 W.2d 669, 674 (2d Cir. )%:1). B, Post-February 1970 " Instant 'I'ax Refund" Advertisements Beginning in February 1970, Beneficial made certain changes in the lnstant Tax Refund" advertisements designed to explain that what was being offered by these advertisements was in fact a consumer loan, The initial change was the addition or an asterisk to the 'j lnstant Tax Refund" slogan in printed advertisements, The ast.erisk directed the reader to an explanatory sentence which stated in substance that 'j you have a refund cuming, you don t have to wait weeks fora government check. The instant you sign your return and qualify for an on-the-spot loan, you get your refund-in cash-instantly," Similar' explanations were contained in aU other advertising references to the Instant Tax Refund" slogan. For example, see Paragraph 2(a) of the complaint.

In late 1970, the ' Instant Tax Refund" advertisements \ ere again modified, In television commercials, the phrase " qualify for a loan" was added, and in radio commercials, the words "advances you the full amount of your refund" was changed to Hyou get your refund-in cashinstantly" (finding 44). Beginning in March 19'71, the " tant Tax Refund" slogan itself was expanded t(; include the \1I(H"ds "loan" or plan" (RX 1:3; ex:: 71, 72, 83), and thc expanded slogans VI'ere fmiher accompanied by various explanatory language which stated in substance: the instant you qualify for a loan, Beneficial will lend you the equivalent of your refund in cash, instantly (findings 45, 47). Respondents contend that the "Instant Tax Refund" advertising thus modified and accompanied by further explanatory language adequately informs the consumer that what is being offered is a consumer loan, The administrative law judge is not able to accept this contention. When viewed and considered as a whole, the message is confusing and misleading, Sebrone Co. v, Federal Trade Conrfrrisrn:on 13,S F,2d 676 679 (7th Cir, 194:i); Aronbcrg v. Federal Trade COYIllni.ss-iufI 1;32 F.2d 165 , IG7 (7th Cir. 1 J42). This confu ion is due to the fact t.blt these adv€ltisements contain t.'.vo different and es: enLiaHy (;onfliccing tlaims. They first imply that Benefieial's tax preparation customers wil get an Instant Tax Refund." They then go on to imply t.hat the promised "tax refund" is a "loan" and you must qualif:/ for it FLwthcr TlIj:r' , rhese advertisenwnts aye eapahle or misleading the public' into hdit v,ng that , 'rp" recon! j, "j, ', ddf ' ac ' "Jtd ll"" .." ,.. "-,,.j,. i", j(n1h ,-a, iJ' (.f: Ic,; gr""p 0:- adv"t tis"!1a-!1l and d cidl'd to empl"y ,,,me form or (":p ,wy i"n u,,;;,. in "",;j,-,,,,,j. ;r, Vi.tn "". " T;,. liu,,", ;i"gJ" l;eilinning in j" ,'bruary 1!17(; (Snydi'l . "f,,- l\o,, 1';- 1' ),,: Higif'''s . "fr- , (I': i:X I ,!I ,, -ee f:mE,,1' -HI).

, BENEFICIAL CORP , ET AI. 14:1 119 Complaint loan" in this context means "a cash advance" offered as a special service to Beneficial tax preparation customers, for a nominal fee not related to interest charges, and that "qualify" in this context simply means that the tax preparation customer must have a refund due from the government (See findings 50, 51). In other words, regardless of the literal truthfulness of the advertisement, the overall implication in the mind of the viewer-audience has the capacity and tendency to mislead. P. Loritlard Co. v. Federal Trade Cormnission 18G F.2d 52 (4th Cir. 1950); Bockenstette v. Fedeml Trade Commission 134 F.2d 369 (10th Cir. 1943).

This is especially true because the "Instant Tax Refund" slogan is an explicit and dominant theme and no qualifying language which may follow it can entirely undo the initial impact of that theme. Cf The J. B. Williams Co. Inc. v. Federal Tmde Commission 381 F.2d 884 (6th Cir. 19(7).

The most charitable conclusion which can be drawn from these advertisements is that they are confusing, that they are susceptible of two meanings. Namely, one that Beneficial offers an "Instant Tax Refund" and the other that Beneficial offers a consumer loan to its customers if they qualify for such a loan. The former is clearly deceptive. Section 5 condemns such advertisements. In Judge Augustus Hand' s words, the Commission can "insist upon a form of advertising clear enough so that, in the words of the prophet Isaiah wayfaring men, though tools, shall not err therein.' " General Motors Corp. Federal Trade Commission 114 F.2d 33, 36 (2d Cir. 1940). Also see Rhodes Pharmacat Co. Inc. v. Fedemt Trade Commission 208 F.2d 382, 387 (7th Cir. 1953), Tev d on other grou.nds 348 U.S. 940 (1955); Mu.rray Space Shoe COTpomtion v. Federal Trade Commission, :104 2d 270 (2d Cir. 19(2): Giant Food Inc. v. Federal Trade Commission 322 F.2d 977, 981 (D.C. Cir. 1963), cet!. dismissed 376 U.S. 967 (1964): United States v. 95 Barrels ofVineya. 265 U.S. 438, 443 (1924). Furthermore, there is substantial evidence in the record which tends to show that the modified "Instant Tax Refund" advertisements confused and misled the public and that a number of consumers recalled the dominant theme of these advertisements to be an offer of Instant Tax Refund" (Martin, Tr. 66:1- , 672, 691-93; Snyder, Tr. 826- 27; Moyers, Tr. 785). This, in return, reinforces the administrative law judge s impression of Beneficial's current television and radio commercials that they prominently feature the "Instant Tax Refund Plan" and play down the explanation (RX 20B and D):

Unauthorized Use of Income Tax Information for Loan Purposes , It i true that .,ome of r 8p"nd"nts' ""n um"r witne" e" t..t;fiber! to a clear understanding of the"" advertisements to mean :'11 ufrer of a consumer loan However . they were rnr the most part persons who were (C""will"cd) , p.

Complaint 86 F.

A. Deceptive Act Complaint counsel contend that the use by Beneficial of confidential tax information for the purpose of soliciting consumer loans from its tax preparation customers is deceptive because the customers are not told in advance that Beneficial wil make such use of the confidential tax information furnished to it. The theory appears to be that Beneficial' s failure to disclose this material fact constitutes a deceptive act in violation of Section 5. In order to support this theory, complaint counsel further contend that Beneficial, by virtue of certain affirmative representations it makes, creates an expectation on the part of its tax preparation customers that the income tax information they furnish Beneficial wil be kept confidential.

In the administrative law judge s view, however, confidentiality inheres in the very nature of personal income tax information regardless of whether Beneficial makes, or does not make, any affirmative representations regarding eonfidentiality (See further discussion infra pp. 31-32 (pp. 145, 146, herein D. Furthermore, the record shows the element of confidence is an important aspect of the relationship between a taxpayer and a tax preparer (findings 69, 71 Crossley Survey). Beneficial's failure to disclose the material fact that the tax information wil be used for loan solicitation purposes in these circumstances clearly is a deceptive practice in violation of Section 5. All-State Industries of N. , Inc. v. Federal Trade Commission, 423 2d 423 (4th Cir. 1970), cet!. denied 400 U.S. 828. Furthermore, what is deceptive here is the use of the "Instant Tax Refund" advertising as a device to lure tax preparation customers to Beneficial' s offices for the purpose of soliciting them for consumer loans. In a feal sense, Beneficial's practice in this respect is akin to the so-called "bait and switch" device, which is a deceptive act in violation of Section 5. Tashofv. Federal Trade Commission 437 F.2d 707 (D. Cir. 1970); Pati-Pot!, Inc. v. Federal Trade Commission 313 F.2d 103 (4th Cir. 196:1). The rationale of these cases applies with equal force to this case. It is the administrative law judge s determination that Beneficial' s use of the "Instant Tax Refund" slogan for the purpose of obtaining leads to loan prospects or luring tax service customers to k'IDwl"dg..able of the oper"tio,, or the co,,"umer loan inrtustry. includin!! !\enericial. by reason of prior dealinJls or otherwise (Tr :171, :JH4, 42:i, 406- . 495. 472. 4HO- , !ill- 12J. It i well ..tt\..d that testimony by some consumers that they personally would nol be misled or ,j"eeiv..d doe;; not prec1mlefinding by the Commissiun that the ebaHenged advertisement is .-eceptive.Douh/e /o:"lI/e LllhricalllR, /IIC. v. Pederal Trade C"m'lIil/."'JI' afiU F.2d 2fi (10th Cir. 19(;:;), cerl rIellicd ;J84 U-S. 4:H (191ifj).

Furthermore. a:; pointer! out hereinahov . the p"rpos of S ction:; is to protect the ""lIhle and credulous as well as the trained and knowlerl cabe. ""pru 26lp. 141. herein 1. . It is weU recoltnized that in "uch eonfidential relation"hips cal' "a/""'plur has no place and e'luity imposes on the parties the duty to act in accordance with the highest standar.-s of morality. Cardozo, Tile Na/Ille "IIhe Jlldicinl PmceR 109- 110 (1922); Pound The Spirit ofthe C,m"'''HI /. 24- (192\). Such duty includes that of full disclosure of material fact:;. 2 Pomeroy. f:',/ily Jllri8prl!cIellce 902. Cf I Story, Jo'qllity Jllris!,f"dcllce 206 ).

119 Complaint Beneficial's loan offices for the purpose of making loans is equally a deceptive act in violation of Section 5.

B. Unfairness Complaint counsel further argue (1) that the use by Beneficial confidential tax information for the purpose of soliciting consumer loans is offensive to the public policy regarding personal privacy, and (2) that Beneficial's loan solicitation of its tax customers is immoral unethical, oppressive and unscrupulous. For these reasons, it is argued that Beneficial's practices are unfair to the consumer within the meaning of the Section 5 under Federal Tmde Commission v. R. F. Keppel Bro., Inc. 291 U. S. 301 (1934) Keppel" and Federal Trade Commission v. Sperry and Hutchinson Co. 405 U.S. 233 (1972) S&H" It is the determination of the administrative law judge that the challenged practices are unfair under Keppel and S&H because (1) they offend the well-established public policy regarding the confidentiality of income tax information, and (2) they are unethical, exploitative and unscrupulous.

In their defense, respondents have advanced several arguments. First it is argued that a business practice, in order to he unfair to consumers within the meaning of Section 5, must be a violation of some public policy codified into a statute or recognized by common law. In this connection, respondents contend that, until the enactment of Section 316 of the Revenue Act of 1971 (26 U. C. 97216), the principle of confidentiality of individual income tax infonnation did not acquire such a status. Second it is argued that, to the extent that the confidentiality principle was recognized, it did not apply to the so-called commercial tax preparers, such as Beneficial, in any event. Respondents contend that Beneficial's tax customers did not regard Beneficial's tax prcparers as tax experts or professionals who would be strictly bound by the confidentiality principle. Indeed, respondents further suggest that, because the fees charged by Beneficial for its tax service are substantially smaller than those customarily charged by lawyers and accountants, Beneficial's tax customers did not expect, or should not have expected, Benefieial to be strictly bound by the confidentiality principle. In the administrative law judge s view, these arguments are without merit and should be rejected. The fact is that Congress, by the enactment of the 1971 Revenue Act codified the confidentiality principle, prescribing criminal sanctions. Equally importantly, long before the 1971 Revenue Act, Congress explicitly demonstrated its public policy concerns regarding the confidentiality of income tax information. For example, 26 U. C. 96103 provides in substance that income tax returns are open to inspection only upon order of the President and under rules and regulations 141; FEDERAL TRADE COMMISSION DECISIONS Complaint HI; F.TC. approved by the President. 2(; D. C. 97213 prescribes criminal penalties for federal employees who disclose information contained in an income tax return, I n the final analysis, the confidentiality principle inheres in the very nature of personal income tax information and governs the relationship between the taxpayer and another person who may be entrusted with the information by the taxpayer. The relationship thus is fiduciary in nature. Therefore, the administrative law judge is unable to accept the argument that the amount of fees paid determines whether or not the person entrusted with such tax information is to be bound by the principle of confidentiality. This is not to ignore the reality that money is a universal measure of commercial transactions, I simply conclude that the relationship existing between a taxpayer and a tax pre parker entrusted with his tax information imposes upon the latter, as a matter of equitable principle, the duty of confidentiality regardless of the amount of fee paid or the professional status of the latter. More importantly, respondents' argument that a business practice, in order to be unfair to consumers within the meaning of Section 5, must be a violation of some public policy codified into a statute or recognized ,. by common law is an attempt to restrict the Trade Commission Section 5 power to enforcement of e::dst-ing statutes, In essence, it is an attempt to turn the clock back half a century to the days of Gratz: However, the attempts to restrict the Trade Commission s Section 5 power to existing or recognized methods of competition have been consistently rejected by the Court since Keppet. Respondents would now, in this case involving unfairness to the consumer, rely on the same , It h s bp('n stat,,!! that the purp"s", of the tatut,. tli tu "prevent the di c1o ur" "r "nfid.,nti,,1 inf"rm"ti"n to li"' who have 110 le!:itimatl' interest in it" Slrrr v. R"'I"/II!!, 22 F. D. 2r,(j (I%H) (ED. 111.) That the policy behi"d gtilO:\ i dirertly rel"t",! In that behind the ferler,1I prohihiti"n or u e and disrl"sure hy inco",,, ta preparers can be ,e,'n from S..""t"r :Yathias' co"'pari,,,n " r th.. former provi.,iun and his prop",,,d law. 111 Cnnl?. Rec. S. H:!IH. Mar. 29. 1!171. A lireat many stat"s have prnvisi"ns similar t" 26 lJ. A, 721:\ making State income ta return ior"rmati"" cunri'!cntial. See rI. District or C"lumbia, Set 47- I:;fi4e. D.C Cod..; Virginia. C"d" or Virl(inia g \Ii; Maryland, An. Cod" M,\. gaOO; Mas""chu etts, Sec. :, , Ch. 1,2, G. ; Minnesota. Sel . 2$10,61; Ohio. Sec. S741. 1H R. : Nt''' York, Sec. r,!17, Ta, Law, Ch, r,n C. : Mich;,,"n, Sec. 2(1i41;;,. C, Then: istestimm1Y in thi, rec"r,; that the confidentiality ofta, inr"m\ati"n is tak..n fnrgrant..rt ..vcn i" '-as'" wherclhetax preparers arl'laym..n (Tr. 77Ii). , In that case, th.. C"'1'1., narrowly eir um"cr;hinli th.. Trade Commi" i"I1" disuetion t" define and ,-l'dare:on a,.t an unfair melhod or c"mpetiti"", struck ,town the Commi"i,,, " cease anrl d",i"1 order hanning tying arraflj!ement, and air\: "Th" wor,b 'unfair mdhotl of ('ompditi",,' are not ddin"d by the statute'. . . . They are dearly in,,!!!,li"ahl.. to I'radi",," neVH before reg-ar'led as opp"sed t" 1(0",\ "'or"l he('au e characteri ..,t by d.."eption. ba,1 faith. fraud or oppression. "r a" againM puhli" poli"y he"a,,"e "r th..ir danl(erou tendency unduly to hinder ..ompdition "r cr at(' mon"poly, " C ;,:J U. "t 42:1-427) , K"f'!' og-niz..rI ror lh.. fir l lime the Trade ' ComlOi i"n\ p"wer t" g" heyonrl ..stablished f'Common taw princil'!es l" ,!et"rmine that lottery sale" "'HI' an unfair mdh,,,1 of ""mpetiti"" in viola lion "f Secti"" .:.. The court said. Wed" not intimate..itherthat lhe,tatut..dm'" notauth"ri?" the prohihitinn nrolher ami hiUwrt" "flKno",n methods of romp""ition or, 00 the other hand, IIw! the Commis"ion may prohibit every """thical comp!'titive pradice rellardle or il partict1l"r charaet!'r or f'"n I''1ueoces, N..", nr diH('rent practice, m,, t h" (""n id"red "" they "ri,,, in the light or t.h..cir""nbtan"e in ,,'hieh they are employe,!." (291 U.S, at :H4), AI,,, sc.. FTC M"r,,,,, Pid"rp A,It. S.",'i, e ("". fur :J.14 lJ.S :,92 (19,,:1): AI/nurir Uef."'''!! ro . v. ftc. X! U.S, :\S7 (19f;;,); ftc . Tn", " J", . :m:, U.S. 22:1 (19fiHL ftc 8,' '''''' Sh,,. :'H4IJ. :Jlt)(I9fti). . . : ,);, ..,, BENEFICIAL CORP., ET AI.. 147 l1!J Complaint argument rejecter! hy the Court in the unfair-method-of-competition cases- Contrary to respondents' argument, however, the Trade Commission s power to define and prohibit new unfair acts as they arise, and do so apart from existing statutes or established public policy, is not open to question. The clear holding of the Keppel and S&H cases is that the Commission has that power. In Keppet the Court accepted a gambling analogy to uphold a Trade Commission ban against lottery sales of candies to children. There, the Court was essentially striking at the unfairness of a practice which exploited the vulnerabilities of children. In S&lI the Court, reaffirming the Trade Commission s power to prohibit trade practices which are unfair to consumers (405 U.S. at 239- 244),' merely insisted that the Trade Commission articulate the basis upon which the practice was found to be unfair (405 U. S. at 248). What then are the standards against which the challenged practice in this case may be judged? In S&H the Court adumbrated a broad and expansive approach: "in measuring a practice against the elusive, but congressionally mandated standard of fairness, (the Commission 1, like a court of equity, (consider I public values beyond simply those enshrined in the letter or encompassed in the spirit of the antitrust laws." (405 S. at 244). Two things are clear. First, the Trade Commission may proceed on equitable principles, like a court of equity.'o Second, the Commission may consider "public values, " II Applying the Court's broad guidelines to the instant case, the wellrecognized principle of confidentiality of individual income tax information is clearly a valid standard in the circumstances of this case. . As early " ill 1!J2:J J\j"ti p Canlm." \ooke,! to th.. Trade Commission to build up "a body of precedent which wil fix the proprieti"s of eommerciall!sa " Cardo Till' Gr,,"'lh "file 1. . I:W (19241. In .)u,ll(" Learned Hand' s words the Trari.. Commission " powers "are not confined to ouch practires as would be unlawful before it acted" an') its duty is to "discover and make explicit thuse unexpressed stamlards of fair dealirJg which the con"cicrJce of the community may prollressively de"elop. Fn/.ral Trm/e C"",,,i. i,,,, v. Sln"flurd Ed"."ti"" S".. AI; F'. 2d 692. r,!\ (2.1 Cir. HJ:I;), "" "11I"'!I'"",,ri.:102 U. 11209:J7).

'" It i" elementary that equitable principle is essentially based 0'1 genenlllroundsofmorais and the community serJse of deCf'ncy and Cair play. Sce Mait!and EQllit!!. I! (1909); Main AII.it'will. "u' 27-211. 65-61;, 401 (notes by Pollock) OJeacnn PapHhack EfJ. Ihi:-\): Pound All /"'rm/"cli",, "f 11/0' PhilIJophu of Luw 57-') (1922). More than two mmenia allo, Aristotle articulated the ethical basis of equity. N,m1lurllerw fo:II';rH, 11; RI/.I"r,c. I . 1:-. It i" of interest to "ote a parallel between Aristotle s concept of equity (Rhcl"n, J. I:J) and the organic c'mcept of "unfair methods of competition" ami "unfair practices" embodie,l i" Section 5 of tho' t' ec1eral Trade Commission Act. SceF.dual Tn/de Co",,,i.,,ifJ/j " . M"will/j l'irr",,' Ari,' S,'r,'irc, :J44 U,S. ;192. :194-:J95 (l9. S&/l, ""I'ro 405 U.S. at 244 " !n S&H (4Wi) U.S. at 244-24;;, 'I, 51, the Court aeceptf'd without comment the factors the Trade Commission ",m iders in determining whether a practice is unfair, a stated in the Commission s 194i4 SI",..",,,,I IJf . "I/I /""I'".'P oft.."le Reg"lnli"" RIOI,' lii. 1.'''.Ioir IJr Dert' j,I;N AtlNr'i.,iuQ "/ld Lobe/illg nfCigarette.';/I Rd"tilJli IIJ'h. "",11111 IlnZl,,'d...,fSlHlJkilig. These facton were (I) whether thf. practice, without necessarily ha,'ing been pr..viously considered unlawful, offem!s public policy a it bao been established by .,statute" the cnmmon law, or otherwise- whether. in other words, it is within at least th" penumhra of "Orne commun- Iaw, "t 't\lt"ry. or other eShhli"h"d cnneept of unfairnpss; (2) whether it is immoral unethical. "p(Jr" si\'" , nr unscrupulous: (;0 wheth..r it cause, ,'ubsta"tial injury to Con;;umf.r;; (nr competitors or nther businessmen) The ,tan,\;,nb oet f"rth in (2) clearly ;;how that the Trade Commission may prohibit a;; unfair to consumers. a practice that has Hot bee" pruscribed by the cnmm"n or ',statutory law or judicial decisio"s. Sf'e Nnte " Unfair Method of Competiti"n I.nl1"r "ectinn;, of thf' Fe,heral Trade Commission Act Re,!"fined " 211 Rutgers L. Rf.v. 427 . 4:1:\ (1!J7;,) . . , .; l1R FEDERAL TRADE COMMISSION DECISIONS Complaint 86 F.

Thc confidentiality principle has long been incorporated into thc codes of ethics of the legal and accounting professions. Congress long ago established the public policy regarding confidentiality of income tax information (26 D. C. 996103, 7213). In 1971, it was made a statutory eommand to tax preparers, backed by federal criminal sanction. Furthermore, the record is clear that customers of the so-called commercial tax pre parers, such as Beneficial, did expect tax preparers to be bound by the principle before 1972 (finding 69). Respondents argument that commercial tax pre parers were not expected to adhere to this principle at all, or not as strictly as lawyers and accountants until the Revcnue Act of 1971, would astound their tax customers as well as the general public. In these circumstances, the use by Beneficial of confidential individual income tax information, obtained ostensibly for the purpose of income tax preparation, for the purpose of soliciting or making consumer loans to the same customer is offensive to the public policy, unethical, unscrupulous, unconscionable and clearly unfair to the consumer, It cannot be gainsaid that the so-called commercial income tax pre parers, such as Beneficial, provide a service very much in demand by the consumer. They perform a legitimate and highly useful function. However, respondents do not contend that the trade realities peculiar to the commercial tax preparation business are so compellng as to require that the deep-rooted concept of confidentiality of individual income tax information yield to them or be modified in some way." Nor is there any basis for such an argument in this record. The ultimate product of commercial civilization need not be abandonment of all traditional values.

That breach of confidence in fact occurred in this case was due to the peculiarities of Beneficial's own business operations, namely (1) combination of the tax preparation business and consumer loan business and (2) use of confidential tax information for the purposes of Beneficial's loan business. The record indicates that historically " In this "o"!'ectiun . it is significant to "ote tl1......"living concept nfuncunscionahility codilled in Section 2-;jO;j of the (f",j,,,,, C''''''crc,ul Cude, which Congress has adopted ror the District of Columbia (D.C. Cod.. Ann. Art. 2/ (1967))- ltisgenerally reco!'nizerJ that this section renects in part the congressional concern for consumer interests and a public policy of vindicating that intere t where justin' rf'quires. A cumment to that section of theUllifim" C"",,,.reiol C",I,. HtateH that "the principle iH one of the prevention of oppression anrl unfair surprise U"iJ"n" C"""".,' cial emle !j2-:J02. Comment 1. Commentators have suggested that. in .Ievelnping the standards of uncnnscion:lbility. the courtsshuuld not only Inok to established common law c()ncept ufunfairness but "pass directly on the uncnnscionabiEty of tho' contmct. Also see I(enerally Note Unconscionable Contract,;: The Uniform Commercial Code " 45 Iowa 1. Rev. H4:J (19(;0); Leff Unconscinnability and the Code-The Emperor s New Clause 115 U- Pa. L. Hev. 4H5 (19(;7): Nute Section" of the federal Trade Commission Act Unfairness to Consumers " 1972 Wis. L. Rev. 1071 , 1094- 1095- " Needlesst" say. busincssrealitiesare hil(hly rell'vant to Sf'ction 5 analysis. See dissenting opinion of Brandeis in Fed.1"1 T",d. C()",,,i si"l1 v. Genlz. 2,,:1 U-S- 421 . at 4:J4-4:17 (1920); F.deral Trod. Cm"",;. K.pp.1 Rm. '''lifo . 291 U-S- at ;JI4. (n the hroadl'st sense, it has long-he"n recol(nized that the law cannot long resist the needs of econumic life that is HtrOnl( anrl just. Cardozo Tire GrfJdh "JII,.. La,,' IIR (1924), Also See Holmes The C"", L",, (Belknap F:,I., 19/;:\); C"II.er.d LegalPuper. lR7 (J920): Cardozo TII. No/"rr ,,r J"d'e,,,1 PTfe., 61-62 (1921). BENEFICIAL CORP., ET AI.. 149 119 Complaint Beneficial entered the tax preparation business mainly as a means of augmenting its consumer loan business (findings 53-54). In a manner of speaking, therefore, the danger of breach of confidence with respect to tax information was inherent both in the purpose and implementation of Beneficial's business plan from its inception. In this sense, it is arguable that the mere combination of tax preparation and consumer loan business under the same roof and common management of Beneficial may raise a Section, 5 question for every such combination contains a seed of very real danger that the confidentiality may in fact be breached. This issue was eliminated by complaint counsel from this case (Mar. 13, 1974 admissions, Paragraph 20) and the administrative law judge has, of course, no occasion to make a determination of this issue one way or the other. However, it is beyond question that the actuat use of tax information obtained in the tax preparation business for the purposes of soliciting or making consumer loans of any kind by Beneficial, including the so-called tax refund loan " is a violation of the well-organized principle of confidentiality and is clearly unfair to consumers within the meaning of Section 5.

It should be stressed that the administrative law judge does not hold the challenged practice to be unfair simply because it is unethical. Whether a practice is morally or ethically objectionable in a general way is the beginning, not the end, of a Section 5 analysis. Here, the determination that the challenged practice is unfair with the meaning of Section 5 is not simply based on the fact that it is repugnant to some broad ethical desiderata, such as the need to protect personal pri vacy of individuals. Rather, it is based on a particularized standard, befitting the particular fact situations of this case, namely, the unauthorized use of confidential individual income tax information, ostensively obtained for the purpose of income tax preparation, for the purpose of soliciting or making consumer loans. What is being condemned is the essentially exploitative and unscrupulous misuse of confidential information in a breach of fiduciary relationship involved in this case. As Justice Cardozo observed long ago, Section 5 requires that "the careless and the unscrupulous must rise to the standards of the scrupulous and diligent. The Commission was not organized to drag the standards down. Federal Trade Commission v. Atgoma Lumber Co., 291 U.S. 67 79 (1933). Therefore, respondents' arguments that there is no established public policy with respect to the protection of personal privacy in general or that personal privacy is routinely disregarded in " Thp n'"orfl is replete with evirlel'I" l.."ding; to "how that (1) th,' c"stomers respondi,,!: to Rendicial' s " Instant Refl1nd" advprtiSl'ment "'HP"licit..d for Keneral consumer loans and, in some instances. ror consolidation loans, b,1th totaHy unrelated to the amounts "fineome tax refunds due them and (2) the financial information furnished by the customer in the course of the iTlcome tax preparation phase ,"':IS used hy Heneficial for the purposf' of soliciting the 50' unrdated l"ans (findings fio. fi6).

ISO FEDERAL TRADE COMMISSION DECISIONS Complaint Xli F. the conduct of some businesses, such as the direct mailing industry and the sale of various mailing lists, do not save respondents' challenged act from Section 5' s proscription, 15 Trade Commission s Section 5 Jurisdiction and Section 311; of the 1971 Revenue Act With respect to Section 316 of the Revenue Act of 1971 (26 U. 97216), respondents further argue that that Revenue Code provision is directed prccisely at conduct of the type alleged in Paragraphs Eight and Nine of the complaint, and that this legislative enactment has the effect of precluding the Trade Commission from taking any action against respondents under Section 5 of the Federal Trade Commission Act. These arguments are without merit.

Firstly, the Revenue Act of 1971 does not expressly repeal any of the provisions of the F. C. Act. Nor does it give tax preparers an express exemption from Section 5 of the Federal Trade Commission Act. And ri Jmmunity from the antitrust laws is not lightly implied. United States v. Philodelphi" Notionat Bank 374 U.S. 321, 348 (1963). This well-established principle applies to the Federal Trade Commission Act, which was designed to supplement and bolster the Sherman and Clayton Acts by reaching not only existing violations of them, but trade practices which conflict with their basic policies as well as those which are unfair to competitors or consumers. 5 & , supra 405 U. S. at 245- 216. Cf United Stotes v. Weste,., Pacific R. R. Ca. 352 U.S. 59, 63- (1956).

Secondly, the Trade Commission s instant proceeding in no way invades the exclusive jurisdiction of the courts to enforce the criminal sanctians prescribed by the Revenue Code. Rather, this is simply anuther instance where Congress provided for concurrent jurisdictions with cumulative remedies. The Trade Commi ion s jurisdiction and power to enforce the Federal Trade Commission Act has been consistently sustained against challenges that statutes enforced by other agencies should be construed to preclude such jurisdiction. See , Chartes of the Ritz DistTiblltors Corp. v. Federal Trode Commissian, supra 113 F.2d at 679. See also !Twin v. Federal Trade Commission 143 F.2d 316 , 325 (8th Cir. 1944); Wattilm Wotch Co. Federal Trade Commission 31S F.2d 28, 31-32 (7th Cir. 1963), cen. de",:ed 375 U. S. 944; BrandenjCis v. Day, 316 F.2d 375, 37S (D.C. Cir. 19(3); cert. denied 375 U. S. 824; American Cyanamid Ca. v. Federal ' Complaint coun. I fl)rc"fully a glle that there is an "stablished public p"licy of prutectinli pers",,,; privacy and th" right of an individual to ('control t.hp disseminat.ion uf infurmation "r p" ,,n,,1 "atur". The alirr. ini trativlI bw jlJdg'. lirec that a broad pri"ei!,l" "f I'rCl("etin!' priva,' y 11,,, "vo)ved liradually duri"g th" past ,10 y"ar ln K"I1Hal. h""' "v,,r the ""urb a",) C()"!i""shavp ""graft,," "um€mu "xc pti'm" ba",,,l 0" their notion of a ba)ao..ing or c'mf1icting intere t" in partic' ul"r "ituatio!1", Th" instant c' " is clearly govern"d by a d,-cp-ro"t,'rI and partic' u\ariH.d public policy re"ardi"li 1.h,. co"fitle"tiality of int'JU1" t"x information and therl' is "" ne d t" i"vok the hrml'lH ern,-q illg c""c"pt of privacy.

119 Complaint Trade Commission 363 F.2d 757 (6th Cir. 1966), 401 F.2d 574 (6th Cir. 1968), It is also well setted that a party may be subject to simultaneous jurisdiction by more than one agency under different statutes. Fedeml Trade Commission v. Cement Instiute 333 U.S. 683 (1948); United States v. Rea 358 U.S. 834, 343-344 (1959); United States v. Borden Co. 347 U. S. 514 (1954); Safeway States, Inc. v. FTeeman 869 F.2d 952 957 (D.C. Cir. 19(6). Similarly, courts have consistently held that concurrent Food and Drug Administration-Trade Commission proceedings involving the same issues are proper, and that the statutory remedies of the two agencies are cumulative and not mutually exclusive. United States v. 1 Dozen Boncquet Tabtets 146 F. 361 (4th Cir. 1944); United States v. Five Cases Capon Springs Water 156 F.2d 493 (2d Cir. 1946). Furthermore, in cases where the Trade Commission has concurrent jurisdiction under different statutes the enforcement standards of the Federal Trade Commission Act may also he different. See, Brandenfets V. Day, supra; American Cyanamid Co. v. Federal Trade Commission, supra; and the FDA cases cited hereinabove. This is such a case. In view of the foregoing discussion, respondents' argument that their use of the so-called BOR-56 consent form fully complies with the requirements of Section 816 of the 1971 Revenue Act, a question the administrative law judge has no occasion to decide, is entirely irrelevant to this Section 5 proceeding. For our purposes, it is enough that the present BO R-56 consent form, together with the manner in which it was used by respondents, is not sufficient to cure the unfairness at issue here (findings 65-(7).

The Liability of Beneficial Corporation We need dwel1 on respondents' argument that Beneficial Corporation, a holding company which owns and controls the Beneficial loan and tax service subsidiaries, is not liable for the practices challenged in this proceeding. The record is abundantly clear that Beneficial Corporation, in addition to its control by ownership, in fact exercises an absolute control over the affairs of its operating subsidiaries, which it collectively calls the Beneficial Finance System, not only through a pervasive web of interlocking directorates and managements but also through its absolute power of the purse (findings 21, 23, 80, 81). Indeed the "Instant Tax Refund" slogan, which respondent so strenuously insist on retaining for continued use, has been copyrighted by Beneficial Corporation itself (finding 28). It is well settled that those who place in the hands of others the instrumentality by which unfair or deceptive acts are accomplished may be held responsible for these 217-184 0 - 76 - 11 Complaint 86 F.

practices. Federal Tmde Commission v. Winsted Hosiery Co. 258 U. 483 494 (1922).

THE REMEDY It is well settled that the Trade Commission has broad discretion in fashioning an appropriate remedy once a Section 5 viulation is found in order to ensure discontinuance of the condemned act. Federal Trade Commission v. Ru. beroid Co., 343 U.S. 470 (1952); Federal Trade Commission v. National Lead Co., 352 U. S. 419 (1957); Fedemt Trade Commission v. Colgate-Palmolive Co., 380 U.S. 374 (1965). The Commission s discretion in this respect is limited only by the requirement that the remedy be reasonably related to the unlawful practices found. Jacob Sieget Co. v. Federal Tmde Commission, 327 S. 608, 613 (1946); OKC Corp. v. Fedemt Tmde Commission, 455 2d 1159 (loth Cir. 1972).

Complaint counsel have proposed an order which, except for a few modifications, is substantially similar to the notice order which was attached to the complaint.

Respondents urge two reasons why in their view the imposition of any order would not be in the public interest: (1) discontinuance and (2) the enactment of the 1971 amendment to the Internal Revenue Code. In the administrative law judge s view, they are invalid and should be rejected.

A. Discontinuance Respondents' argument that the misleading advertisements ceased years ago and that, therefore, no order need be entered is contrary to the administrative law judge s conclusion, elaborated hereinafter, that only the excision of the " Instant Tax Refund" slogan wil provide adequate protection. Infra pp. 42-44 (pp. 153 154 hereina. In any event it is well settled that discontinuance of abandonment of the offending practice does not render a cease and desist order improper. The statutory scheme of the Federal Trade Commission Act clearly contemplates the issuance of an appropriate order in order to protect the public from any resumption of the unfair practices without further resort to the statutory sanctions available for future enforcement. Clinton Watch Co. v. Federal Tmde Conu",:ssion 291 F.2d 838 (7th Cir. 1961); BenTns Watch Co. v. Federal Trade Commission 352 F.2d :n3 (8th Cir. 1965), cmi. denied 384 U.S. 939 (1966); Montgomery Ward Co. 666 (7th Cir. 1967); Doheny, v. Federal Trade Commission 379 F.2d v. Federal Trade Commission, 392 CIWord, Steers Shenfield, Inc. F 2d 921 (Grh Cir. 1968).

B. The Revenue Act of 1971 Respondents next contend that, because the use or individual income 119 Complaint tax information by commercial tax preparers for any purpose other than the preparation of tax returns of their clients has been made a criminal offense by Section :116 of the Revenue Act of 1971 (26 U. 97216), there is no longer any need for the Trade Commission to issue a cease and desist order against unauthorized use by Beneficial of confidential income tax information for the purpose of soliciting or making consumer loans in the future. This argument is without merit for the same reasons discussed hereinabove in connection with the Commission s Section 5 power to proceed in this case. Essentially, the Commission s remedy is cumulative, and not mutually exclusive with the statutory remedy provided for by the Revenue Code. Supra pp. 39- 40(pp. 150-151). Furthermore, the Trade Commission has a broad equitable power to prescribe a more stringent or different remedy than that provided for by the Revenue Ad of 1971 , or the regulations promulgated thereunder, in order to adequately protect the consumer. In the final analysis, therefore, respondents' argument in this respect is directed to the Commission s discretion. And, on the basis of this record, the administrative law judge concludes that the issuance of a cease and desist order is necessary and proper, C. Provision Against the Use of "Instant Tax Refund" Slogan Complaint counsel assert that nothing short of an outright prohibition against further use of the "Instant Tax Refund" slogan, or any variation thereof, would provide an adequate remedy in the circumstances of this case. They stress that mere insertion of an explicit qualifier or other explanatory language in advertisements containing the " Instant Tax Refund" slogan wil not do. Respondents vigorously claim that the "Instant Tax Refund" slogan, which is a registered trademark and has been heavily promoted by them over the past few years, constitutes a valuable proprietary right, that the insertion of explicit and appropriate phrase stating that what is being offered is a loan in reasonable proximity of the slogan would adequately cure the alleged deception, and that under the circumstances, the extreme and harsh remedy of an outright ban against any use of the slogan would be unreasonable, arbitrary and capricious and a violation of due process, The administrative law judge is of the view that the same reasons which render unfair and deceptive the post-February 1970 "Instant Tax Refund" advertisements discussed hereinabove, compel the conclusion that further use of the deceptive slogan should be prohibited. See supra pp. 26- , (pp. 142- 143, herein). Furthermore, it is well settled that qualifying language that is contradictory to the deceptive trade name cannot be used. Fedemt Trade Commission Cir. 1937); El MomArmy and Navy Tmding Co. 88 F.2d 776, 780 (D.C. Cigar Co. v. Fedeml Trade Commission 107 F.2d 429 (4th Cir. 1939); I.S4 FEDERAL TRADE COMMISSION DECISIONS Complaint SG F, Bakers Franchise Corp. v. Federal Trade Commission 302 F.2d 258 262 (:1cl Cir. 1962); Resort Car Rental System Inc. v. Federal Trade Commission 2d (,july 31 1973). This is such a case. See supra p. 28 (p. 143, herein J.

For the same reason, respondents' argument that their proprietary right in the slogan should be respected by the Commission must be rejected. As Justice Cardozo so aptly put it in a leading case, to cling to a benefit which is the product of misrepresentation, however innocently made, would constitute "a kind of fraud." Respondents must extricate themselves from it by purging their advertisement of the offending slogan. Under the circumstances, only a complete excision of the "Instant Tax Refund" slogan or any variation thereof, can provide an adequate protection. Federal Trade Commission v. Algoma Lu.mber Co. 291 U.S. 67, 81 (1934).

Furthermore, the "Instant Tax Refund" slogan is calculated to exploit the common and natural desire of taxpayers to get back from the government as speedily as possible any money they may have paid above and beyond what they actually owe in taxes. In this sense, the slogan is more than simply deceptive and misleading. It is, in a real sense, exploitative. See supra pp. 30, :17, (pp. 144, 149, herein). In these circumstances, it would be unthinkable to permit respondents to continue to use the "Instant Tax Refund" slogan or any variation thereof in their future advertisements.

D. The Requirements for a Consent Form Complaint counsel have proposed detailed requirements for a consent form which may be used by respondents in order to cure the deceptive and unfairness of their practices condemned herein. In the administrative law judge s view, these requirements are reasonably related to the violation found and appear to be designed to protect the consumers adequately in the circumstances of this case. These requirements will therefore be adopted by the administrative law judge.

E. The Provision Requiring Respondents to Send a Letter to their Tax Service Customers for the Most Recent Year Complaint counsel have also proposed an order provision which would require respondents to send a letter explaining the terms of the cease and desist order entered in this case to the last known address of each of their tax preparation customers for the most recent tax years. Indeed, respondents have contended that the "Instant Tax Refund" slogan has been identified by the consumer with Beneficial and that it constitutes a valuable proprietary interest. It is arguable, therefore that something more than mere prohibition of the offending advertisements is required in order to counter the residual effects of these 119 Complaint advertisements. It is beyond question that the Trade Commission has the power to require corrective advertisement as a part of an affirmative remedy where appropriate Federal Trade Commission Colgate-Patmoli1Je Co. 80 U.S. :174 (1965); Federal Trade Commission v. Algoma LnmbeT Co. 291 U.S. 67, 78 (19:34); American Cyanamid Federal Trade Commission 401 F.2d 574 (1968), ceTt. denied 94 U. 920 (1969). Nevertheless, the administrative law judge is of the view that the record evidence does not justify a provision for corredive advertisement in this case. First, Beneficial's use of the offending advertisements has been of a relatively recent origin. It started some 4 years ago (findings 41). Second, the advertising campaign using the offending slogan has been largely seasonal, limited to the income tax season. Finally, the administrative law judge is concerned with the possibly counterproductive effects corrective advertisements may have upon those consumers who have never been exposed to Beneficial' Instant Tax Refund" advertising campaigns, In this sense, any requirement for corrective advertisements may very well operate to dilute the central provision of the remedy in this case, namely, the excision of the "Instant Refund" slogan or any variation thereof from the future advertisements of Beneficial. For these reasons, the administrative law judge does not include a corrective advertisement provision in the order, The administrative law judge rejects complaint counsel's argument that respondents be required to send a letter explaining the terms of the order to respondents' past tax customers. The necessity for and utility of such a notification letter is highly dubious. In the administrative law judge s view, the most effective protection that can be devised for respondents' tax preparation customers in this case is a total ban against the use of the "Instant Tax Refund" slogan by respondents in the future. This is adequate in the circumstances of this case. CONCLUSIONS OF LAW 1. The Federal Trade Commission has, and has had jurisdiction over respondents, and the acts and practices charged in the complaint and involved herein, took place in commerce, as "commerce" is defined in the Federal Trade Commission Act.

2. Respondents Beneficial Corporation and Beneficial Management Corporation are jointly responsible for the unlawful acts and practices committed in this case and both are subject to the order issued herein. 3. Respondents have engaged in false, misleading and deceptive advertising, 4. Respondents' use of information gathered as a result of their preparation of customers' tax rcturns for purposes other than the IS(j FEDERAL TRAm: COMMISSION DECISIONS Complaint 86 F, preparation of those tax returns is false, misleading, deceptive and unfair, 5. The use by respondents of the aforesaid false, misleading and deceptive advertising and deceptive and unfair acts and practices has had, and now has, the capacity and tendency to mislead members of the public into the purchase of respondents' income tax preparation services, and were and are to the prejudice and injury of the pub lie and of respondents' competitors and constituted and now constitute unfair methods of competition in commerce and unfair and deceptive acts and practices in commerce, in violation of Section 5 of the Federal Trade Commission Act.

G. The order set forth below is the necessary and appropriate relief in this case, As a consequence of the foregoing and of the findings of fact set out above, the following order is entered:

ORDER It is ordered That respondents Beneficial Corporation and Beneficial Management Corporation, corporations and their successors and assigns, and their officers, and respondents' agents, representatives and employees, directly or through any corporation, subsidiary, division or other device, in connection with the preparation of income tax returns or the extension of consumer credit in commerce, as commerce" is defined in the Federal Trade Commission Act, do forthwith cease and desist from:

Using the term "instant tax refund " or any other word or words of similar import or meaning.

2. Using any guarantee without clearly and conspicuously disclosing the terms, conditions and limitations of any such guarantee; or misrepresenting, in any manner, the terms and conditions of any guarantee.

:1. Representing, directly or by implication, that respondents will reimburse their customers for any payments the customer may be required to make in addition to his initial tax payment, in instances where such additional payment results from an error by respondents in the preparation of the tax return.

4. Failing to disclose, clearly and conspicuously, whenever respondents make any representation, directly or by implication, as to their responsibility for, or obligation resulting from, errors attributable to respondents in the preparation of tax returns, that respondents will not reimburse the taxpayer for any defideney payment assessed against the taxpayer which results from the said errors. 5. Representing, directly or by implication, that the percentage of 1I9 Complaint respondents' customers who receive tax refunds is demonstrably greater than the percentage of the tax paying public at large who receive refunds; or misrepresenting, in any manner, the magnitude or frcquency of refunds received by respondents' tax preparation customers, 6. Representing, . directly or by implication, that respondents' tax preparing personnel are specially trained or unusually competent in the preparation of tax returns and the giving of tax advice; or that they have the ability and capacity to prepare and give advice concerning complex and detailed income tax returns; or misrepresenting, in any manner, the competence or ability of respondents' tax preparing personnel.

7. Using any information concerning any customer of respondents including the name and/or address of the customer, for any purpose which is not essential or necessary to the preparation of a tax return if such information was obtained by respondents as a result of the preparation of the customer s tax return which includes any information given by the customer after he has indicated, in any way, that he is interested in utilizing respondents' tax preparation services, unless prior to obtaining such information respondents have both (1) specifically requested from the customer the right to usc the tax return information of the customer and (2) have executed a separate written consent signed by the customer which shall contain: 1. Respondent's name;

2. The name of the customer;

3. The specific purpose for which the consent is being signed; 4. The exact information which wil be used; 5. The particular use which will be made of such information; 6. The parties or entities to whom the information will be made available;

7. The date on which such consent is signed; 8. A statement that the tax return information may not be used by the tax return preparer for any purpose other than that stated in the consent, and;

9. A statement by the taxpayer that he consents to the use of such information for the specific purpose described in subparagraph (3) of this paragraph.

Nothing in the above provision is intended to relieve respondents of any further requirements imposcd on them by thc Revenuc Act of C. 97216 or1971, Pub. L. 92- 178, title II, 9316(a) Dec. 10, 1971; 26 U. regulations issued pursuant to it.

It is ordered That respondents herein shall notify the Commission at least 30 days prior to any proposed change in the structure of the ISH FEDERAL TRADIC COMMISSION DECISIONS Opinion HG F,T.C.

corporate respondents such as dissolution, assignment or sale resulting in the emergence of a successor corporation, the creation or dissolution of subsidiaries or any other change in the respondent corporations which may affect compliance obligations arising out of this order. OPINION OF THIC COMMISSION By ENGMAN Cornmiss-imwr:

In this case respondents Beneficial Corporation and Beneficial Management Corporation, which we shall refer to jointly as Beneficial unless otherwise noted, appeal from the administrative law judge initial decision and order.

Beneficial operates a nationwide system of consumer loan offices and, starting in late 1969, the loan offces began offering a personal income tax preparation service, The complaint in this matter, which was issued on Apr. 10, 1973, charged Beneficial with a variety of offenses under Section 5 of the Federal Trade Commission Act (15 C. 45), stemming from the advertising and operation of the income tax service. During adjudication, counsel for the parties signed a stipulation for partial adjudicated settement, by which Beneficial admitted violations, and consented to appropriate order provisions concerning advertising misrepresentations of Beneficial's reimbursement policy, its competence to prepare tax returns, and the number of customers for whom it has secured government refunds. The law judge accepted this stipulation and we see no reason to overrle him. However, the order provisions which the law judge entered respecting these issues do not correspond in some particulars to the stipulated order provisions, and, on the joint motion of Beneficial and complaint counsel, we shall substitute the latter.

After the partial admission, the remaining issues to be adjudicated were the lawfulness of Beneficial's advertisements featuring its Instant Tax Refund" slogan, the lawfulness of Beneficial's soliciting loans with information given by its tax service customers, and the liability of respondent Beneficial Corporation. The law judge found against respondents on each of these issues in an initial decision filed Oct. 21 1974. Respondents have appealed on each issue. We affirm the administrative law judge. Except to the extent that they are inconsistent with this opinion, the findings and conclusions of the law judge are adopted as those of the Commission. I. LIABILITY OF BENEFICIAL CORPORATION E very local loan office of what is known as the Beneficial Finance System is a separate corporation wholly owned, with the exception of a ), ), BENICFICIAL CORP., ET AI,. lS9 119 Opinion few shares of a few companies, by Beneficial Corporation. At the end of 1972 505 of these local loan corporations operated domestically. (CX 18 at 8) 1 Beneficial Corporation also wholly owns respondent Beneficial Management Corporation, which provides management services, at cost, to the local loan subsidiaries. Other wholly-owned Beneficial Corporation subsidiaries include Beneficial Management Corporation of America, which implements the local loan policies set by Beneficial Management Corporation, and Beneficial Data Processing Corporation which provides accounting services for the local loan subsidiaries. (J.D. Pars. 7, 20). It is undisputed that the conduct challenged in this matter was performed, directly at least, by subsidiaries, and that Beneficial Corporation must be subject to vicarious liability or none at all. In determining a parent corporation s liability, we examine the pattern and framework of the whole enterprise. Art National Mfgs. lJist. Co. v. Federal Trade Comrn:ission 298 F.2d 476, 477 (2d Cir. ceTt. denied 370 U.S. 939 (1962). And if the facts demonstrate even latent control, the applicable standard 'is met:

rw Jhere a parent possesses latent power, through interlocking directorates, for example, to (iired the policy of its subsidiary, wh( re it knows of and tacitly approves the use by its subsidiary of deceptive practices in commerce, and where it fails to exercise its influence to cllrb ilegal trade practices, active participation by it in the . affairs of the subsidiary need not be proved to hold the parent vicariously responsible, Under these circumstances, complicity wil be presumed.

PP. Collier Son Corp. v. Federal Trade Commission 427 F.2d 261 270 (6th Cir. cert. denied 400 U.S. 926 (1970). Despite this clear statement, respondents contend that we should be governed instead by the common law rule, restated in National Lead Co. v. Federal Trade Commission 227 F.2d 825, 829 (7th Cir. 1955), rev d. on other grounds 352 U. S. 419 (1957), that to pierce the corporate veil we must find evidence of such complete control of the subsidiary by the parent that the subsidiary is a mere tool and its corporate identity a mere fiction. We reject the contention that any such stringent standard applies.

Manifestly, where the public interest is involved, as it is in the enforcement of Section 5 of the Federal Trach' Commission Act, a strict adherence to common law principles is nol required in the determination of whethl r a parent should be held for the acts of its subsidiary, where strict adherence would enable the corporate device to be used to circumvent the policy of the statute.

PP. Collier, supra 427 F. 2d at 267. See also, e. , Goodman v. Federal Trade Commission 241 F.2d 5R4, 590 (9th Cir. 1957). Accordingly, we have examined the overall pattern of Beneficial , TheD.follnwing!niti;J1 DI',.ahbreviatinn,ision of a,lmi"i"trati\'are ll .,rl !'inlawthi"judopinion.I("it",j by paragraph where adopted without phangej Tr. - Tran r;pt of t""lim"ny ex. C"mmi "inn "xhihit RX - Re"pondentsexhihit :

lfjQ FEDERAL TRADE Commisslon DECISIONS Opinion H6 F.

Corporation s relation with its subsidiaries, and we find for several reasons that an order should issue against the parent. First, respondent Beneficial Corporation shares a common management with respondent Beneficial Management Corporation. The president of the former serves as president and chairman of the board of the latter, and sits on the executive committee of each. The first vice president of Beneficial Corporation also sits on both executive cornmittees. Beneficial Corporation s chairman of the board is additionally general counsel of Beneficial Management Corporation and likewise, a joint executive committee member. These three men were a majority of Beneficial Corporation s executive committee and were the entire executive committee of Beneficial Management Corporation during much of the relevant period. The executive committee of Beneficial Management Corporation approved the start of the income tax preparation business (I.D. Pars. :10, 31 , R2). Through its domination of the service subsidiaries, Beneficial Corporation also controls each of its local loan subsidiaries. While no officer or director of the parent serves directly as an officer or director of any local loan subsidiary, Beneficial Corporation chooses local officers and directors from the ranks of the rnanagement subsidiaries. Since at least 1969, Beneficial Corporation has installed each regional vice-president of Beneficial Management Corporation as a director of all local loan subsidiaries in his region; typically, the same man also serves as president of all the local loan subsidiaries in the region. The remainder of each local board is filed by a small group of employees of Beneficial Management Corporation of America. Thus, the president of Beneficial Management Corporation of America and two other employees of that corporation serve on the boards of all 1 143 local loan subsidiaries outside New York, and are a majority of those boards; the same three men are alsu, respectively, secretary, vice-president, and treasurer of these 1 143 subsidiaries. (CX 145a; Tr. 198-201 221 , 226). The admini.strative law judge correctly called these patterns of control !Oa pervasjve web of interlocking directorates and manage , as in P.F. Collier, supra 427 mets." (I. D. at 40 (p. 151, herein)). Here F . d aI 2138, the men who directed th,;;, policy and operations of the p&1"2nt also directed the. p:)licy '-nd orJ( ration (1 the v,:heIIy-ov..'1ed subsidiaries, Second, Ben ficial Corporation also exercis2 complete finarwial control over the aff li"H cf its subsidia.ries, l' ne local loan offices :n:-;ceive ;:l)1 cash for -i-,'uldng- ennS1,:mer Im'ns fr(' n the p '!rent r0mprm, eithi":r by q:)Jtali ti(H, Of b:r' loan. Bpl1efkl&1 D performs all of the accounting for the local loan subsidiaries, The sf'fvice silbsiuiaries provide their servi('es to the local loan companies at 119 Opinion cost, and themselves borrow needed funds from Beneficial Corporation. (J.D., Pars. 19 20). Without the continuing support and intervention of the parent, neither the local loan subsidiaries nor the service subsidiaries would be independently viable. Third, Beneficial Corporation also allows or encourages local loan subsidiaries to hold themselves out as part of a single nationwide Beneficial entity. Each of them is similarly named Beneficial Finance Company of Pittsburgh, or of Knoxvile, or of Charlotte. Moreover, they are jointly identified through advertising as the Beneficial Finance System, with offices nationwide and around the world. Consumers believed themselves to be dealing with a nationwide Beneficial organization. (Tr. 375, 426). As in F. Collier, supra 427 2d at 269, Beneficial Corporation allowed its subsidiaries to trade on its own name and good will. Moreover, by clothing its subsidiaries with apparent authority to act for it, Beneficial Corporation is liable when they use that authority to deceive the public. Cf Goodman v. Federal Trade Commission, supm 244 F.2d at 591-93.

Fourth, Beneficial Corporation has set up a retirement plan for all employees of the local loan companies and the service subsidiaries and has contributed several million dollars to the plan. Beneficial Corporation has also set up various other employee plans, such as a stock plan and a Thrift Club plan (Tr. 208- 10; J.D. Par. 22). Finally, the very advertising slogan which is a subject of this case is copyrighted by Beneficial Corporation. That the parent owns the slogan while the subsidiaries use it is further evidence, if any is needed of the closely intertwined nature of Beneficial Corporation and its flock of subsidiaries. But the copyright ownership by itself is also suffcient to fix liabilty on Beneficial Corporation. As respondents vigorously point out when arguing to keep the slogan, a copyrighted phrase is a property right. And the law is clear that one who places into another hands the instrumentality by which unfair or deceptive acts or practices are accomplished may be held responsible for those practices. Federal Trade Commission v. Winsted Hosiery Co., 258 U.S. 483, 494 (1922); C. Howard Hunt Pen Co. v. Fedemt Trade Commission 197 2d 273, 281 (3d Cir. 1952).

As we have noted, a suffcient . standard is whether the parent having latent power to halt ilegal practices .of its subsidiary, instead tacitly-approved them. That standard is clearly met. In fact, Beneficial Corporation s control was more than latent, for the parent was intimately entwined with the management, the finances, the employees and the marketing practices of its subsidiaries. The paper division of Beneficial's business into 1 800 separate companies does not mask overall existence of a single enterprise, See Zale Corporation, et a.t. Hi2 FEDERAL TRADE COMMISSION DECISIONS Opinion HG F.

Federal Tmde Commission 47: F.2d 1317 (5th Cir. 197:1) Whether looking at the pattern or framework of the whole enterprise or at the individual factors mentioned, we find Beneficial Corporation liable. Indeed, even though the common law standard argued by respondents is inapplicable, in this case that more stringent standard is met as well for the subsidiaries were simply convenient fictions for Beneficial Corporation s use.

II. INSTANT TAX REFUND ADVERTISING As the administrative law judge found, substantially all of Beneficial's tax preparation advertising has featured the "Instant Tax Refund" theme. The first advertisements, in late 1969 and early 1970 gave little or no explanation of what Beneficial was actually offering. For example, one radio commercial states:

* * * Do you have a refund coming to you on your income taxes this year ? Well there s no need to wait week.s for your refund check. Get the money right now - even before you mail your return - with a cash advance from Beneficial. We call it the Instant Tax Refund, a special service of Beneficial Finance, Instant Tax Refund. At Beneficial you re good for more, * * * (CX R5(f).

By February 1970, after initial public response demonstrated widespread misunderstanding of the Instant Tax Refund (Tr. 65-66), Beneficial began to alter its advertising. Broadcast advertisements since then have variously referred to thc Instant Tax Refund' Plan or " ' Instant Tax Refund' loans " and have included such explanatory language as "lend you the equivalent of your refund in cash" or "qualify for a loan." A typical television advertisement is: * * *' And the Beneficial " Instant Tax Refund" Plan, If you have a refund coming, Beneficial wil lend you the equivalent of your refund in cash the instant you qualify for a loan, * * * (CX R4(f), Print advertisements also changed somewhat from their original form. After 1970 Beneficial placed an asterisk after the Instant Tax Refund reference with a corresponding asterisk below accompanied by explanatory language, or uthcrwise used the words "loan" or "Plan with explanatory language. For example, CX 63 states: New Income Tax Service offers " Instant Tax Refund" Plan *When you get your taxes prepared at Beneficial you can take advantage of our Instant Tax Refund" Plan, The instant you qualify for a loan, Beneficial will lend you the equivalent of your refund - in cash - instantly ' * * even before you mail your return. In truth, it is admitted, what Beneficial is offering is its everyday loan service. The Instant Tax Refund is not a refund at all but a personal consumer loan, with regular finance charges, costs, and repayment period. (complaint, Par. 7(1); Ans., Par. 7; J.D. Par. 4R). Such BENEFICIAL CORP., ET AL. 16:\ IHI Opinion a loan is always available to anyone meeting Beneficial's credit standards, whether or not the customer is owed a tax refund by the government, but Beneficial wil not make any loan to a person failing to meet its credit standards, even if the customer is due a government refund. The size of the loan Beneficial wishes to sell is not related to any tax refuml, but to the customer s credit limit (CX 14:je, 143i; Tr. 169).

Beneficial takes a narrow view of the dispute on appeal. According to Beneficial, the only issue which its Instant Tax Refund advertising presents is whether Beneficial offers real tax refunds. The broader issue, whether consumers are deceived over what Beneficial actually does offer, is presumably irrelevant. Beneficial suggests that deciding this case on other than the narrow issue of actual refunds wil import a new theory neither charged nor litigated.

We reject the idea that any such narrow question is before us. Beneficial had ample notice of the issues in this case, which were, and are, whether the Instant Tax Refund advertising is unfair or deceptive under the Federal Trade Commission Act, and specifically whether the Instant Tax Refund advertising misrepresents that Beneficial is offering no more nor less than its normal consumer loan service with its normal finance charges. The complaint raises these issues by quoting Beneficial's advertising (Par. 5), charging that it seems to offer some instant refund" (Par. 6(1)), and then alleging that in fact Beneficial is offering not a refund at al1 but a personal loan with finance charges (Par. 7(1)).' A clearer and more precise allegation is difficult to conceive. It certainly goes beyond the minimum standards of notice pleading acceptable in administrative hearings. E. Staley Mfq. Co. v. Federal Trade Commission 135 F.2d 453, 454 (7th Cir. 1943). During litigation, Beneficial clearly understood that this case related to the total truth of its offer and not just to actual tax refunds. Consistent with the position taken in its pre hearing brief before the , Th.. fllll,'har!-ingparagr"l'h."r",,,1 I'Alt IH."'I"m,IN\!,hJ\\ler"pCO''''' lIlpdthatl , R"'f"""I..nt, will pro"lei.. t"'pay"r, wI", have their r"turn, p"'. parpd by r"'land"nb and If) whom a r..rUII'\ is ned by th.. IntHnal R""pnLU' Sen'!"" with an " in,tant refund" at th.. time th..;r r..turn, ar.. pro.par..cl I'AR. .. l"lruth and in fact . R"'lou""t,instant lax ""fun,l" is non d n'fur,,1 but a pnsonalloan an,llb ""'\pi,,nt orth" I"an is "quir"d to pay finane" "harr: ' and "th",' (. ",t, f"r such loan ), 1(54 FEIJrRAL TRADIC COMMISSION DECISIONS Opinion 86 F.

law judge that its advertisements "fairly and fully inform the public precisely what is involved ":! Beneficial asked each of its consumer witnesses if they realized consumer loans with normal finance charges were offered (e. Tr. 364- , 401 , 460, 469-73). Beneficial also attempted to show that consumers understand the word "loan" to imply finance charges (e. Tr. 56- , 114-15). Even assuming that only the narrow issue of adual tax refunds was alleged in the complaint, which we do not find, we have consistently held that a party cannot subsequently challenge as beyond the pleadings an issue which was litigated, if he has had actual notice and opportunity to defend. Grand Cailtou Packing Co. 65 F. C. 799, 820-821 (1964), Tev d in part on othet grounds sub nom. LaPeYTe v. Fedemt Trade Commission, 366 2d 117 (5th Cir. 1966). See a.lso, e. , Armand Co. v. Fedemt Trade Commission 84 F.2d 973 (2d Cir. cert. denied 299 U.S. 597 (1936); Rule 3.15(a)(2), 16 C. R. 93.15(a)(2). In short, Beneficial has had a full and fair opportunity to litigate whether its advertising misrepresented the total trlith of its offer, and we wil decide that point. Turning, therefore, to Beneficial's advertising, we conclude that the Instant Tax Refund advertisements, in both their plain and adorned forms, had a capacity and tendency to mislead the public about the truth of Beneficial's loan offer, and thus violated Section 5. We find this both on the basis of our own expertise and judgment, from having examined the advertising, see, e. , Federal Trade Commission Cotgate-Palm.olive Co. 380 U.S. 374, 391-92 (1965), and on the basis of ample record evidence (e. Tr. 53- , 115- 506- , CX 159). The early Instant Tax Refund advertising is, on its face, totally misleading about the true nature of Beneficial's offer. Instead of making clear that Beneficial is simply offering its everyday loan service, the advertising implies that Beneficial will give a special cash advance to income tax preparation customers with a government refund due, in the amount of their refund. The natural impression, since the Instant Tax Refund is stressed as exclusive and special, is that this cash advance is different from a normal consumer loan. Beneficial was acutely aware that the early advertising Was misleading consumers about the nature of its offer, for it made all the subsequent changes in an attempt to clarify the real meaning (Tr. 53- 115- , 504-08). The extent of the early advertising s deception is epitomized by a report from Beneficial's advertising agency on the consumer impact of its first Instant Tax Refund campaign (CX 159): Results of this initial wave of interest depend on the office and its location, In center- , Respundents' tria! brier, before the law judge L30 197;, at 4. BENEFICIAL CORP., ET AL If-D 119 Opinion city offices, particularly those Tlea,' ghetto areas, the impression gathered fl"m managers was that mally of the phone calls camp from totally unc;editworthy " riff-raft'' '" "' " people with no .steaely job record, with very low incomes. whose soie concern was in the Install Tax Het'ulld. :\1an y thought they CCH1Ir\ simply get their government checks immediately at Benerlcial. Others didn t have the required Sij df posit. There were many loud :lrguments nrl unpleasantnesses ,* including- one 01' two incidents of violence b!2ing threalemcd. Managers in thes,' situations tend to agn:e that advel,tising should have dE-HIt more directly with the C11191ificatio!1s required tl) obtain 3n Inst;J !t Tax Refund.

In other offices - in steady, stable whicx middle class neighborhoods - many customers alsu needed explanations about the loan aspee:s of the Instant Tax Refund. But natm'ally there were fewer hopeless applicanb, and managers in places like that feel much better about the high response level cmc1 a1'(, much calmer about the advertising claim:

In the face of this, we are unpersuaded that, as Beneficial argu0s consumers could decipher the real meaning of its advertising because thc Instant Tax Refund phrase was placed in quotations or because Beneficial' s identity as a consumer loan business may have given a clue. At any rate, consumers are not obliged to guess about the meaning of advertising. Cf Federal Trade Conml,isslou v. Standard Education Society, 302 U. S. 112, 116 (1937).

Beneficial contends that it eliminated any early faults by adding the explanatory language characteristic of its hter advertising, Although as we discuss infm the later advertising is not appreciably less misleading than the early, even assuming that Beneficial did discontinue its early deception in this case we find it an insufficient defense. Whether a cease and desist order should be entered when discontinuance is claimed rests within the discretion of the Commission. Rem" Watch Co. v. Federal Trade Commi.esion 352 F.2d 313, 322 (8th Cir. 1965), c",1. denied 384 U.S. 9:J9 (1966). And the Commission has required respondents to meet a heavy burden to prevail on such a claim. Compare, e. , ATgUS Camera, Inc. 51 F. C. 405 (1954), with Feddas Corp. Dkt. 8932, 3 CCH Trade Reg. Rep. Par. 20 825 (Jan. 14 1975) (85 F. C. 38J. Assuming discontinuance of the early deception to have occurred, we can detect no reason to accept that discontinuance as a defense here, for we have no assurance that. the deception wil not be resumed. Beneficial is stil in the tax preparabon business and could revert at any time to similar deceptive prachces. See Giant Foods, 61 C. 326 , 357 (1962), affd. 322 F.2d 977 (D. C. Cir. 1963), cert. denied 377 U.S. 967 (1964). Moreover, such changes as it made in its advertising came partly from the prodding of various regulatory agencies, so were not totally voluntary (Tr. 11 , 70- , 506-07). See , Althoup;" we have rejected Benefici s narrow eunstructinn of the complaint, we note that this memunlldum indicates fwme COIll'umerst lea"! did heiieve Beneficial actually would provide tf!,,1 ta refllmj ), lfiG FEDERAL TRADIC COMMISSION DECISIONS Opinion R6 F.

Eugene Dietzgen Co. v. Federal Trade Cormnission 142 F.2d 321 , :3:30 (7th Cir. cert. denied :323 U.S. 730 (1944). At any rate, no discontinuance occurred, for, as we have noted despite continual revision Beneficial's later advertising did not succeed in shedding the deceptive and misleading characteristics. The addition of the words uloan" and "plan" and "qualify" was not, in our view sufficient to clarify exactly what Beneficial was really offering. As the law judge noted, the advertising at best is open to two interpretations. Though some consumers may understand that regular consumer loans are offered;' another interpretation is that Beneficial is offering a special, tax-related service apart from its everyday loan business. Of course, where two interpretations of an advertisement are possible, one of which violates Section 5, the advertising is unlawful. Murray Space Shoe Corp. v. Federal Trade Commission :304 F.2d 270, 272 (2d. Cir. 1962).

Beneficial insists that we examine the later advertisements in their entirety, and consider the overall explanation of the Instant Tax Refund phrase. Cf Parker Pen Co. v. Federal Trade Commission 159 2d 509, 512 (7th Cir. 1946). We have done so. But as noted we find the explanation confusing and misleading. For example, addition of the supposedly explanatory word "plan" seems to us to heighten the implication of the Instant Tax Refund's uniqueness, rather than clarify that it is not unique at all. Thus, we have no occasion to determine whether the explanation, considering the advertising as a whole, was sufficiently conspicuous to dispel the impression generated by the dominant Instant Tax Refund slogan, for nothing amounting to real explanation was included.

The testimony of consumers confirms our view that the later advertising has a capacity to mislead in a material respect. A number of consumers failed to understand that Beneficial was offering only its normal loan service with normal finance charges. Their reasonable impression was that they would pay only a small fee and that the main qualification for the Instant Tax Refund was being due an actual Government refund (Tr. 663, 691 , 713- , 775, 808-09). The consumers had they realized from the advertising that the "Instant Tax Refund" was simply Beneficial's ordinary loan business, would not have gone to Beneficial's offices at all (Tr. 665 , 729, 745-46, 778). We may assume, as Beneficial would have us, that respondents never intended to deceive consumers. But intent is not an element of a deceptive advertising charge under Section 5. Regina COTp. v. Federal , Beneficial pruduced " number of "'lIcbcon umers. Itapp"-ars from their testimony. "however. t"at must uf them understood the Instant Tax Refund for what it Was because oftheir. prior dealings with loancomp'-nie and not b,,\:al1se they independently comprehended the advertising (Lg. Tr. ;J7I a91 42: 472 480.fll 495), ,. ), ,, 119 Opinion Tmde Cmnm.iss1:on :,22 F.2d 765, 768 (3d Cir. 196:1. The simple fact is that Beneficial's Instant Tax Refund advertising had a capacity and tendency to deceive, and did in fact deceive, the consuming public. The law judge s order bans the use of the Instant Tax Refund phrase or similar words. He found that no qualifying language could remedy the deception and that only purging Beneficial's advertisements of the phrase would suffice. Beneficial vigorously contends that explanatory language could cure any fault and that forced abandonment of its copyrighted and heavily promoted phrase is unwarranted. In some instances, it is true, respondents have been allowed to retain trade names which had become valuable business assets, because the misleading qualities of the names could be dispelled by explanation Federal Trade Commission V. Royal Milling Co. 28R U.S. 212 (1933). But Royat Milling and its progeny are not limitations on the Commission s authority to enter a fully effective order. If explanatory language is insufficient to qualify a deceptive trade name or is inherently contradictory, its effect is simply to confuse the public and the Commission in framing a proper remedy must excise the offending phrase altogether. See, e. , Resort Car Rental Systems, Inc. V. Federal Trade Commission 518 F.2d 962 (9th Cir. Apr. 14 , 1975); Bakers Franchise Corp. v. Federal Trade Commission 302 F.2d 258, 262 (3d Cir. 19(2); Carter Products, Inc. v. Federal Trade Commission, 268 2d 461, 498 (9th Cir. cert. denied 361 U.S. 884 (1959); United States Navy Weekty, Inc. V. Federal Trade Commission 207 F.2d 17, 18 (D. Cir. 1953). Moreover, the Commission has wide latitude in judgment particularly in determining whet.her qualifying words wil eliminate a deceptive trade name. Jacob Siegel Co. v. Federal Tmde Comm.ission 327 U.S. 608, '313 (1946).

In light of these principles, we see no reason for allowing Beneficial to retain the offending slogan. The Instant Tax Refund advertisements we have held, have the capacity and tendency to mislead and have in fact misled consumers. In fact, since its inception in 1969, the Instant Tax Refund phrase has deceived continuously, and Beneficial's repeated efforts to explain it have not cured the false impression it leaves. Beneficial's inability to remedy the deception, which persists even in the qualifying phrase it offers on this appeal as a settlement confirms what we believe to be obvious. No brief language is equal to . ThouJ!h we believe the ,,' Milli"rJ line of case is compatible with our normal responsibility to enter eHeetive but not overbroad onlers, to the extent it may actually be a limitation or exception to the Commission s aothority to devise fully effecti"e remedies . then we clecline to expand the exceptioo from tn"l.. names to "cI"..rtisinJ!loJ!"ns. The Instant Tax Refund slo an is unlik.. the eslablished company names in Ro Milli"9, for it is not the n"me of anything, It is an empty promotiol1alphra.p referring to nothing. . , ,;,, 1f: FEDERAL TRADES COMMISSION DECISIONS Opini 80 F.

the task of explaining the Instant Tax Hcfund slogan, for the phrase is inherently contradictory to the truth of Beneficial's offer. In truth, the Instant Tax Refund is not a refund at all, but only Beneficial's everyday loan service, complete with normal finance charges and credit e'iks; nor is it in the least related to any tax refunds, for the size of th,: loan Beneficial wishes to sell is geared to the customer s credit limit instead of his government refund and many people due a government refund do not qualify for an Instant Tax Refund loan at all; moreover depending on the season of the year or the customer s sales resistance the Instant Tax Refunrl may be called a Vacation loan, a Taxpayer loan or a Bil Consolidation loan.

Nor are we inclined to temper our conclusion to ban the phrase rimply because Beneficial has copyrighted it and promoted it heavily. The phrase, which is only six years old, has been deceptive from the start, so to protect it is to protect Beneficial's investment in deception. We reject the idea that the more heavily a false claim is advertised, the mote tenderly we must treat it, Beneficial argues that excision of the Instant Tax Hefund slogan and words of similar import would prevent any reference to the concept of ax refund loans. This is quite true. The record is absolutely clear that in Beneficial's business at least, no such concept exists. If, however Beneficial should begin offering a special loan service actually related in some \/ray to income tax refunds, it may seek to reopen the order. F or now we believe the absolute prohibition necessary. 7 In light of what we have said we must affirm the law judge s order and reject Beneficial's offer of settlement. III. MISUSE OF CONFIDENTIAL RELATIONSHIP Finally, ,'respondents appeal the law judge s conclusion that Beneficial misused confidential information gathered in the course of its tax preparation business, by using it to solicit loans without consent. The law judge held Beneficial's practices exploitative, unscrupulous deceptive, and unfair, Th2 essential facts are not contested, Beneficial entered the tax preparation business for the explicit purpose of generating loan customers. (J.D. Par. 54; Tr. 84). In practice the tax service, which Beneficial operated from the same offces as its loan business, fulfiled this goal; it was in fact the greatest source of new borrowers which Becceficial had developed in some time (J.D. Par. 55; Tr. 508). , 'Ne are ;;kcwi e lJnper ua(kd by Beneficial's argument that the Firs! Amendment ban thi order. !t is tun clear to wart",,! diH('u Hion that tile First Amendment d,w no! protect comrn..rcialpeech which h,," been found to he :"c" ti"0 "nr\ mi \eat1inl:. Murrlill SP Sid,,' C"cp. F",I"",/ Tr(lap C",,, "It". IJrIl. :114 F.ld at 272. 'riler.. i" n" cO" litut\"na\ rij.ht tn di Heminate raise "r ff,ble:,ding advertioing.f'- F. Dnn' C,,- F,. rnl Tmdf' C,,,,,,,, i. 2;j;, 2d 7:j ,'4() (2r\ Cir. 1956). cr'-""lii, 5l S. 'l9 (!%7) 119 Opinion Beneficial used two different procedures to turn tax customers into borrowers. First, from the beginning of its tax preparation venture in 1969 until December 1971, Beneficial made no effort whatever to limit the use of customers' tax data to the preparation of tax returns, Under the procedure in effect during this period, Beneficial's employees prepared a tax interview sheet for each customer who presented himself for tax preparation. This sheet, which contained a variety of financial information, was sent to a computer firm for actual preparation of the return, and the customer frequently had to return a second time to pick up his completed return (J.D. Par. 58). Beneficial explicitly instructed its personnel to use the tax data appearing on the information sheet to solicit loans. For example, CX 26 states: Right on the Tax Interview Form it shows you what banks or loan companies th(' customer owes. It is an easy matter to go on from there and Jist other debts and show how all the bils can be consolidated, the bank loan can be paid off, the loan company can be paid off, the balance on the car can be cleared - all with a Bil Consolidation Loan, In addition, if the customer were not sold a loan during the first interview, Beneficial solicited again during the second visit and continued to solicit thereafter by telephone and otherwise (J.D. Pars. , 64). Personnel were instructed to run a credit check on those who on their first visit, were reluctant to borrow money, (J.D. Par. 63), and to present these customers on their second visit with completed loan papers awaiting only a signature (J.D. Par. 62). After December 1971, Beneficial revamped its procedure because of the enactment of the Revenue Act of 1971. Section 3Hi of that Act, 26 u.se. 9 7216, imposed criminal penalties upon commercial tax pre parers for using customers' tax data for non- tax purposes without consent. Under the new procedure, Beneficial continued to stress turning tax customers into loan customers, but Beneficial's employees required each tax customer to sign a supposed consent form before soliciting any loan. The form, which Beneficial called a BOR- Authorization, purported to authorize Beneficial to solicit the customer for "any business" in which Beneficial may engage, and to stipulate that any data appearing on a loan application was not given for tax preparation. In addition to completing a tax interview sheet, Beneficial's employees were instructed to complete for each customer a loan interview sheet containing similar or identical financial information and to base their loan solicitation on the latter document. BeneL:;al maintained a separate "customer loan folder" for the loan inform .tio(l (J.D. Pars. 65, 66).

Beneficial contends for two reasons that our consideration of its loan Opinion 8fi F. solicitation practices should be limited. First, the pre-Revenue Act conduct is supposedly irrelevant, because, according to Beneficial, the law judge drew no legal conclusions from his extensive factual findings on this issue; apparently Beneficial argues that he tacitly dismissed this part of the case and the Commission should not alter his disposition. Second, the law judge s post-Revenue Act findings are, Beneficial says beyond the scope of the complaint and thus should be dismissed. N either of these arguments is supportable. As to the pre-Revenue Act conduct, the law judge s opinion clearly considered and drew legal conclusions from the record evidence. In addition to entering detailed factual findings (J.D. Pars. 53-64), the law judge explicitly held that Beneficial's pre- Revenue Act practices were "offensive to the public policy, unethical, unscrupulous, unconscionable and clearly unfair to the consumer." (J.D. at 36) (p. 148, herein I. Of course, even had the law judge actually ignored Beneficial's pre-Revenue Act conduct, the Commission on review could itself fully consider its lawfulness Rule 54(a), 16 C. R. 93.54(a).

Beneficial's second argument - that the law judge s theory of post- Revenue Act violation is beyond the scope of the complaint - must be rejected on the same grounds that its similar claim respecting the tax refund advertising was rejected. According to Beneficial, the complaint which alleged misuse of the "tax return" and the tax "financial profile does not encompass Beneficial's post-Revenue Act procedure of preparing a separate loan information profile for loan solicitation instead of referring directly to the tax documents. But we do not read the complaint so restrictively. It plainly alleges misuse of a confidential relationship by soliciting loans, without consent, using information given for tax purposes (complaint, Par. 8). Since the law judge explicitly found the post-Revenue Act consent form inadequate to differentiate tax information from so-called loan information in customers' minds the law judge correctly construed the complaint when he applied it to the post-Revenue Act procedures. Moreover, even accepting the argument that the complaint does not by its explicit terms encompass the post-Revenue Act procedures, we see no indication that the real substance of the dispute was not clarified for Beneficial during adjudication. As we noted before, an administrative complaint is a t:exible document; semantic deficiencies wi1 not preclude full resolution of the issues where the party proceeded against has a reasonable opportunity to know the matters in controversy Avnet v. Federal Trade Commission 511 F.2d 70, 76 (7th Cir. 1975). Beneficial has offered , Apparently in "nn"di"n wit.h lhi Hecond argllm..,,!.. B"n"ric;al also s....ms to ati':" that th.. law judJ." was improperly influenced by a pers"nallJelief that a dual I",.n and tax bllsiness is I"'" .". unfair- However. the I..", jur\gE' "ffered no such "pinion "",I ill fact specifically declined to rule 011 the i slJe (I_ M;!7) II'- 14!J . hpr",in 1- The legality"r dual "p..ration was ..limillat"d as all issu" by "omplaillt c"lJlI l 011 br- 1:1.1 BENEFICIAL CORP., ET AI" 171 119 Opinion utterly no information suggesting it was prejudiced, or unfairly surprised, or otherwise unable to litigate the legality of its post- Revenue Act conduct. In fact, Beneficial itself highlighted the issue by raising the supposed lawfulness of its post-Revenue Act conduct as an affirmative defense.

We conclude, therefore, that the substantive lawfulness of Beneficial's conduct, both pre-Revenue Act and post-Revenue Act, is properly before us.

We first consider Beneficial's pre- Revenue Act conduct. The law judge found this conduct unfair, because it violated basic public policy respecting the confidentiality of tax data, and deceptive, because it was premised on omission of material facts.

In determining whether Beneficial's conduct was unfair, the appropriate standard is a broad one, The Commission does not arrogate excessive power to itself if, in measuring a practice against the elusive but congressionally mandated standard of unfairness, it, like a court of equity, considers public values beyond simply those enshrined in the letter or encompassed in the spirit of the antitrust laws, Federal Trade Commission v. Sperry Hutchinson 405 U.S. 233, 244 (1972).

In accordance with this mandate, the law judge determined the applicable public policy relating to use of tax data from a wide range of relevant statutory and ethical sources. However Beneficial argues that applicable public policy can only be found in a law or canon running by its terms to Beneficial, and that public policy deduced and synthesized from analogous situations cannot govern its conduct. Accordingly, for the period before the Revenue Act explicitly applied a standard of confidentiality to its business, Beneficial would find no applicable policy.

This argument totally misapprehends the scope of unfairness under Section 5 of the Federal Trade Commission Act. There is no doubt at this point that the Commission may adapt the substance of Section 5 to changing forms of commercial unfairness, and is not limited to vicariously enforcing other law. Therefore, in this case, as in others those who engage in commercial conduct which is contrary to a generally recognized public value are violating the Federal Trade Commission Act, notwithstanding that no other specific statutory strictures apply Federal Trade Commission v. R. F. Keppel Bro. v. Spe,- & Ine. 291 U. S. :104 , 313 (1934); Federal Trade Commission H nlchinson, wpra. The passage of the Revenue Act reiterated, but Opinion G F.

certainly did not create, the policy of tax confidentiality which we apply here, The policy we apply is evident in the numerous incarnations of our society s concern for the confidentiality and proper use of personal tax data. This theme, broader than the letter of anyone law, plainly links those public statutes which variously impose criminal penalties upon federal employees for revealing a tax return 1O or allow disclosure of income tax returns only under Presidential order or regulation, 11 or forbid disclosure of state income tax returns." The same policy of tax confidentiality is also manifested in the ethical standards of other commercial tax prepal'crs, Accountants, I:! certified public accountants and lawyers " would all be in violation of their ethical canons if they used tax information received from a customer to solicit a loan without consent. While it is not our intent to inject entire professional ethics codes into Beneficial's business, we believe the various similar fiduciary requirements of professional income tax preparers reflect a basic ethical consideration which by its nature is equally applicable to anyone in a position to abuse the confidence of a client, The reason for this statutory and ethical concern is obvious. Personal financial data is the private business of the individual to whom it relates. Its inherent confidentiality requires that the relationship between the tax preparer and his customer be a fiduciary one. This basic fiduciary nature is reflected in the personal expectations of consumers (tr. 256, 778). Numerous witnesses testified that they expect confidentiality from tax preparers and regard loan solicitation based on tax data as breach of confidentiality (e. 493- , 666, 724- , 809- 10). Beneficial argues, however, that its misuse of tax information was minimal because the information was not transferred out of the company. However, even putting aside the evidence that Beneficial did in fact transfer the names of its tax customers outside the company , In light nfthe pervasive anr! specific policy of tax confid,'nti,dity, WI' , like the law jl1dJle. have no neeo to decide whdher a hroader consideration ofper oral pr;va,'y could ;:overn this case. In oeclinin;: to reach that issue, however we do not u;:"est that a J'eneralizet! ri"ht of personal privacy and personal control over private riata is an inadequate foundation on which tu Krouod " finding of unlawfulness uml..r S..cti"n Ii. In fact. the ril/ht of privaq has become a wirlely- all1edpuhlic policy. with constitutional and statutory und"rpim,;nK.C/. ". . H.", v. Wade 410 U-S. l1a. lli2 (197:1); Privacy Act of 1!I4 ;; U. C. !j1i:.2a. Its violation in a commercial context would lik..ly he unlawful unrler lhe Federal Trad.. Commission Act 26 U,S. !j72I:\.

" 26 U.S. !j610 " Code nf Virginia, !j5H--f;;. pnls,, l atfn. li(p, 146, herein I. . Tr. 1:14 . 1: 141( " Tr_ 2!i2 2GS 26:!.

" Se,!Canon 4 . Code of Professiunal Respflnsibility of the American flar Associati"n (Disciplinary Rule 4- 101 "od I-thi"," C,-'si,leration 4- ,. Beneficia! argues that some \J,' ()f osjooal inc"m.. tax preparen; also ",,1icit other business from their clients However, in using tax data to ir\entify uther specializerl neeos of their chents. accountants aOfj lawyers are fulfillinJ'a prllfessionalohligc,tion markedly different from Beneficial's practi"e of trying to sell loans t" each of its tax "u"tomet (T.. t42- , 2G7-.;!!), The point in looking t" other inc"",e tax preparers i not tn make Ren..ricial and th..roo indi,;t;ngl1ishabk hut only to ili..notify an irrcducihle minimom quant.um "f fa rEcss and c","merc;al int"go. ;; : :\ , . .,,; ! , . ( . , , , : . Beneficial CORP., ET At. 1'" 119 Opinion while running creclit checks, (CX 27, ;J4c1; 1'1' 37 , 721-22), this argumsJlt ignores the fact that the confidential relationship is bre"ched where'.,'l the customer s ir:formation is used for the financial gain of the prepared'. Whether or not respondents brokerecl the confic1ential information to other businesses, or simply capitalized on it themselves is thus unimportant. By the same token, respondents' argument that customers expected to be solicited for loans because of Beneficial'. reputation as a consumer loan business, and were not shocked at being solicited, ignores the record evidence that customers \\ ould not approve of any such loan solicitation made on the basis of their confidential tax data (Tr. 667, 725). The fact that some tax customers initiated hc, discussions themse! ves, typically by volunteering' the anlOlmi, uf th2i2 anticipated refunds, demonstrates to us not their disir:trrest iD the confidentiality of rh('il' YdX eIat.n; bui ratl :;' ihc effecti \, ene of thl 1 n;:(.8nt Tax Refund slogan in f; ely convincing them that. a Te nla:' cnn ;umer loan \vas someho'vv tax-related.

Thus, we conclude that Beneficial's loan solicitation i"ji';;lctices \iVel' inr;::f'ensible, In the face of the prf' ,-'ailng public policy, t.h ('ommCj basic standards of ethical behavior, and the widespread expectations of consumers, Beneficial during the pre-Revenue Act period engaged in \vhol(; le and intentional disregard of the privileged nature of jt relationship with its tax customers, and the confidential status of thu: tax information. Its practices preyed on the vulnerability of customer, who were entitled to expect, and did expect, that their informatimi would be handled v.with integrity and discretion. 'N e cannot disagree \with the la .r judge s characterization of Beneficial's activiti€:-: explGitative unscrupulous, and UflCOT1t:;cionable. Vle find Beli nci:;d' behavior legally unfair.

The same V;.lhl:k expectation Q ' cnnfid.'mtiality Wllich rr, akc: Hen;.:l cial's conduct unfair .:1so niakeF it deceptive. Although the pU bee expects the fiduciary t:haracter of a t,lj.payer-tax prepare!' :rehJdonship to be honored ;, Btni' ic:al enter2(; Sucl pelationships v.rith ;10 iji1Clhc,. or guarding tax info:'Hwtk'D L' oin :niauth01-ized use 8.11(\ L: Lw( cOlr..rerted tax data for its own )rofiL Bcneficic.l's failu to dil :k,s';:' trH?f:;E cQuiltionE', had tf,2 c?!Jilrity to mislead cO' ;2DmEX;=, into bel;eiin;:\ t.h:, t t:' :nr(:rE: lticLJl (),)ld nl: Y' ,u; tor"''' ;111 c::elf returns. buch c.l; oml sion of 1\1CU hid; ;,j'C nul!.;:': :;;1 (0 invciligent purcha::ing df' cision; nn1a\Nfu1 ,"'10' , P. I,oti:i urd Cn rt"eJeFi' Ti"u,de 2d t, , c. JI. Lif. t, 1 ;.d. :::lso f:::: ,-:' ; ti:' ::i Jj c::;llr: oZ ili-'JLL'ri;;j fac ire, iI" , "L. ln" "" n:. pTOl)f th8\ r,,- - . "M...T ic ,2 :h' ro1;I.; "" t"X rd\L",j !,, ': H:Ji!, ' Chi, 1\'L, :)I\"r,1 ,, the CO"iH j()ll f;''' pcl hy !3pnd;c: " ::,i. - , ti,'i,.,,. wi. '" 1" ,,:"f,. - OJ 'pee;ai - "\' "1"'2'" \ (,;"C€ '""e auy is '1'" )'e- tlt d '" ;J:, "',,e l H'..: :,j: 174 n:DICHAL THAIJE COMMISSI01- DECISIONS Opinion Bfi important in a confidential relationship. Though this is true, the general commercial duty to disclose material fads is sufficient to make Beneficial's actions deceptive, Finally, the law judge found Beneficial's conduct deceptive because in conjunction with the Instant Tax Refund slogan, it is analogous to bait and switch advertising. Although Beneficial's pradices are not a classic bait and switch, the conceptual similarities are striking. Bait advertising is an enticing but insincere offer of good!: or services designed to obtain leads for a different product or service see, e. R. Part 238. Guides Against Bait Advertising. Benefieial's tax advertising was consciously designed to generate customers for the loan busines!: and, even though the tax preparation service itself was a legitimate offer, the Instant Tax Refund advertised as part of the service was not a legitimate offer at all Since Beneficial's tax advertising was designed to attract customers with an alluring offer and the tax service was designed to switch the customers unwittingly to Beneficial's regular loan service, we find as an additional ground of deception that the Joan solicitation pradices were part of a pattern conduct akin to bait and switch.

We now turn to Beneficial's post-Revenue Act conduct, which on its face at least was an attempt to avoid use of confidential data. Beneficial argues that its new procedures cured the unfairness and deceptiun in its early practices because it never used tax information to solicit loans after the Revenue Act became effective.

Even assuming this were true, it would not be an adequate defense to Beneficial's clear violations of law prior to the Revenue Act. As we noted earlier, discontinuance of unfairness or deception does not render a cease and desist order improper Coro, Inc. v, Federal Trade Commission 338 F.2d 149 , 153 (1st Cir. 19(4), eert. denied 380 U.S. 954 (1965), We have in rare occasions refrained from entering an order where discontinuance was voluntary, prolonged, and likely to be permanent. But here the discontinuance, assuming there were any, occurred only after a criminal statute prodded Beneficial into making changes, Given Beneficial's dual business and its persistent desire to turn tax customers into loan customers, we find no reason to refrain from issuing an orrler in this case because of Beneficial's supposed curing of its unlawful conduct.

At any rate, the new procedures did not in fact cure the deception and unfairness. Although the uninhibited conversion of private information which characterized the earlier period gave way to purported authorization forms and separated "tax" and "loan" folders BENEFICIAL CORP.. ET AL. 17:) lei Opinion the net effect of the new procedure was to confuse consumers and continue to abuse their proper expectations concern in?; the use to which their confidential information would be put. We find Benefieial's post- Revenue Act practices unfair and deceptive in their own right. The main factor distinguishing the new procedure from the old was the BOR-5li Authorization form which Bencficial required each tax customer to sign. Only if this paper were adequate to allow informed consumer consent to loan solicitation could a waiver of the fiduciary tax relationship occur. However, the law judge found the DOR-5fi form totally inadequate on its face as a consent form, and we agree, It does not inform the customer that the fiduciary tax relationship is being terminated and that financial information given thereafter wil be used for loan solicitation. Though it authorizes solicitation of "any business it docs not disclose what kind of business and it does not disclose that the solicitation is beginning even as the customer signs the form. Our independent view of the release form s inadequacy is reinforced by the testimony of consumer witnesses, some called by Beneficial, who had various opinions of the form s purpose, all wrong (e. Tr. 372, 395, 410 486).

Obviously consumers have a right to waive the confidentiality of their tax data if they choose. And, since Beneficial does offer a useful service in both the tax and loan businesses, some tax customers will presumably wish to forego their purely fiduciary relationship with Beneficial. But this decision must be based on full disclosure and informed consent.

In light of the inadequacy of the BOR-5fi form, the other changes in procedure after the Revenue Act become purely formal and without significance. Though Beneficial prepared what it called a Loan Interview Sheet for each customer, from the unsuspecting customer point of view the information being gathered was stil subject to the fiduciary tax relationship. Though Beneficial scrupulously separated so far as thewhat it called "loan" folders from the "tax" folders, customer understood every folder was a tax folder. For these reasons we see no essential difference between Beneficial's post- Revenue Act conduct and its pre-Revenue Act conduct.

Thc law judge entered an order designed to allow consumers to make an informed choice over waiving the confidentiality of their tax data. Beneficial argues that for several reasons the order is inappropriate, Beneficial first argues that the Revenuc Act of 1971, which provides criminal penalties for tax preparers, as a matter of law preempts the Federal Trade Commission Act in this area and precludes entering an ), 17(; FEDERAL TRADE COMMISSION DECISIONS Opinion 8G F, order. Alternatively, Beneficial argues that, as a matter of administrati ve discretion, the Commission should defer to the Revenue Act either by entering an order coextensive with that Act or entering no order at all.

The contention that the Revenue Act has pm tanto deprived the Commission of authority over the commercial misuse of income tax information is not persuasive. The courts have repeatedly rejected the argument that the Federal Trade Commission Act is ousted because of the possibly concurrent operation of another statute enforced by a different agency. The jurisdiction of the Commission has been seen as cumulative . Pederal Trade Cmnrnission v. Cernent Institute, 333 Co. S. 683, 689-95 (1948) (Justice Department); Warner-La-mber! Federal Trade Cornm:ission 361 F. Supp. 948, 953 (D. D.C. 1973) (Food and Drug Administration); American Cyanamid Co. v. Federal Trade Commission 363 F.2d 757, 771 (6th Cir. 1966) (Patent Offce); Batdwin Bracetet Co. v. Federal Trade Commission 325 F.2d 1012, 1014 (D. Cir. 19(3), cert. denied 377 U.S. 923 (1964) (Tariff Commission). In Batdwin as here, the supposedly preemptive law was a criminal statute implemented with Treasury Department regulations. See also Brander/leis v. Day, 316 F.2d 375, 378 (D.C. Cir. cet!. denied 375 U.S. 824 (1963).

Had Congress intended to limit the jurisdiction of the Commission, it would have done so explicitly, as it has before cf, e. Packers and 1921), amended 72 Stat.Stockyards Act, 42 Stat. 159, 169 (Aug. 15, 1749 1750 (Sept. 2 1958); McGuire Act, 66 Stat. 631, 632 (July 14 1952). But the Revenue Act contains no repeal, and the legislative history does not refer to the Commission at all. Nor wil we infer repeal, for repeals by implication are not favored. Only where two laws are clearly repugnant to each other and both cannot be carried into effect wil the latter prevail. S. v. Borden Co., 308 U.S. 188, 198 (1939); L. Heller & , 957 (7th Cir. 1951). Son v. Federal Trade Commission 191 F.2d 954 Here, though the civil requirements of the Federal Trade Commission Act may impose more stringent demands than the criminal standards of the Revenue Act, there is no repugnancy. Like the law judge we view Beneficial's possible compliance with the Revenue Act as irrelevant and clo not decide that issue.

Since the standards of the Revenue Act are irrelevant to this case we see no reason to enter an order coextensive with that Act or to defer altogether. Our concern is to purge Beneficial's unlawfulness under Section 5. Because the fault we have found lies in the undisclosed use of confidential data, the law judge was correct in entering an order provision requiring full disclosure and consent before loan solicitation may begin. Under the order, Beneficial may not use any information , 119 Final Order given by a tax customer unless the customer has signed a consent fonn detailing, inter alia the specific purpose for the consent, the exact information to be used, and the particular use intended. The lack of just this information is what makes the present Bar-56 form inadcquate. Thus, the ordcr provision is more than just reasonably related to the offense found Jacob Siegel Co. v. Fedemt Tmde Commission, supra 327 U.S. at 613; it is the most obvious and direct way to cure Beneficial's practices, Beneficial also argues that the lack of a time limit in the order would make it impossible ever to give a loan to any tax customer who signed no consent, even years later. If Beneficial wished to solicit such a loan using information obtained because of the tax relationship, this is absolutely true. But if the loan should arise from the customer s wholly independent action, in a context far removed in time from the income tax experience, making the loan would likely not violate the order. At any rate, Beneficial could cure its supposed problem by securing a signed consent before obtaining information for the loan. Finally, Beneficial argues that the order does not allow it to solicit tax customers for additional tax business. We wil add appropriate language to remedy this.

IV. CONCLUSION Having considered the entire record, the initial decision of the administrative law judge, and the briefs, the Commission affirms the law judge to the extent set forth in this opinion. An appropriate order accompanies this opinion, FINAL ORDER This matter having been heard by the Commission upon respondents appeal from the initial decision; and The Commission having considered the oral arguments of counsel their briefs, and the whole record; and The Commission, for reasons stated in the accompanying opinion having denied in part and granted in part the appeal; accordingly It is ordered That, except to the extent that it is inconsistent with the Commission s opinion, the initial decision of the administrative law judge be, and it hereby is, adopted together with the opinion " Beneficial raised other hypotheticals which, it says, rlemllnstrate that the "rder may rleprive it of loan business even from willing tax customers. Howe,...r e are not persuaded to mudify the order by "fantasies," Pedera/ Trade Cu"""i,s,,,,,v. NII,i,,,,,1 i,..ad '''P'''' ;Jf,2 U.S. at 4;JI. Beneficial has recourse to ourcomp1iance procedures if actual situations arise which may be presented in evidentiary form. But Beneficialt e pect some fencing in, and foregoinj! then.ypotheti al loan busine may be a necessary price of simultaneously engaging in two essentially eontradietorybusinesses.

17H FICO,:RAL TRAlJIC COMMISSION DECISIONS Final Order H6 FTC.

accompanying this order as the Commission s final findings of fact and conclusions of law in this matter;

It is jilrther ordered That the following cease and desist order be and it hereby is, entered:

It is ordered That respondents Beneficial Corporation and Beneficial Management Corporation, corporations, and their successors and assigns, and their officers, and respondents' agents, representatives and employees, directly or through any corporation, subsidiary, division or other device, in connection with the preparation of income tax returns or the extension of consumer credit in or affecting commerce as "commerce" is defined in the Federal Trade Commission Act, do forthwith cease and desist from:

Using the term "instant tax refund " or any other word or words of similar import or meaning, 2. Using any guarantee without clearly and conspicuously disclosing the terms, conditions and limitations of any such guarantee; or misrepresenting, in any manner, the terms and conditions of any guarantee, 3. Representing, directly or by implication, that respondents wil reimburse their customers for any payments the customer may be required to make in addition to his initial tax payment, in instances where such additional payment results from an error by respondents in the preparation of the tax return; Provided, however That it shall be a defense in any enforcement proceeding for respondents to establish that they make such payments.

4. Failing to disclose, clearly and conspicuously, whenever respondents make any representation, directly or by implication, as to their responsibility for, or obligation resulting from, errors attributable to respondents in the preparation of tax returns, that respondents wil not reimburse the taxpayer for any deficiency payment which results from said errors Provided, however That it shall be a defense in any enforcement proceeding for respondents to establish that they make such payments.

5. Representing, directly or by implication, that the percentage of respondents' customers who receive tax refunds is demonstrably greater than the percentage of individual taxpayers at large who receive refunds; or misrepresenting, in any manner, the magnitude or frequency of refunds received by respondents' tax preparation customers.

6. Representing, directly or by implication, that respondents' tax preparing personnel are tax experts or unusually competent in the preparation of tax returns or the rendering of tax advice; or 119 Final Order misrepresenting, in any manner, the competence or ability of respondents' tax preparing personnel.

7- Using information concerning any custumers of respondents including the name and/or address of the customer, for any purpose which is not essential or necessary to the preparation of a tax return if such information was obtained by respondents as a result of the preparation of the customer s tax return which includes any information given by the customer after he has indicated, in any way, that he is interested in utilizing respondents' tax preparation services, unless prior to obtaining such information respondents have both (1) specifically requested from the customer the right to use the tax return information of the customer and (2) have executed a separate written consent signed by the customer which shah contain: 1. Respondent's name;

2. The name of the customer;

3. The specific purpose for which the consent is being signed; 4. The exact information which wi1 be used; 5, The particular use which wil be made of such information; 6. The parties or entities to whom the information wih be made available;

7. The date on which such consent is signed; 8. A statement that the tax return information may not be used the tax return preparer for any purpose other than that stated in the consent, and;

9. A statement by the taxpayer that he consents to the use of such information for the specific purpose described in subparagraph (3) of this paragraph.

Pro'Uided, however That nothing herein shah prohibit respondents from using names and addresses only of customers for the purpose of communication with such customers solely concerning respondents income tax preparation business, Nothing in the above provision is intended to relieve respondents of any further requirements imposed on them by the Revenue Act of 1971, Pub. L. 92-178, title III 9316(a), Dec. 10, 1971; 26 D. C. 97216 or regulations issued pursuant to it.

It is further ordered That respondents herein shah notify the Commission at least 30 days prior to any proposed change in the structure of the corporate respondents such as dissolution, assignment or sale resulting in the emergence of a successor corporation, the creation or dissolution of subsidiaries or any other change in the respondent corporations which may affect compliance obligations arising out of this order.

It is furlher ordered That respondents shah, within 60 days after ;

lho FICj),.;AL TRADE COMMISSION DECISIONS Order Placing Matters on Dockd for Review HG F. service of this order, file with the Commission a written report, signed by the respondents, setting forth in detail the manner and form of their compliance with this order.