Richard D. Jones Mortgage Services, Inc

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IN THE MATTER OF RICHARD D. JONES MORTGAGE SERVICES, lng, ET AL.

CONSENT ORDER, ETC., IN REGARD TO ALLEGED VIOLATIO;'' OF THE federal TRADE COMMISSIO?\ AND TRUTH IN LE:'DI:'' ACTS Docket C-2785. Complaint. Mar. , 1.977 - Decision. Mar. , 1977 Consent order requiring a La :\esa, Calif. finance company, among other things to cease violating the Truth in Lending Act by f '1iljng to disclose to consumers, in connection with the extension of consumer credit, such disclosures as are required by Federal Reserve System regulations. Appearances For the Commission: Paul R. Roark. For the respondents: Michael M Anello, Wingert, Grebing & Anello, San Diego, Calif.

COMPLAINT Pursuan t to the provisions of the Federal Trade Commission Act and of the Truth in Lending Act and the implementing regulation promulgated thereunder, and by virtue of the authority vested in it by said Acts, the Federal Trade Commission having reason to believe that Richard D. Jones Mortgage Services, Inc., a corporation, and Richard D. Jones, individually and as an officer of said corporation, hereinafter sometimes referred to as respondents, have violated the provisions of said Acts and implementing regulation, and it appearing to the Commission that a proceeding by it in respect thereof would be in the public interest, hereby issues its complaint stating its charges in that respect as follows:

PARAGRAPH 1. Respondent Richard D. Jones Mortgage Services Inc. is a corporation organized, existing and doing business under and by virtue of the laws of the State of California, with its principal offce and place of business located at 8580 La Mesa Boulevard, La Mesa, Calif.

Respondent Richard D. Jones is an individual and an offcer of the corporate respondent. He formulates, directs and controls the acts and practices of the corporate respondent including the acts and practices hereinafter set forth. His address is the same as that of the corporate respondent.

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JtlCJ:AKD D. .JU1"".t lVlvnlUl""-:f1' H"J.VJ."U .L.''-. 184 Complaint PAR. 2. Respondents are now, and for some time last past have been engaged in arranging for the extension of credit through the operation of a mortgage brokerage business, which generally arranges, for a fee, for investors to lend money to consumers using real property as security for the performance of the obligation arising out of the transaction.

PAR. 3. In the ordinary course and conduct of their business as aforesaid respondents regularly arrange for the extension of consumer credit or offer to extend or arrange for the extension of such credit as "arrange for the extension of credit" and "consumer credit" are defined in Section 226.2 of Regulation Z, the implementing regulation of the Truth in Lending Act, duly promulgated by the Board of Governors of the Federal Reserve System.

PAR. 4. Subsequent to July 1 , 1969, in the ordinary course and conduct of their business as aforesaid, respondents arrange for the extension of loans whkh are not a credit sale. In these transactions respondents:

1. Fail to make the disclosures required by Section 226.8 of Regulation Z clearly, conspicuously and in meaningful sequence, as required by Section 226.6(a) of Regulation Z. 2. Fail to determine accurately the finance charge, by failing to include service, transaction, activity or carrying charges, loan fees, points, finder s fees or similar charges, as required by Section 226.4(a) of Regulation Z.

3. Fail to include in the finance charge fees for title examination, abstract of title, title insurance, preparation of deeds, settlement statements, other documents, appraisal fees and credit reports, in excess of reasonable amounts, as required by Section 226.4(e) of Regulation Z.

4. Fail to print the terms "annual percentage rate" and "finance charge" more conspicuously than other required terminology, as required by Section 226.6(a) of Regulation Z. 5. Disclose additional information or explanation stated, utilized and placed so as to mislead or confuse the customer and to contradict, obscure and detract attention from the information required to be disclosed by Section 226.8 of Regulation Z, as proscribed by Section 226.6(c) of Regulation Z.

6. Fail to preserve, for two years, evidence of compliance with the disclosure requirements of Regulation Z, other than the advertising requirement under Section 226. , as required by Section 226.6(i) of Regulation Z.

7. Fail to make the disclosures required by Section 226. 8 of 233- 111 77 Complaint 89 F.

Regulation Z on either (1) the note or instrument evidencing the obligation on the same side of the page and above or adjacent to the place for the customer s signature; or (2) one side of a separate statement which identifies the transaction, as required by Section 226.8(a) of Regulation Z.

8. Fail to disclose the annual percentage rate accurately to the nearest quarter of one percent, computed in accordance with Section " as226.5 of Regulation Z, using the term "annual percentage rate required by Section 226.8(b )(2) of Regulation Z. 9. Fail to disclose the due dates or periods of payment scheduled to repay the indebtedness as required by Section 226.8(b)(3) of Regulation Z.

10. Fail, in arranging for the extension of credit for loans secured by other than first liens or equivalent security interest on a dwelling made to finance the purchase of that dwelling, to disclose the sum of all the periodic payments and fail to use the term "total of payments to describe said sum as required by Section 226.8(b)(3) of Regulation 11. Fail, where a payment is more than twice tbe amount of an otherwise regularly scheduled equal payment, to identify the amount of such payment by using the term "balloon payment " as required by Section 226.8(b )(3) of Regulation Z.

12. Fail to disclose the amount, or method of computing the amount, of any default, delinquency or similar charges payable in the event of late payments, as required by Section 226. 8(b)( 4) of Regulation Z.

13. Fail to describe the penalty charge that may be imposed by the creditor or his assignee for prepayment of the principal of the obligation with an explanation of the method of computation of such penalty and the conditions under which it may be imposed, as required by Section 226.8(b )(6) of Regulation Z. 14. Fail to identify the method of computing any unearned portion of the finance charge in the event of prepayment of the obligation and a statement of the amount or method of computation of any charge that may be deducted from the amount of any rebate of such unearned finance charge that wil be credited to the obligation or refunded to the customer, as required by Section 226.8(b)(7) of Regulation Z.

15. Fail to identify the amount of credit which will be paid to the customer or for bis account or to another person on his behalf including all charges, individually itemized, which are included in the amount of credit extended out which are not part of the finance .

.ll,lvITM..ll,1. 1.. "'Vl lUVH.lU.nuc. 1J.b.l Y.l"".LU, UH_ , LI.I ,.1.1. 184 Decision and Order charge, using the term "amount financed," as required by Section 226.8(d)(I).

16. Fail to disclose, except in the case of a loan secured by a first lien or equivalent security interest on a dwellng and made to finance the purchase of that dwelling, the total amount ofthe finance charge using the term "finance charge " as required by Section 226.8(d)(3) of Regulation Z.

17. Fail, in the case of transactions in which a security interest is or will be retained or acquired in any real property which is used or expected to be used as the principal residence of the customer, except in the case of the creation, retention or assumption of a first lien or equivalent security interest as provided in Section 226. 9(g) of Regulation Z, to:

a. disclose that the customer has a right to rescind the transaction by midnight of the third business day following the transaction, as required by Section 226.9 of Regulation Z; b. set forth along with the notice contemplated by Section 226.9(b) of Regulation Z, Section 226.9(d) of Regulation Z, as required by Section 226.9(b) of Regulation Z; and c. delay performance of respondents' obligations under contract until the rescission period has expired, as required by Section 226.9(c) of Regulation Z.

PAR. 5. By and through the acts and practices set forth above respondents have failed and are now failing to comply with the requirements of Regulation Z, the implementing regulation of the Truth in Lending Act, duly promulgated by the Board of Governors of the Federal Reserve System. Pursuant to Section 103(q) ofthe Truth in Lending Act, respondents' aforesaid failures to comply with the provisions of Regulation Z constitute violations of the Act and, pursuant to Section 108 thereof, respondents have thereby violated the Federal Trade Commission Act.

DECISION AN!) ORDER The Federal Trade Commission having initiated an investigation of certain acts and practices of the respondents named in the caption hereof, and the respondents having been furnished thereafter with a copy of a draft of complaint which the Los Angeles Regional Offce proposed to present to the Commission for its consideration and which, if issued by the Commission, would charge respondents with violation of the Federal Trade Commission Act and of the Truth in Lending Act and the implementing regulation promulgated thereunder;

Decision and Order 89 F. The respondents and counsel for the Commission having thereafter executed an agreement containing a consent order, an admission by the respondents of all the jurisdictional facts set forth in the aforesaid draft of complaint, a statement that the signing of said agreement is for settlement purposes only and does not constitute an admission by respondents that the law has been violated as alleged in such complaint, and waivers and other provisions as required by the Commission s Rules; and The Commission having thereafter considered the matter and having determined that it had reason to believe that the respondents have violated the said Acts and implementing regulation, and that complaint should issue stating its charges in that respect, and having thereupon accepted the executed consent agreement and placed such agreement on the public record for a period of sixty (60) days, now in further conformity with the procedure prescribed in Section 2.34 of its Rules, the Commission hereby issues its complaint, makes the following jurisdictional findings, and enters the following order: 1. Respondent Richard D. Jones Mortgage Servces, Inc. is a corporation organized, existing and doing business under and by virtue of the laws of the State of California, with its offce and principal place of business located at 8580 La Mesa Boulevard, La Mesa, Calif.

Respondent Richard D. Jones is an offcer of said corporation. He formulates, directs and controls the policies, act and practices of said corporation, and his principal offce and place of business is located at the above-stated address.

2. The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of the respondents, and the proceeding is in the public interest.

ORDER It is ordered, That respondents Richard D. Jones Mortgage Services, Inc., a corporation, its successors and assigns, and its offcers, and Richard D. Jones, individually and as an offcer of said corporation, and respondents' agents, representatives and employees directly or through any corporation, subsidiary, division or other divice, in connection with any extension or arrangement for the extension of consumer credit, as "consumer credit" is defined in Regulation Z (12 C. R. 226) of the implementing regulation of the Truth in Lending Act, (15 UB.G 1601-1665 (1970), as amended, 15 C. 160l-1665(a), (Supp. IV, 1974)), do forthwith cease and desist from:

1. Failing to make the disclosures required by Section 226.8 of RICHARD D. JONES MORTGAGE SERVICES, INC., ET AL. 189 184 Decision and Order Regulation Z clearly, conspicuously and in a meaningful sequence, as required by Section 226.6(a) of Regulation Z. 2. Failing to include in the finance charge the service, transaction, activity or carrying charges, loan fees, points, finder s fees and similar charges as required by Section 226.4(a) of Regulation Z. 3. Failng to include in the finance charge fees for title examination, abstract of title, title insurance, preparation of deeds, settlement statements, other documents, appraisal fees and credit reports, in excess of reasonable amounts, as required by Section 226.4(e) of Regulation Z.

4. Failng to print the terms "annual percentage rate" and finance charge" more conspicuously than other required terminology, as required by Section 226.6(a) of Regulation Z. 5. Disclosing additional information or explanation stated, utilized or so placed so as to mislead or confuse the customer or to contradict, obscure or detract attention from the information required to be disclosed by Section 226.8 of Regulation Z, including, but not limited to, setting forth any rate of interest or annual percentage rate in percentage terms which is not the true annual percentage rate required to be disclosed by Regulation Z and this order, as required by Section 226.6(c) of Regulation Z. 6. Failing to preserve, for two years, evidence of compliance with the disclosure requirements of Regulation Z, other than the advertising requirements under Section 226. , as required by Section 226.6(i) of Regulation Z.

7. Failing to make the disclosures required by Section 226.8 of Regulation Z on either (1) the note or instrument evidencing the obligation on the same side of the page and above or adjacent to the place for the customer s signature; or (2) on one side of a separate statement which identifies the transaction, as required by Section 226.8(a) of Regulation Z.

8. Failing to disclose the annual percentage rate accurately to the nearest quarter of one percent, computed in accordance with Section 226.5 of Regulation Z, using the term "annual percentage rate," as required by Section 226.8(b )(2) of Regulation Z. 9. Failng to disclose the due dates or periods of payment scheduled to repay indebtedness, as required by Section 226.8(b)(3) of Regulation Z.

10. Failing, in arranging for the extension of credit loans secured by other than a first lien or equivalent security interest on a dwellng made to finance the purchase of that dwellng, to disclose the sum of all payments and failing to use the term "total of payments" to describe said sum, as required by Section 226.8(b)(3) of Regulation Z. Decision and Order 89 F. T. 11. Failing, in transactions where a payment is more than twice the amount of an otherwise regularly scheduled equal payment, to identify the amount of such payment by using the term "balloon payment " as required by Section 226.8(b)(3) of Regulation Z. 12. Failng to disclose the amount, or method of computing the amount, of any default, delinquency or similar charges payable in the event of late payments, as required by Section 226.8(b)(4) of Regulations.

13. Failing to describe the penalty charge that may be imposed by the creditor or his assignee for prepayment of the principal of the obligation with an explanation of the method of computing such penalty and the conditions under which it may be imposed, as required by Section 226.8(b )(6) of Regulation Z. 14. Failing to identify the method of computing any unearned portion of the finance charge in the event of prepayment of the obligation and a statement of the amount or method of computation of any charge that may be deducted from the amount of any rebate of such unearned finance charge that will be credited to the obligation or refunded to the customer, as required by Seetion 226.8(b)(7) of Regulation Z.

15. Failng to identify the amount of the credit which wi1 be paid to the customer or for his account or to another person on his behalf including all charges, individually itemized, which are included in the amount of the credit extended but which are not part of the finance charge, using the term "amount financed, " as required by Section 226.8(d)(I) of Regulation Z.

16. Failing to disclose, except in the case of a loan secured by a first lien or equivalent security interest on a dwelling and made to finance the purchase of that dwelling, the total amount of the finance charge, using the term "finance charge " as required by Section 226.8(d)(3) of Regulation Z.

17. Failng, in the case of a transaction in which a security interest is or wi1 be retained or acquired in any real property which is used or expected to be used as the principal residence of the customer, except in the case of the creation, retention or assumption of a first lien or equivalent security interest, as set forth in Section 226.9(g) of Regulation Z, to:

a. Disclose that the customer has a right to rescind the transaction by midnight of the third business day following the transaction as required by Section 226.9 of Regulation Z; and b. Furnish the customer with two copies of the notice set forth at Section 226.9(b) of Regulation Z, as required by Section 226.9(b) of Regulation Z; and RICHARD D. JONES MORTGAGE SERVICES, INC., ET AL. 191 184 Decision and Order c. Set forth, along with the notice contemplated and required by Section 226.9(b) of Regulation Z, Section 226.9(d) of Regulation Z, as required by Section 226.9(b) of Regulation Z; and d. Delay performance of respondents' obligations under contract until the rescission period has expired, as required by Section 226.9(c) of Regulation Z.

18. Failng in any consumer credit transaction to make all disclosures determined in accordance with Section 226.4 and 226.5 of Regulation Z at the time and in the manner, form, and amount required by Sections 226. , 226. , and 226.9 of Regulation Z. It is further ordered, That respondents deliver a copy of this order to cease and desist to all present and future personnel of respondents engaged in the consummation of any extension of consumer credit or in any aspect of preparation, creation or placing of advertising, and that respondents secure a siged statement acknowledging receipt of said order from each such person.

It is further ordered, That respondents notify the Commission at least thirty (30) days prior to any proposed change in the corporate respondent, 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 corporation which may affect compliance obligations arising out ofthe order. It is further ordered That the respondents herein shall within sixty (60) days after service upon them of this order, fie with the Commission a report, in writing, setting forth in detail the manner and form in which they have complied with this order. It is further ordered, That the individual respondent named herein shall promptly notify the Commission of each change in his business or employment status, including discontinuance of his present business or employment, and each affliation with a new business or employment for a period of ten years following the effective date of this order. Such notice shall include the address of the business or employment with which respondent is newly affliated and a description of the business or employment as well as a description of the respondent's duties and responsibilities in that business or employment.

Complaint 89 F.