Chicago Metropolitan Pontiac Dealers' Association, Inc

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IN THE MA'IER OF CHICAGO METROPOLITAN PONTIAC DEALERS' ASSOCIATION, INC.

CONSENT ORDER IN REGARD TO ALLEGED VIOLATION OF SEC. 5 OF THE FEDERAL TRADE COMMISSION ACT AND THE TRUTH IN LENDING ACT Docket C-3110. Complaint, June 1983-Decision, June, 1983 This consent order requires a Wheaton, Ill Pontiac dealers' association, among other things, to cease failing to make clear and conspicuous credit disclosures in T. advertisements promoting consumer credit. The order requires that credit terms be displayed in the video portion orthe ad for at least five seconds, and that rates offinance charges be quoted as an "annual percentage rate." The association is also prohibited from using certain credit terms in advertisements promoting credit sales unless those advertisements also include statutorily required information in the manner prescribed by the Truth in Lending Act and its implementing Regulation Z.

Appearances For the Commission: George R. Bellack. For the respondent: David G. Mountcastle Wheaton, Ill. COMPLAINT Pursuant to the provisions of the Federal Trade Commission Act and of the Truth in Lending Act and the implementing regulations promulgated thereunder, and by virtue of the authority vested in it by said Acts, the Federal Trade Commission, having reason to believe that the Chicago Metropolitan Pontiac Dealers' Association, Inc. (hereinafier referred to as "respondent"), a corporation, has violated the provisions of said Acts and the implementing regulation promulgated under the Truth in Lending 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:

PARAGRAPH 1. Respondent Chicago Metropolitan Pontiac Dealers Association, Inc., is a corporation organized, existing and doing business under and by virtue of the laws of the State of Ilinois, with its offce and principal place of business located at 208 North West Street, P.O. Box 48, Wheaton, Ilinois.

PAR. 2. Respondent's members are now, and for some time have been, engaged in the business of offering for sale and sale of new and CHICAGO METROPOLITAN PQNTIAC DEALERS' ASSOC. , INC. 855 854 Decision and Order used automobiles to the public at retail. In the ordinary course and conduct of their business, respondent's members regularly arrange for the extension of consumer credit, as "arrange for the extension of credit" and "consumer credit" are defined in Sections 226.2(h) and 226.2(p) of Regulation Z (12 C. R. 226), the implementing regulation of the Truth in Lending Act, duly promulgated by the Board of Governors of the Federal Reserve System'! PAR. 3. In the ordinary course and conduct of its business, respondent caused advertisements, as Uadvertisement" is defined in Section 226.2(d) of Regulation Z, to be broadcast on television at various times during January and February of 1981. Certain of these advertisements were designed to aid, promote, or assist directly or indirectly the extension of consumer credit by its members, as ttconsumer credit" is defined in Section 226.2(p) of Regulation Z. PAR. 4. In certain of the advertisements referred to in Paragraph Three above, respondent used an advertising format in which the credit terms required by Section 226. 1O(d)(2) of Regulation Z were presented in the video portion of the advertisement. The required disclosures were displayed for an insuffcient time for the viewer to read the credit terms, thereby detracting from the clarity and conspicuousness of the required disclosures.

PAR. 5. In certain of the advertisements referred to in Paragraph Three above, the annual percentage rate was not stated as "annual percentage rate " using that term, as required by Section 226.10(d)(l) of Regulation Z.

By means of such advertisements, respondent Chicago Metropolita Pontiac Dealers' Association, Inc. violated Section 226. 1O(d)(2) of Regulation Z, which requires credit disclosures to be made clearly and conspicuously, and Section 226.1O(d)(I) of Regulation Z which requires the finance charge to be stated as "annual percentage rate, using that term. Pursuant to Section 103(s) of the Truth in Lending Act respondent' s aforesaid failures to comply with the provisions ofRegulation Z constitute violations of that Act and, pursuant to Section 108(c) thereof, respondent has violated the Federal Trade Commission Act.

DECISION AND ORDER The Federal Trade Commission having initiated an investigation of certain acts and practices of the respondent named iD the caption hereof, and the respondent having been furnished thereafter with a copy of a draft of complaint which the Chicago Regional Offce I An reference to the Truth in Lending Act and Rfogulation Z contained in this Complaint shall refer to the Trth in Lendim: Act as amended to March 23. 1976 and Regulation Z as amended to March 23, 1977. Decision and Order 101 F. proposed to present to the Commission for its consideration and which, if issued by the Commission, would charge respondent with violation ofthe Truth in Lending Act and the implementing regulations promulgated thereunder and of the Federal Trade Commission Act; and The respondent, its attorney, and counsel for the Commission having thereafter executed an agreement containing a consent order, an admission by the respondent 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 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 Acts, 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, and having duly considered the comments fied thereafter by interested persons pursuant to Section 2. of its Rules, now in further conformity with the procedure described 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 Chicago Metropolitan Pontiac Dealers' Association Inc., is a corporation organized, existing and doing business under and by virtue ofthe laws of the State of Ilinois, with its offce and principal place of business located at 208 North West Street, P.O. Box 48 Wheaton, 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 I. It is ordered That respondent Chicago Metropolitan Pontiac Dealers' Association, Inc., its successors and assigns, member dealers and respondent's offcers, agents, representatives and employees, directly or through any corporation, subsidiary, division or other device in connection with any television advertisement to promote, directly or indirectly, any extension of consumer credit, as Hadvertisement" and "consumer credit" are defined in Regulation Z (12 C. R. 226), the implementing regulation of the Truth in Lending Act, 15 D. C. 1601 ._ .. . ._ 854 Decision and Order et seq. do forthwith cease and desist from: 1. Stating the amount or percentage of any downpayment, the number of payments or period of repayment, the amount of any payment or the amount of any finance charge, unless the following terms are also stated, as required by Section 226.24 (c)(2) of Regulation Z: (a) the amount or percentage of the down payment; (b) the terms of repayment; and (c) the "annual percentage rate " using that term, and, if the rate may be increased after consummation, that fact. The terms which are required by Section 226.24(c)(2) of Regulation Z are subject to the general "clear and conspicuous" standard set forth in Section 226.17(a)(l) of Regulation Z and Section 226.24-I of the Offcial Federal Reserve Board Staff Commentary on Regulation 2. Failing to disclose the terms required by Section 226.24(c)(2) of Regulation Z in the video portion of any television advertisement subject to this order for at least five (5) seconds' duration. 3. Failing in an advertisement which states a rate of finance charge to state the rate as an Hannual percentage rate " using that term as required by Section 226.24(b) of Regulation Z. II. It is further ordered That:

1. Respondent shall distribute a copy of this order to each person having decision-making authority to determine all or part of the contents of an advertisement which is subject to this order, and to the president or chief executive offcer of each of respondent' s members and shall secure from each such person a signed statement acknowledging receipt of said order.

2. 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 ofa successor corporation, the creation or dissolution of subsidiaries or any other change in the corporation which may affect compliance obligations arising out of this order.

3. Respondent shall, within sixty (60) days after service upon it of this order, fie with the Commission a written report setting forth in detail the manner and form in which it has complied with this order. J Al references to the Truth in Lending Act and Reguation Z contained in this Order shall refer to the Truth in Lending Act as amended to March 31, 1980, and Reguation Z as amended to April 1, 1981 Complaint 101 F.