Commercial Credit Company

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IN THE MATTER OF COMMERCIAL CREDIT COMPANY MODH' YING ORDER IN REGARD TO ALLEGED VIOLATION OF THE FEDERAL TRADE COMMISSION AND TRUTH IN LENDING ACTS Docket 2420. Decision, June 1973-Modifying Order, Sept. , 1981 This order reopens the proceeding and modifies the Commission s order issued on June 26, 1973 (38 F.R. 20229; 82 F. C. 1841) against Dneof the nation largest finance companies by substituting for the order in its entirety, modified order which deletes language requiring the company to obtain a Personal Insurance Authorization" form from each borrower before the loan could be completed. For the next five years, the modifed order requires the company to give borrowers who elect to purchase insurance a notice entitled Your Right To Cancel Insurance " and give the customer the right to cancel credit insurance within 15 days of signing for a loan and receive a full refund of insurance funds.

ORDER REOPENING THE PROCEEDING AND MODIFYING CEASE AND DESIST ORDER Upon consideration of a request by respondent to reopen the proceeding and modify the Cease and Desist Order entered by consent against respondent in this matter on June 26, 1973, with the concurrence of the Divisions of Credit Practices and Compliance, and with the Director of the Bureau of Consumer Protection having recommended that the requested modifications of the Order be granted, the Commission has concluded on the basis of the foregoing that respondent's request should be granted It is therefore ordered That this proceeding be reopened and that the following Modified Final Order be substituted and issued in lieu ofthe Order entered on June 26, 1973:

MODIFIED FINAL ORDER I. It is ordered That respondent Commercial Credit Company, it successors and assigns, and its officers, agents, representatives an employees, directly or through any corporation, subsidiary, divisic or other device, in connection with the granting of consumer loa subject to the provisions of Regulation Z, 12 C. R 226.8 (1980), aft April 1, 1982 12 C. R 226. 17 and 226. 18 (1981), and the Truth Lending Act, 15 U.s. c. 1601 et Beg., as amended, do forthwith ce and desist from:

Failing, when the charges for credit life insurance anr Modifying Order 98 F.

credit accident and health insurance are not included in the finance charge:

(a) To quote monthly payments, whether on the telephone, in person, or otherwise, which exclude the cost of credit life insurance and/or credit accident and health insurance. (b) If monthly payments do reflect credit life insurance and/or credit accident and health insurance, such payments may be quoted only ifthe consumer is clearly told that:

(i) credit life insurance and/or credit accident and health insurance are optional; and (ii) the consumer s choice regarding the insurance coverage will not be considered in respondent's approval of the consumer s credit. 2. Failing to include in the finance charge, charges for credit life insurance and/or credit accident and health insurance written in connection with the credit transaction unless: (a) The insurance coverage is not required by the respondent and is not a factor in the approval by the respondent of the extension of credit and this fact is clearly and conspicuously disclosed in writing to the customer; and (b) Any customer desiring such insurance coverage gives specifically dated and separately signed affirmative written indication of such desire after receiving written disclosure to the customer of the cost of such insurance, as required by 12 C.F.R 226.4(a)(5) (1980) (12 C.F.R 226.4(d) (1981) after April 1 , 1982). 3. When the charges for credit life insurance and! or credit accident and health insurance are not included in the finance charge:

(a) Misrepresenting, orally or otherwise, directly or by implication, that credit life and/or credit accident and health insurance are equired as a condition for obtaining credit from respondent, (b) Discouraging, by misrepresentation, oral or otherwise, director by implication, the declination of credit life and/or credit ,cident and health insurance.

4. When the charges for credit life insurance andor credit ,ident and health insurance are not included in the finance large, failing:

I) To grant each borrower who is covered by credit life and/or !it accident and health insurance a period of not less than fifteen COMMERCIAL CREDIT CO.

783 Modifying Order days in which to cancel such insurance and receive a fuU refund of insurance funds. Such canceUation period shaU begin to run on the day that respondent delivers to the borrower the notice of "CanceUation Right" and "CanceUation Request" referred to in section (b) and (c) of this paragraph 4. A borrower s notification to respondent of cancellation of his or her insurance coverage shall be considered given on the date mailed or otherwise delivered to respondent. (b) To deliver to each borrower who is covered by credit insurance a notice entitled "Your Right to Cancel Insurance." Such notice shaU:

(i) he printed on paper of a color different from other loan dqcuments;

(ii) be printed in print not smaUer than the print of Attachment A hereto;

(iii) be substantiaUy similar to the content of Attachment A hereto;

(iv) be the last document delivered to the borrower at the time of closing together with an acknowledgement of receipt which is specificaUy dated and separately signed by the borrower. (c) To deliver to each borrower who is covered by credit insurance a borrower s copy of the "CanceUation Request" which contains only the contents of Attachment B hereto, and an envelope addressed to respondent.

(d) To mail or personaUy deliver to each borrower covered by credit insurance who orany inquires about canceUation, the notice of canceUation right described in section (b) and the envelope described in section (c).

(e) However, where the respondent receives a request for an extension of credit by mail, telephone, or written communication without personal solicitation, the provisions of this paragraph 4 shaU not be applicable if the respondents' printed material delivered or made available to the customer clearly sets forth the disclosures required by 12 C. R. 226.4(a)(5) (1980) (12 C. R. 226.4(d) (1981) after April 1, 1982), and also sets forth the scheduled amount of payments both including the cost of credit and or credit accident and health insurance and excluding the cost of credit and or credit accident and health insurance, and which otherwise meets the requirements of 12 R. 226.8(g)(2) (1980) (12 C. R. 226. 17(g) (1981) after April 1 1982).

Failng to compute and disclose accurately the finance charge Modifying Order 98 F.

as required by 12 C. R. 226.4(a)(5) and 226.8(d) (1980) (12 C. 226.4(d) and 226. 18(b) and (c) (1981) after April 1, 1982). 6. Failing to compute and disclose accurately the annual percentage rate to the nearest quarter of one percent as required by 12 R. 226.5(l) and 226. 8(l) (1980) (12 C. R. 226.22 and 226.18 (1981) after April 1, 1982).

7. Failing, in any consumer loan transaction or advertisement to make all disclosures, determined in accordance with 12 C. R. 226.4 and 226.5 (1980) (12 C. R.226.4 and 226.22 (1981) after April 1 R. 226.1982) in the manner, form and amount required by 12 C. 226. 226. , and 226. 10 (1980) (12 C.F. R. 226. 226. 226.23, and 226.24 (1981) after April 1 , 1982).

II. It is further ordered That the respondent's obligations under the Order issued on June 26, 1973, shall remain effective and binding upon any of the consumer loan offices of respondent until such office providedis in compliance with paragraph 4 of this modified order however that all of respondent's consumer loan offices shall be in compliance with paragraph 4 of this modified order not later than six months from the date of service of this modified order. Each of respondent' s consumer loan offices shall be obligated to comply with paragraph 4 of this modified order only for tbe period of five years following immediately after the day on which the loan office is in compliance with such paragraph 4.

III. It is further ordered That respondent shall maintain for a three year period, by individual consumer loan offces, records of the total number of borrowers and the names and addresses of each borrower who exercises his Of her right to cancel credit insurance. At the request of the Commission staff, the respondent shall maintain records for an additional two-year period. The records required by this paragraph shall be available for inspection and copying by ommission staff upon request.

IV. It is further ordered That respondent, shall not later than six lOnths after the service of this Order upon it, deliver a copy of this rder to Cease and Desist to all present and future personnel of !spondent at its general offces in Baltimore and in each of its 'bsidiary or other loan offces who are engaged in the extension of nsumer loans.

V. It is further ordered That respondent notify the Commission hin thirty (30) days of any change in the corporate respondent ich may affect compliance obligations with regard to the exten- COMMERCIAL CREDIT CO.

783 Modifying Order sian of consumer loans arising out of this Order, 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 with regard to the extension of consumer loans which may affect compliance obligations arising out of this Order.

VI. It is further ordered That respondent shall within two hundred ten (210) days after service upon it of this Order, fie with the Commission a report, in writing, setting forth in detail the manner and form in which it has complied with this Order. . j . :. : . ,.,.,. Modifying Order 98 F.

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790 FEDERAL TRADE COMMISSION ImCISIONS Complaint 98 F.