Brick Homes, Inc

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IN THE MATTER OF BRICK HOMES, INC., ET AL.

CONSENT ORDER, ETC., IN REGARD TO THE ALLEGED VIOLATION OF THE TRUTH IN LENDING AND FEDERAL TRADE COMMISSION ACTS Docket C-2482. Complaint, Dec. 14, 1973—Decision, Dec. 14, 1973 Consent order requiring a Charlotte, N.C., seller, builder, and distributor of residential houses, among other things to cease misrepresenting the quality of materials used in its houses and their degree of completion, and from violating the Truth in Lending Act by failing to disclose to consumers, in connection with the extension of consumer credit, such information as required by Regulation Z of the said Act. Further, should respondent corporation merge with another corporation or transfer all or a substantial part of its business assets, respondents shall require a written agreement from its successor, to be filed with the Commission, that it will be bound by this order. Appearances For the Commission: Robert L. Osteen, Jr.

For the respondents: pro se.

COMPLAINT Pursuant to the provisions of the Federal Trade Commission Act, and of the Truth in Lending Act and the implementing regulation promulgated thereunder, and by virtue of the authority vested in it by said Acts, the Federal Trade Commission having reason to believe that Brick Homes, Inc., a corporation, and Richard C. Fulmer, individually and as an officer of said corporation, hereinafter referred to as respondents, have 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 Brick Homes, Inc., is a corporation organized, existing and doing business under and by virtue of the laws of the State of North Carolina with its principal office and place of business located at 4901 Pineville Road, Charlotte, N.C. Respondent Richard C. Fulmer is an officer of the corporate respon- Complaint 83.F.T.C.

dent. He formulates, directs, and controls the acts and practices of the corporate respondent, including the acts and practices hereinafter set forth. His address is the same as that of the corporate respondent. PAR. 2. Respondents are now, and for some time last past, have been engaged in the advertising, offering for sale, sale, construction, and distribution of residential houses.

COUNT I Alleging violations of Section 5 of the Federal Trade Commission Act, the allegations of Paragraph One and Two hereof are incorporated by reference in Count I as if fully set forth verbatim. PAR. 3. In the course and conduct of their business, as aforesaid, respondents now cause, and for some time last past have caused, their said products, when sold, to be shipped from their place of business in the State of North Carolina to purchasers thereof located in various other States of the United States, and maintain, and at all times mentioned herein have maintained, a substantial course of trade in aforesaid products in commerce, as “commerce” is defined in the Federal Trade Commission Act.

PAR. 4, In the course and conduct of their aforesaid business, and for the purpose of inducing the purchase of their products, respondents have made certain statements and representations with respect thereto in advertisements inserted in newspapers of general circulation, and through other advertising media, of which the following are typical and illustrative, but not all inclusive:

1. Standard brick of finest quality Standard high quality brick 2. Plumbing complete 3. A fully completed Brick Home Completely finished and ready to move into PAR. 5. By and through the use of the aforesaid statements and representations and others of similar import and meaning not specifically set forth herein, respondents have represented directly and by implication that:

1. The finest quality brick available is used in houses constructed by respondents.

2. The plumbing in houses constructed or sold by respondents is complete, including the installation of a well and septic tank or connection to the public water and sewer lines.

3. The houses constructed or sold by respondents are complete and finished, needing no additional work or fixtures. PAR. 6. In truth and in fact: | 1. The brick used in the houses is “Grade B” brick, which is not the finest quality brick available.

ae BRICK HOMES, -ING., ET AL. 1118 nn os oe va Complaint a See el 2 ‘The plumbing ir in houses. constructed or sold by respondents i is not complete and does. not include installation of a well and septic tank or. : the connection to the public water and sewer lines. -. 8. The houses constructed or sold by respondents are not complete or ~ finished and need additional work and fixtures, including closet shelv- -. ing, bathroom rods, installation of well and septic tank or connection to public water and sewer lines, and installation and connection of fuel oil containers. :

PAR. 7. Respondents advertised an - offer to. construct completely ~ finished houses into which purchasers. could immediately move without disclosing that the said houses (1) are not connected to public or indi- - Ss vidual water or sewage systems; (2) are not furnished or connected to. a Be fuel oil containers; or (8) do.not contain closet rods and shelving or bathroom towel and tissue racks. Knowledge. of such facts: would indi- — _ eate the necessity of expending additional funds in order to make the Bo houses habitable. Thus, respondents have failed to disclose a material. fact, which if known to certain customers: would likely affect their — ~ consideration of whether or not to respond to said advertising in order “to obtain additional information concerning the offer and to enter. negotiations with respondents which results, in 1 many instances,, inpurchases of such houses. : .

~ PAR. 8. In the course and conduct of their business, and at all times : mentioned herein, respondents have been in substantial competition, in “commerce, with corporations, firms. and individuals in the sale and | - construction of houses of the same general kind and nature as those sold _ by respondents.

PAR. 9. The use by respondents of the aforesaid false, misleading and deceptive statements, representations and practices has had, and now. has, the capacity and tendency to mislead members of the purchasing public into the erroneous and mistaken belief that said statements and Be representations | were, and are, true and into negotiations were, resulting , ~- in the purchase of substantial quantities of respondents’ products by reason of said erroneous and mistaken belief. PAR.10. The aforesaid acts and practices of the respondents, as oe herein alleged, were, and are, all to the prejudice and injury of the. public: and the respondents’ competitiors; and constituted, and now constitute, unfair methods of competition, in commerce, and unfair and - deceptive acts and practices, in commerce, in violation of Section 5 of = the Federal Trade Commission Act. , “te “COUNT I “Alleging violations of the Truth in Lending Act and the implementing ~ regulation promulgated thereunder, and of the Federal Trade Commis-

BRICK HOMES, INC., ET AL. a AUB 8 cae Ree ae wae Decision. and Order - (i) The cash price; glee Pa .

(i) The amount. of the downpayment. ¢ or - that no 0 downpayment is a required, as applicable; de.

_ Gi) The number, amount. and due dates or. period. of payments ee : scheduled to repay. the indebtedness. if the credit is extended; _ (iv) The amount of the finance charge expressed. as an “annual per- Lo : centage rate.” Ze PAR. 15. Pursuant to Section: 103(q) of the Truth in Lending Act, : oor respondents’ aforesaid failure to comply with the provisions of Regula-. - - tion Z, constitute violations of that Act and pursuant to 108 thereof, P respondents have thereby violated: the Federal Trade Commission Act. See pphasee DECISION AND ORDER “The Federal Trade Commission having initiated an investigation of “certain acts and practices of the respondents named in the caption 7 7 hereof, and the respondents having been furnished thereafter with a a copy of a draft of complaint which the Atlanta Regional Office proposed to ‘present to the Commission for its consideration and which, if issued: ee by the Commission, would charge respondents with violation’ of the. 2 7 _. Federal Trade Commission Act, and of the Truth in. Lending Act and » as the implementing regulation promulgated thereunder; and | The. respondents. and counsel for the Commission having thereafter - . executed an agreement containing a consent order, an admission by the an respondents 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 respondents that the law has been violated as alleged i in such complaint, “and waivers and other provisions as: ‘required by the Commission’ s rules; whe and :

The Commission having thereafter considered the matter and having oa determined that it had reason to believe’ that. the respondents have». violated the said Act, and that complaint should issue stating its charges e. in. that respect, and having thereupon accepted the executed consent: agreement. and placed such agreement on the public record for a period: of thirty (30) days, now in further conformity with the procedure pre- _ scribed in Section 2.34(b) of its rules, the Commission hereby issues its -.-complaint, makes the following jurisdictional findings, and enters the a following order:

OL Respondent Brick Homes, Ine. ,isa ‘corporation organized: ‘existe: ~» Ing and doing business under and by virtue of the laws of the State of - North Carolina, with its office and principal place of business located at -- 4901 Pineville Road, Charlotte, N. C.

Respondent Richard C. Fulmer i is an officer of said corporation. He ae. | FEDERAL TRADE COMMISSION DECISIONS ee Be Decision and Order. Sa ESE mn “83. PTC. formulates, directs and controls the policies, acts arid practices of said” corporation, | and his principal office and place of business i is located at™ the above stated address. mS 2. The Federal Trade Commission: has jutisdiction of the subject: ane matter of this proceeding and of the respondents, and the proceeding i is in the Public interest. ;

- ORDER.

Iti is s ordered, That respondents Brick Homes, Ine., a corporation, its a ~ successors and assigns, and its officers, and Richard C. Fulmer, indi- -vidually and as. an officer of said corporation, respondents’ agents, — representatives, and. employees, directly or through any. corporation, - subsidiary, division or other device, in connection with the advertising, offering for sale, sale, distribution, or construction, directly or through. SAEs - others,. of residential houses or any other. products, in commerce, as ae S - “commerce” is defined in the Federal Trade Commission Act, do forthwith cease and desist from:

1. Representing, orally, visually, in writing or in any, other ee manner, directly or by implication, that houses or other products sold or constructed by respondents are constructed of the finest - quality materials unless such is the case; or misrepresenting, i in any manner, the quality of materials used in the construction of houses — ~ or other products sold or constructed by the respondents. 2. Representing, orally, visually, in writing or in any other manner, directly or by implication, that the plumbing in houses sold or constructed by respondents is complete; or misrepresenting, in any manner, the degree to which any aspect of the houses or other products sold or constructed by respondents is complete. 3. Representing, orally, visually, in writing or in any other manner, directly or by implication, that houses or other products sold or constructed by respondents are complete; or misrepresenting, in any manner the degree to which the houses or other products sold or constructed by the respondents are complete. 4, Failing to disclose, clearly, conspicuously and in such a manner as will accurately reflect the facts in connection with any . = advertisement, direct mail piece or other promotional material that houses sold or constructed by respondents: (1) are not connected to either public or individual water or sewer systems; (2) are not» furnished or connected to fuel oil tanks or containers; and (3) do not. contain closet rods and shelving or bathroom towel and tissue — racks.

Maven 2] 1111 Decision and Order It is further ordered, That the respondents, incident to selling or contracting for construction of houses or other products, cease and desist from:

1. Contracting for any sale which shall become binding on the buyer prior to midnight of the third day, excluding Sundays and legal holidays, after the date of signing the contract. 2. Failing to orally disclose prior to the time of sale, and in writing conspicuously and clearly on any conditional sales contract, promissory note or other instrument executed by the buyer that the buyer may rescind or cancel the sale by written notice of cancellation to respondents’ address prior to midnight of the third day, excluding Sundays and legal holidays, after the date of the sale. Upon such cancellation the burden shall be on respondents to collect any goods left in the buyer’s home and to return any payments received from him. Nothing contained in this right-tocancel provision shall relieve buyers of the responsibility for taking reasonable care of the goods prior to, and for a reasonable period following, cancellation.

3. Failing to provide a separate and clearly understandable form which the buyer may use as a notice of cancellation. 4. Negotiating any conditional sales contract, promissory note, or other instrument of indebtedness to a finance company or other third party prior to midnight of the fifth day, excluding Sundays and legal holidays, after the date of execution by the buyer.

Provided, however, That nothing contained in this paragraph of this order shall relieve respondents of any contractual obligations required by federal law or that law of the state in which the contract is negotiated. When such obligations are inconsistent, respondents may apply to the Commission for relief from this provision with respect to contracts executed in the state in which such different obligations are required. It is further ordered, That respondents Brick Homes, Inc., a corporation, its successors and assigns, and its officers, and Richard C. Fulmer, individually and as an officer of said corporation, and respondents’ agents, representatives, and employees, directly or through any corporation, subsidiary, division or other device, in connection with any extension of consumer credit or any advertisement to aid, promote or assist directly or indirectly any extension of consumer credit, as “consumer credit” and “advertisement” are defined in Regulation Z (12 C.F.R. § 226) of the Truth in Lending Act (Pub. L. 90-321, 15 U.S.C. 1601 et seq.), do forthwith cease and desist from: 1. Failing to furnish customers with all consumer credit cost Decision and Order 83 F.T.C.

disclosures prior to the consummation of the sale, as required by Section 226.8(a) of Regulation Z.

2. Failing to disclose the annual percentage rate accurately to the nearest quarter of one percent, in accordance with Section 226.5 of Regulation Z, as required by Section 226.8(b)(2) of Regulation Z.

3. Failing to describe the type of any security interest in property held, or to be retained or acquired in connection with any extension of credit, as required by Section 226.8(b)(5) of Regulation Z.

4, Failing to keep records evidencing compliance with the consumer credit cost disclosure requirements of Regulation Z for two years, as required by Section 226.6(i) of Regulation Z. 5. Stating the amount of the downpayment or the amount of the monthly payments which could be arranged in connection with a consumer credit transaction, without also stating all of the following items, in terminology prescribed under Section 226.8 of Regulation Z, as required by Section 226.10(d)(2) thereof: (i) The cash price;

(ii) The amount of the downpayment or that no downpayment is required, as applicable;

(ii) The number, amount and due dates or period of payments scheduled to repay the indebtedness if the credit is extended; and (iv) The amountof the finance charge expressed as an “annual percentage rate.”

6. Failing, in any consumer credit transaction or advertisement, to make all disclosures, determined in accordance with Sections 226.4 and 226.5 of Regulation Z, in the manner, form, and amount required by Sections 226.6, 226.8, 226.9, and 226.10 of Regulation Z.

It is further ordered, That respondents shall forthwith distribute a copy of this order to each of their operating divisions. It is further ordered, That respondents deliver a copy of this order to cease and desist to all present and future personnel of respondents engaged in the consummation of any extension of consumer credit or in any aspect of the preparation, creation, or placing of advertising, and that respondents secure a signed statement acknowledging receipt of said order from each such person.

It is further ordered, That respondents notify the Commission at least thirty (30) days prior to any proposed change in the corporate respondent such as dissolution, assignment or sale resulting in the emergence of a successor corporation, the creation or dissolution of subsidiaries or GULF SOUTH CORP., ET AL. 1119 1119 Complaint any other change in the corporation which may affect compliance obligations arising out of the order.

It is further ordered, That in the event the corporate respondent merges with another corporation or transfers all or a substantial part of its business or assets to any other corporation or to any other person, respondents shall require said successor or transferee to file promptly with the Commission a written agreement to be bound by the terms of this order; Provided, That if respondents wish to present to the Commission any reasons why said order should not apply in its present form to said successor or transferee, they shall submit to the Commission a written statement setting forth said reasons prior to the consummation of said succession or transfer.

It is further ordered, That the individual respondent named herein promptly notify the Commission of the discontinuance of his present business or employment and of his affiliation with a new business or employment. Such notice shall include respondent’s current business or employment in which he is engaged as well as a description of his duties and responsibilities.

It is further ordered, That the respondents herein shall within sixty (60) days after service upon them of this order, file with the Commission a report, in writing, setting forth in detail the manner and form in which they have complied with this order.