Excell Mortgage Corporation

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BILLING CODE 6750-01-M [File No. 892 3224] Excell Mortgage Corporation; Proposed Consent Agreement With Analysis to Aid Public Comment AGENCY: Federal Trade Commission. ACTION: Proposed consent agreement. SUMMARY: In settlement of alleged violations of federal law prohibiting unfair and deceptive acts and practices and unfair methods of competition, this consent agreement, accepted subject to 1 Copies of the Complaints and the Decision and Orders are available from the Commission’s Public Reference Branch, H-130,6th Street & Pennsylvania Avenue, NW, Washington, DC 20580. final Commission approval, would require, among other things, an Englewood Cliffs, New Jersey, corporation to accurately calculate and disclose the annual percentage rate, finance charge, payment schedule and other information required by Regulation Z. The order would also require respondent to make adjustments to the accounts of consumers extended an adjustable rate mortgage on or after January 1,1987, and before January 1, 1990, and who had an open loan as of April 1,1991, to whom it disclosed annual percentage rates (APRs) that were understated by more than V* of one percentage point below the APR determined in accordance with Regulation Z.

DATES: Comments must be received on or before November 26,1991. ADDRESSES: Comments should be directed to: FTC/Office of the Secretary, room 159,6th St. and Pa. Ave., NW., Washington, DC. 20580.

FOR FURTHER INFORMATION CONTACT: Carole Reynolds or Rolando Berrelez, FTC/S-4429, Washington, DC 20580 (202) 326-3230 or 326-3222. SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal Trade Commission Act, 38 Stat. 721,15 U.S.C. 46 and § 2.34 of the Commission’s Rules of Practice (16 CFR 2.34), notice is hereby given that the following consent agreement containing a consent order to cease and desist, having been filed with and accepted, subject to final approval, by the Commission, has been placed on the public record for a period of sixty (60) days. Public comment is invited. Such comments or views will be considered by the Commission and will be available for inspection and copying at its principal office in accordance with § 4.9(b)(6)(ii) of the Commission’s Rules of Practice (16 CFR 4.9(b) (6) (ii)). Agreement Containing Consent Order to Cease and Desist The agreement herein, by and between Excell Mortgage Corporation (hereinafter sometimes referred to as “proposed respondent” or “respondent”) by its duly authorized officer and counsel for the Federal Trade Commission, is entered into in accordance with the Commission’ Rule governing consent order procedures. In accordance therewith the parties hereby agree that:

1.

Excell Mortgage Corporation is a corporation organized, existing, and doing business under and by virtue of the laws of the state of New Jersey, with its principal office and place of business located at 550 Sylvan Avenue, Englewood Cliffs, New Jersey 07532. Proposed respondent admits all the jurisdictional facts set forth in the draft complaint here attached. 2. Proposed respondent waives: a. Any further procedural steps; b. The requirement that the Commission's decision contain a statement of findings of fact and conclusions of law;

c. All rights to seek judicial review or otherwise to challenge or contest the validity of the order entered pursuant to this agreement; and d. All claims under the Equal Access to Justice Act.

3. This agreement shall not become part of the public record of the proceeding unless and until it is accepted by the Commission. If this agreement is accepted by the Commission, it, together with the draft of the complaint contemplated thereby, will be placed on the public record for a period of sixty (60) days and information in respect thereto publicly released. The Commission thereafter may either withdraw its acceptance of this agreement and so notify the proposed respondent, in which event it will take such action as it may consider appropriate, or issue and serve its complaint (in such form as the circumstances may require) and decision, in disposition of the proceeding.

4. This agreement is for settlement purposes only and does not constitute an admission by proposed respondent that the law has been violated as alleged in the draft of the complaint here attached.

5. This agreement contemplates that, if it is accepted by the Commission, and if such acceptance is not subsequently withdrawn by the Commission pursuant to the provisions of § 2.34 of the Commission’s Rules, the Commission may, without further notice to the proposed respondent, (a) issue its complaint corresponding in form and substance with the draft of the complaint here attached and its decision containing the following order to cease and desist in disposition of the proceeding and (b) make information public in respect thereto. When so entered, the order to cease and desist shall have the same force and effect and may be altered, modified, or set aside in the same manner and within the same time provided by statute for other orders. The order shall become final upon service. Delivery by the U.S. Postal Service of the complaint and decision containing the agreed-to order to proposed respondent’s address as stated in this agreement shall constitute service. Proposed respondent waives

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49186 Federal Register / Vol. 56, No. 188 / Friday, September 27, 1991 / Notices any right it may have to any other manner of service. The complaint may be used in construing the terms of the order, and no agreement, understanding, representation, or interpretation not contained in the order or the agreement may be used to vary or contradict the terms of the order.

6.

Proposed respondent has read the proposed complaint and order contemplated hereby. Proposed respondent understands that once the order has been issued, it will be required to hie one or more compliance reports showing that it has fully complied with the order. Proposed respondent further understands that it may be liable for civil penalties in the amount provided by law for each violation of the order after it becomes final.

Order Definitions For purposes of this Order, the following definitions apply: 1. Composite APR means a blend of interest rates as described in § 220.17(c)(l)-lO of the Federal Reserve Board’s Official Staff Commentary to Regulation Z;

2. First adjustment date is the date on which the consumer’s monthly payment of principal and interest is first changed, in accordance with the terms set forth in the consumer’s note or adjustable rate rider;

3. Original TIL disclosure is the last TIL disclosure given to a consumer by respondent before consummation of the loan;

4. Open loan is any loan that has not been paid off or refinanced. I It is ordered, that respondent Excell Mortgage Corporation, a corporation, its successors and assigns, and its officers, agents, representatives, and employees, directly or through any corporation, subsidiary, division, or any other device, in connection with any extension of consumer credit in or affecting commerce, as “commerce” is defined in the Federal Trade Commission Act, do forthwith cease and desist from: A.

Failing to disclose accurately in its discounted adjustable rate mortgages the finance charge and the annual percentage rate by failing to disclose accurately the composite annual percentage rate, as required by sections 106,107 and 128 of the Truth in Lending Act, 15 U.S.C. 1605,1606 and 1638, and §§ 226.4, 226.22 and 226.18(d) and (e) of regulation Z, 12 CFR 226.4, 226.22 and 226.18(d) and (e), and § 326.17(c)(1) of Regulation Z, 12 CFR 226.17(c)(1), as more fully set out in §§ 220.17(c)(l)-8 and 226.17{c)(l)-10 of the Federal Reserve Board’s Official Staff Commentary to Regulation Z, 12 CFR 226.17(c)(1)-« and 226.17(c)(l)-10. B. Failing to disclose accurately the number, amount, and timing of payments scheduled to repay the obligation, as required by section 128 of the Truth in Lending Act 15 U.S.C. 1638, and § 226.18(g) of Regulation Z, 12 CFR 226.18(g).

C. Failing to make all disclosures determined in accordance with sections 106 and 107 of the Truth in Lending Act, 15 U.S.C. 1605 and 1606, and §§ 226.4 and 226.22,12 CFR 228.4 and 226.22, and in the manner, form and amount required by §§ 226.17,226.18,226.19, 226.20 of Regulation Z, 12 CFR 226.17, 226.18, 226.19 and 226.20. II It is further ordered, that A. Respondent, its successors and assigns shall make adjustments to the accounts of each consumer who was extended an adjustable rate mortgage loan on or after January 1,1987 and before January 1,1990 and who had an open loan as of April 1,1991, to whom respondent disclosed on the original TIL disclosure an annual percentage rate that was miscalculated by more than V# of 1 percentage point below the annual percentage rate determined in accordance with § 226.22 of Regulation Z, 12 CFR 226.22, so that each such consumer will not be required to pay a finance charge in excess of the finance charge actually disclosed or the dollar equivalent of the annual percentage rate actually disclosed, whichever is lower, plus a tolerance of the dollar equivalent of Vi of 1 percentage point; except, the adjustment shall be limited to the time period up to the first adjustment date. B. Respondent, its successors and assigns shall have a three-year period in which to complete the adjustments described in paragraph A above; except, where the amount of the adjustment is $200 or less, the adjustment shall be completed by the end of the first year. Each consumer shall receive payment from respondent, its successors and assigns for at least one third of the applicable adjustment for that consumer no later than the last day of each calendar year beginning with the current year.

III It is further ordered, that all adjustments required by this order shall be made by mailing the consumer a check by first class mail to the current or last known address of each such consumer. For each consumer for whom a check is returned as undelivered, respondent, its successors and assigns shall make all reasonable efforts to obtain the current address of each such consumer, including contacting all subsequent holders and servicers of the loans that are not currently held or serviced by respondent For each consumer for whom a new address is located, respondent, its successors and assigns shall re-mail the check by first class mail to the consumer at the new address.

IV It is further ordered, that respondent, its successors and assigns shall include with each check mailed pursuant to this order the letter contained in appendix A. Respondent, its successors and assigns shall mail the check and letter in an envelope approved by the Federal Trade Commission Division of Credit Practices.

V It is further ordered, That for four years after the date of service of this order respondent, its successors and assigns shall maintain and upon request make available all records that will demonstrate compliance with the requirements of this order. VI It is further ordered, That respondent, its successors and assigns shall distribute a copy of this order to any present or future officers, agents, representatives, and employees having responsibility with respect to the subject matter of this order and that respondent, its successors and assigns shall secure from each such person a signed statement acknowledging receipt of said order.

VII It is further ordered, That respondent, its successors and assigns shall promptly notify the Commission at least thirty (30) days prior to any proposed change in the corporate entity 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 afreet compliance obligations arising out of the order.

VIII It is further ordered, That respondent, its successors and assigns shall, within ninety days (90) days of the date of service 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.

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Federal Register / Vol. 56, No. 188 / Friday, September 27, 1991 / Notices 49187 Within thirty (30) days of the end of each year for three years, starting with the current year, respondent, its successors and assigns shall forward a copy of all checks mailed to consumers in that year to the Federal Trade Commission, Enforcement Division, Washington, DC 20580.

Appendix A Dear [Consumer]: Excell Mortgage Corporation made an error in determing the finance charge on your mortgage loan. For this reason, the Federal Trade Commission in Washington, DC ordered us to send this letter.

Because of this error, we are refunding to you$— ---------- - If you have any questions about this letter, you may contact the Federal Trade Commission at (202) 326-_____ . Sincerely, Morton Covitz, President, Excell Mortgage Corporation. Analysis of Proposed Consent Order to Aid Public Comment The Federal Trade Commission has accepted an agreement to a proposed consent order from respondent Excell Mortgage Corporation.

The proposed consent order has been placed on the public record for sixty (60) days for reception of comments by interested persons. Comments received during this period will become part of the public record. After sixty (60) days, the Commission will again review the agreement and the comments received and will decide whether it should withdraw from the agreement or make final the agreement’s proposed order. The complaint alleges that respondent has failed to disclose accurately a composite annual percentage rate and has under­ disclosed the annual percentage rate finance charge in its discounted adjustable rate mortgages, in violation of § § 226.4, 226.22 and 226.18(d) and (e) of Regulation Z, and § 226.17(c)(1) of Regulation Z, as more fully set out in §§ 226.17(c)(1) -8 and 226.17(c)(1) - 10 of the Federal Reserve Board’s Official Staff Commentary to Regulation Z. The proposed order requires respondent to accurately calculate and disclose the annual percentage rate, finance charge, payment schedule and other information required by Regulation Z, in connection with respondent’s extensions of consumer credit. The proposed order also requires respondent, in accordance with Section 108(e) of the Truth in Lending Act, 15 U.S.C. 1607, to make adjustments to the account of each consumer who was extended an adjustable rate loan on or after January 1, 1987, and before January 1,1990, and who had an open loan as of April 1,1991, to whom respondent disclosed on the original TIL disclosure an annual percentage rate that was miscalculated by more than V* of 1 percentage point below the annual percentage rate determined in accordance with | 226.22 of Regulation Z. Those adjustments relating to respondent's failure to use a composite annual percentage rate are limited to the time period up to the first date at which the interest rate is adjusted on the loan.

Respondent has three years to complete the adjustments, except that where the adjustment is $200 or less, respondent must provide it by the end of the first year. For adjustments greater than $200, respondent is required to provide at least one third of the amount each year to consumers, starting with the current year. The adjustments must be made by providing a check to applicable consumers.

The purpose of this analysis is to facilitate public comment on the proposed order. It is not intended to constitute an official interpretation of the agreement and proposed order or to modify in any way their terms. Donald S. Clark, Secretary.

[FR Doc. 91-23349 Filed 9-26-91; 8:45 am]