Aldens, Inc

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IN THE MATTER OF ALDENS, INC.

CONSENT ORDER, ETC" IN REGARD TO ALLEGED VIOLATION OF SEC. 5 OIo THE FEDERAL TRADE COMMISSION ACT Docket C-3076. Complaint, Oct. 1981-Decision, Oct. , 1981 This consent order requires, among other things, a Chicago, Ilinois mail order house to cease, in connection with the collection of debts, improperly contacting consumers or third parties. Except to advise consumers of legal remedies usually taken to collect debts, respondents are prohibited from communicating with consumers who have written the firm indicating that they wil not pay the debt or wish no further contact regarding the debt. Additionally, for a five year period, the order requires the insertion of a prescribed statement in all charge account agreements, which slates that the company will limit discussions with third parties to information necessary to locate the consumer. The order also provides that should the Commission promulgate a trade regulation rule applicable to respondent' s third party contacts, compliance with that rule will be considered part of the order. Appearan For the Commission: Alan D. Retlkin.

For the respondent: Lawrence F Henneberger and Christopher Smith. Arent, Fox, Kintner, Plotkin Kahn Washington, 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 Aldens, Inc., a corporaion, hereinafter referred to as Aldens or respondent, has violated he provisions of said Act, and it appearing to the Commission that a roceeding by it in respect thereof would be in the public interest ereby issues its complaint stating its charges in that respect as lIows:

PARAGRAPH 1. Respondent, Aldens, Inc., is a corporation, orga- , existing and doing business under and by virtue of the laws of State of Ilinois, with its principal office and only place of tness located at 5000 West Roosevelt Road, Chicago, Ilinois. 'R. 2. Respondent is now and for some time in the past has been larly engaged in the sale of consumer products by catalog and t mail merchandising to consumers residing throughout the ,d States. All orders, whether for cash or credit (extended by ALDENS, INC.

790 Complaint respondent using its Aldens Charge Accounts), are solicited by mail through catalogs, flyers and other direct mail literature. For its fiscal year ending January 31, 1980, Aldens' sales were approximately $ 250 milion, making it the nation s fifth largest mail order company.

PAR. 3. In the ordinary course and conduct of its business Aldens, by its agents, representatives and employees, regularly engages in the collection of consumer debts allegedly owed to Aldens for the sale, on credit, of mail order consumer products as described in Paragraph Two. Respondent maintains, and at all times mentioned herein has maintained, a substantial course of trade in said business in commerce, as "commerce" is defined in the Federal Trade Commission Act.

PAR. 4, In the ordinary course of attempting to collect the consumer debts referred to in Paragraph Three, herein, respondent by means of the U.S. Postal Service, has transmitted and in certain instances continues to transmit to consumers and others not necessarily responsible for the financial affairs of said consumers unsolicited forms, letters and notices demanding payment or requesting assistance or information to aid in the collection of said consumer debts. Copies of some of the forms used by Aldens are attached hereto as Exhibits 1 through 14.

Typical and ilustrative, but not necessarily all inclusive, of the statements and representations made in said forms and printed materials are the following excerpts.

1. Prior to accepting this for final settlement I am asking our Credit people to determine why you have failed to discharge your obligation. A review of your history indicates:

you receive income from (employer).

bank affjliations with (bank).

you have credit with (merchant).

Additionally, (name of a credit-reference/friend/relatives may be in a position to hel' you. Of course, as we proceed we wil update and uncover current conditions. 2. I have been instructed to place your seriously past due account locally f collection.

It is possible a local investigation will be made regarding your financial status order to determine the most expedient means of obtaining payment in full. Y . Excerpt numbers correspond to the numbers of theexhibits from which they are extracted. Complaint 98 F.

employer, both past and present references, neighbors, local merchants and credit bureau may all be asked to report.

3. Your name was given to us as a personal reference or relative when we opened a Credit Account for (consumer s nameJ.

The terms under which payments were to be made have not been kept. Despite numerous requests for settlement in a friendly manner, a serious past due condition stil exists.

It is our desire to avoid the necessity of legal action in the local courts. That is why we are writing to you.

Perhaps a word from you wil emphasize the gravity of this situation and result in payment.

The above named person has an account with us which is seriously past due Would you be interested in contacting this party regarding a loan for $ , the total amount owed us? If you find that you cannot grant this loan but you can complete the following questionnaire, please do so and return it to us. We will gladly reimburse you for any investigative expense.

Verified address Phone Place of employment Phone Wife s place of employment_- Phone Neighbor or relative where customer might be contacted by phone memo to:

n. g. hadges (Alden s Collection Dept. Employee) lfrom: j. 1. davis, Alden s Collection Dept. Supervisor) Re: (Consumer s Name) In reply to your memo stating that the above named person has ignored our efforts :owards a friendly settement, I recommend one of the following methods for nforcing payment.

Contact the debtor s employer to ask his assistance in obtaining payment in full opy of this letter is being sent to the debtor to inform him of our intentions. If a full Iffcnt is not received within the next seven days, proceed with whatever action you sider the most appropriate and expedient.

The delivery of this letter at your place of employment indicates that you are fully employed, and can pay your just obligations. 'lps you don t realize the seriousness of your position. ALDENS, INC. l:7u 790 Complaint We don t want to cause you unnecessary embarrassment. Nevertheless, action will be taken to collect the entire balance of $ __through your employer unless you send a payment of $ today.

7. Before authorizing an agent in your locality to act on our behalf, I intend to ask your employer for assistance in arranging payment of this long overdue account. I shall contact him in approximately 10 days. An immediate payment of $ wil eliminate the need for involving your employer in this matter, as well as the possibility of legal proceedings. I advise you to act promptly, before it is too late. 8. May we ask your assistance in obtaining payment from your employee whose name appears above? This person has not completed payments on merchandise purchased from us If you would be kind enough to speak to your employee about this obligation, I feel sure it would make him realize the seriousness of the situation and help bring about an amicable settlement.

If our customer no longer works for you, can you give us the name and address of his present employer? 9, I sincerely hope you didn t think we were trying to unload our problems on your shoulders when we asked you to speak to the above named person about his past due indebtedness to Aldens.

From our long experience in the credit field, we know that a few words from the employer usually result in the resumption of payments. Without your assistance, our only recourse wil be to place the account with a local attorney. Since we don t want to take such drastic action if it can possibly be avoided, anything you can do to influence a friendly settlement wil be greatly appreciated. If this person no longer works for you, can you give us the name and address of his new employer? 10. From our previous communications with the Military Department, it is evident that they, too, desire to be cooperative and he of assistance to military personnel having financial difficulties.

Your reply and payment must be sent within the next seven (7) days. Otherwise, we wil appeal to your Commanding Officer for assistance. Have you considered the consequences of such action? Notice of our intention is given so that you may avoid any unpleasantness or reflection on your record. 11. SEND $ AT ONCE, UNLESS YOU RESPOND WE WILL CONTACT YOUR COMMANDING OFFICER. YOU OF COURSE REALIZE HE MAY ENFORCE THE PROVISIONS OF ARTICLE 133 OR 134 OF THE UNIFORM CODE 01 MILITARY .JUSTICE. 12. We are having a serious collection problem with the customer named above who we believe is under your command. When he opened his account in 19- , he agreed to pay $ per month. At present his account balance h of which $ is past due.

Complaint 98 F.

A substantial amount of the items purchased may have been for the support of the serviceman s dependents.

We would greatly appreciate your discussing this matter with our customer, as we are confident that such a discussion would result in the resumption of regular payments. Any information you can give us regarding this man s problem and his plan for payments wil be helpful.

13. We are wondering. . . if you received our previous letter concerning the above named person who we believe is serving under your command. Apparently he is experiencing financial diffculties since his Open End Credit Account has become considerably past due - . as is evident by the data shown above. Would you kindly arrange to have this matter called to his attention. 14. We regret very much. . . that it was necessary to contact your Commanding Officer about your past due account.

Since the Military Department encourages a serviceman to discharge his obligations satisfactorily, this matter wil undoubtedly be brought to your attention by your superior offcer.

As soon as this (payment) is received, at your request, we will notify your Commanding Officer of your agreement to settle this account. If you fail to cooperate, we wil have no choice but to further proceed through proper military channels.

PAR. 5. In the ordinary course and conduct of its business as aforesaid, respondent has transmitted and in some instances continues to transmit to consumers and third parties in a number of States thousands of copies of Exhibits 1-14 per month via the United States Postal Service. By and through the use of Exhibits 1, 2, 5, 6, 7 10, 11, & 14, respondent threatened and in some instances continues to threaten consumers that it will contact third parties (including, but not limited to: friends, relatives, neighbors, commanding officers employers and supervisors) in connection with its attempt to collect allegedly delinquent consumer debts. By and through the use Exhibits 3, 4, 8, 9, 12, & 13, Aldens contacted and in some instances continues to contact such third parties. If no reply is received from the initial third party contact, a second contact may be attempted. (Respondent frequently made and continues to make third party ;ontacts by means of the telephone, as well.) In the course of such )ractices, respondent frequently divulged and in some instances ontinues to divulge to third parties the fact, substance, and details r consumer s alleged indebtedness.

By and through the use of these acts and practices, respondent has the past, and is in some instances presently, acting in an ALDENS, INC. 795 790 Complaint oppressive or coercive manner, thereby unfairly threatening the jobs, reputations, emotional and mental security, and individu"l privacy of several thousands of consumers each month. PAR. 6. The aforesaid acts and practices of respondent, as herein alleged, were and are all to the prejudice and injury of the public and have constituted, and now constitute, unfair acts and practices in or affecting commerce in violation of Section 5 of the Federal Trade Commission Act.

Chairman Miler did not participate.

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367- 444. a - 82 - 52 QL 3 Decision and Order 98 F.

DECISION AND ORDER The Federal Trade Commission, having initiated an investigation of certain acts and practices of the respondent named in the caption hereof, and the respondent having been furnished thereafter with a copy of a draft of complaint which the Bureau of Consumer Protection proposed to present to the Commission for its consideration and which, if issued by the Commission, would charge respondent with violation of the Federal Trade Commission Act; and The respondent, their attorneys, and counsel for the Commission having thereafter executed an agreement containing a consent order, an admission by the respondent of all thc 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 respondent 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 respondent has violated the said Act, and that complaint should issue stating its charges in that respect, and having thereupon accepted the executed consent agreement and placed such agreement on the public record for a period of 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 Aldcns, Inc. is a corporation organized, existing and doing business under and by virtue of the laws of the State of Ilinois, with its office and principal place of business located at 5000 West Roosevelt Road, in the City of Chicago, State of Ilinois. 2. The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of the respondent, and the proceeding is in the public interest.

ORDER DEFINITION: For the purposes of this Order, the term colt"umer shall mean any natural person obligated or allegedly obligated to pay any debt.

It is ordered That respondent, Aldens, Inc. , a corporation, its 790 Decision and Order successors and assigns, and respondent's offkers, agents, representatives and employees, directly or through any corporation, subsidiary, division or other device, in connection with the collection or attempted collection of any consumer debt, in or affecting commerce, as "commerce" is defined in the Federal Trade Commission Act, as amended, do forthwith cease and desist from: (1) Communicating with any consumer without the prior consent of the consumer given directly to respondent at the time of the attempt to collect any debt, or the express permission of a court of competent jurisdiction if:

(a) Such communication is at any unusual time or place, or a time or place known (or which should be known) by respondent to be inconvenient to the consumer, including the consumer s place of employment, if respondent knows or has reason to know that the consumer s employer prohibits the consumer from receiving such communication; or (b) Respondent knows the consumer is represented by an attorney acting on behalf of and in the name of the consumer with respect to such debt, and has knowledge of or can readily ascertain such attorney s name and address; provided, however that respondent is permitted to communicate directly with the consumer if the attorney fails to respond, within a reasonable period of time, to a communication from respondent, or the attorney consents to direct communication with the consumer.

(2) Communicating with any consumer if the consumer has notified respondent in writing that he or she refuses to pay the debt, or wishes respondent to cease further communication, except: (a) as reasonably necessary to inform the consumer that respondent may invoke specified remedies which are ordinarily invoked by respondent; or (b) to advise the consumer that respondent wil cease further communication.

(3) Failing to comply with the terms of the following statement which shall appear as a contract provision in all of respondent' charge account agreements for a period of five (5) years, beginning no later than six (6) months after this Order becomes final: In the course of collecting or attempting to collect any debt arising from this charge agreement, Aldens will not discuss or threaten to discuss my debt with any person other than me or my attorney, without my written consent (given at the time of the attempt to collect) unless permitted by a court. However, Aldens may contact other Decision and Order 98 F.

persons without mentioning any debt, if that is necessary to locate me. This provision does not limit Aldens' right to contact its attorneys or debt collection and credit reporting agencies, when permitted by law.

(a) This provision shall be printed clearly and conspicuously in the same size type as are the other provisions of the agreement. (b) The term "collecting or attempting to collect any debt " as used in the above statement, shall not include contacts by respondent:

(1) with a credit reporting agency for the purpose of reporting obtaining information;

(2) with a debt collection agency engaged or being engaged to collect the debt in question;

(3) with any person with the written consent of the consumer given at the time of the attempt to collect; (4) with its own attorneys;

(5) with third persons for the purpose of acquiring location information as provided in paragraph 3(c) of this Order; or (6) which are reasonably necessary to effectuate a post-judgment judicial remedy.

(c) When contacting third persons to determine the location of the consumer) respondent shall:

(1) request information only as to the consumer s home address home phone number, and place of employment; (2) identify itself and state the purpose of the contact (i, , Aldens is trying to locate the consumer) without stating that the consumer owes any debt; and (3) not communicate more than once with any such person unless it is reasonably believed to be necessary. (d) Upon the expiration of the five (5) year period provided for in Paragraph (3) of this Order, respondent shall continue to comply with the terms of the statement contained in that paragraph. It is further ordered That:

(4) In the event that the Federal Trade Commission promulgates a valid trade regulation rule applicable to respondent's third party contact activities, then compliance with that rule shall be deemed compliance with Paragraph (3) of this Order. (5) Respondent shall deliver a copy of this Order to cease and ALU.t.N1: L:.

790 Decision and Order desist to all present and future personnel of its collection staff who are engaged in the preparation or use of materials and procedures to be used in connection with the training of personnel or the actual day-to-day operation of respondent's collection activities, and shall secure a signed statement acknowledging receipt of said Order from each such person.

(6) Respondent shall notify the Commission at least thirty (30) days prior to any proposed change in the 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 ohligations arising out of the Order.

(7) Respondent shall, within sixty (60) days after service upon it of this Order, file with the Commission a report, in writing, setting forth in detail the manner and form in which it has complied with this Order.

Chairman Miler did not participate.

Modifying Order 98 F.