Marcor, Inc

Text (OCR of the scan at left; may contain errors)

IN THE MATTER OF MARCOR, INC., ET AL.

DISMISSAL ORDER, ETC., IN REGARD TO ALLEGED VIOLATION OF THE FEDERAL TRADE COMMISSION AND EQUAL CREDIT OPPORTUNITY ACTS Docket 9092. Complaint, Nov. 23. 1.976 - Dismissal Order, Sept. 20. 1977 This order dismisses, without prejudice, a complaint issued against a Chicago, Il. corporation and its department store chain, for alleged violations of Federal Reserve Board regulation and the Federal Trade Commission Act, in connection with the extension of consumer credit. The complaint has been dismissed because newly-finalized amendments to !,'ederal Reserve Board regulation necessitate further investigation as to firm s compliance with the amendments, and proceeding on the basis of the present complaint would be against the public interest.

Appearances For the Commission: Lewis H. Goldfarb. For the respondents: Patrick Head and Karl J. Bemesderfer, Chicago, Ill. Joseph L. Gibson and Spencer H. Heine, Washington COMPLAINT Pursuant to the provisions ofthe Equal Credit Opportunity Act, as amended, and its implementing regulation, Regulation B, and the Federal Trade Commission Act the Federal Trade Commission, has reason to believe that Marcor Inc., a corporation, and Montgomery Ward and Company Inc. , a corporation, ("respondents, ) have violated the provisions of said Acts and regulation. It appears to the Commission that a proceeding by it in respect thereof would be in the public interest. The Commission hereby issues its complaint stating its charges as follows:

PARAGRAPH 1. Respondent Marcor, Inc. ("Marcor ) is a corporation organized, existing and doing business under and by virtue of the laws of the State of Delaware, with its principal place of business and offce located at 619 West Chicago Ave., Chicago, Ilinois. Marcor wholly owns respondent Montgomery Ward and Company Inc. and formulates, controls and directs its policies, acts and practices, including the acts and practices set forth in Paragraphs Two through Six.

Respondent Montgomery Ward and Company, Incorporated Montgomery Ward") a wholly-owned subsidiary of Marcor, is a Complaint 90 F.

corporation organized, existing and doing business under and by virtue of the laws of the State of Ilinois, with its principal place of business and office located at 619 West Chicago Ave. , Chicago Ilinois. All references to "respondent" in Paragraphs Two through Five below wil refer to Montgomery Ward.

PAR. 2. Respondent regularly extends credit to persons through the issuance of credit cards and through the use of retail installment contracts which enables those persons to purchase property or services from respondent and to defer payment therefor. PAR. 3. Respondent regularly accepts applications for credit to determine which "applicants," as that term is defined in Regulation B, qualify for an extension of credit. When an application for credit is received by respondent, it is reviewed to determine whether, on the basis of the information provided therein, the applicant meets respondent' s standards of creditworthiness also known as its "credit risk evaluation system.

PAR. 4. A substantial number of the applicants referred to in Paragraph Three fail to satisfy respondent's standards of creditworthiness and are informed by respondent that credit has been denied. A substantial number of these applicants subsequently request respondent to provide them with the reasons for the denial of credit as required by Section 202.5(m)(2) of Regulation B. PAR. 5. In response to its applicants' requests for the reasons for denial, respondent furnishes a standard response (Attachment A) stating that it uses a "credit risk evaluation system" which assigns points to various items appearing on the credit application. The respondent further states that the applicant's total point score failed to meet respondent's minimum required point level and, for this reason, the applicant's request for credit was rejected. This response to its applicants' request for the reasons for denial constitutes a failure to provide applica ts with the reasons for denial in violation of Section 202.5(m)(2) of Regulation B.

PAR. 6. Pursuant to Section 702(g) of the Equal Credit Opportunity Act, respondents' aforesaid failure to comply with Regulation B constitutes a violation of that Act, and pursuant to Section 704(c) thereof respondents have violated Section 5(a)(1) of the Federal Trade Commission Act.

ATTACHMENT A (MONTGOMERY WARD LETTERHEAD This is in response to your request for a more detailed explanation of the reason for denial of your credit application request. In considering credit applications, Montgomery Ward employs a "Credit Risk Hui Uismissal Order Evaluation System based upon our experience with thousands of applicants like yourself, over a period of years.

In this system, points are assigned to various items appearing on the credit application and added together to produce a total point score for the application. In your case, this score was below our minimum required level. This is an economic decision, in no way should you construe it as a reflection on your personal integrity.

Sincerely yours, /s/ J. Ebbert Credit Manager AD- 34654 ORDER DISMISSING COMPLAINT The Commission withdrew this matter from adjudication upon joint motion of the parties on April 19, 1977 for the purpose of considering a negotiated settlement. On June 28, 1977 the Commission rejected the proposed settlement and, having directed the staff to attempt further negotiations, was thereupon informed that such negotiations had proved unsuccessful.

Since the Commission originally issued its complaint in this matter on November 23, 1976, the Federal Reserve Board has finalized amendments to Regulation B (12 C.F.R. 202 et seq. which bear directly on issues raised in the complaint. Having taken offcial notice of these changes in Regulation B and having been advised by staff that further investigation would be necessary to determine respondent' s compliance with the regulation, as amended, the Commission has concluded that it is no longer in the public interest to conduct further proceedings on the basis of the complaint as presently drafted.

Accordingly, it is ordered. sua sponte, pursuant to Rule 3. 25(1)(3), that the complaint in the above-captioned matter be dismissed without prejudice to any further action the Commission may deem appropriate, including direct enforcement of the provisions of Regulation B in Federal district court pursuant to section 704(c) of the Equal Credit Opportunity Act, as amended (15 U.S.C. 169Ic(c)), and section 5(m)(l)(A) of the Federal Trade Commission Act, as amended (15 VB. C. 45(m)(I)(A)).

In light of the Commission s action, respondent' s motion to dismiss the complaint, fied on July 28, 1977, is denied as moot. Complaint 90 F.T.C.