Beauty-Style Modernizers, Inc

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IN THE MATTER OF BEAUTY-STYLE MODERNIZERS, INC., ET AL.

ORDER, OPINION, ETC., IN REGARD TO ALLEGED VIOLATIONS OF THE TRUTH IN LENDING AND FEDERAL TRADE COMMISSION ACTS Docket 8898. Complaint, Sept. 18, 1972 — Decision, June 11, 1974 Order requiring a Newark, N.J., seller of home improvement materials, supplies and installation services, among other things to cease 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. Appearances For the Commission: James Manos. | For the respondents: Martin Gelber, Newark, N.J. COMPLAINT Pursuant to the provisions of the Truth in Lending Act and the implementing regulation promulgated thereunder, and the Federal Trade Commission Act, and by virtue of the authority vested in it by said Acts, the Federal Trade Commission, having reason to believe that Beauty-Style Modernizers, Inc., a corporation, and Morris Jakel and Saul Jakel, individually and as officers of said corporation, hereinafter referred to as respondents, have violated the provisions of said Acts and regulations, 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 Beauty-Style Modernizers, Inc., 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 482 Central Avenue, Newark, N.J. Respondents Morris Jakel and Saul Jakel are the president and general manager respectively, of said corporation. They formulate, direct and control the consumer credit policies, acts and practices of the corporate respondent, including the acts and practices hereinafter set forth. Their 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 sale of home improvement materials, supplies and installation services to the public.

PAR. 3. In the ordinary course and conduct of their business as aforesaid, respondents regularly arrange for the extension of consumer credit, as “consumer credit” and “arrange for the extension of consumer Complaint 83 F.T.C.

credit” are defined in Regulation Z. the implementing regulation of the Truth in Lending Act, duly promulgated by the Board of Governors of the Federal Reserve System.

PAR. 4. Subsequent to July 1, 1969, in the ordinary course of their business as aforesaid, and in connection with their credit sales, as “credit sale” is defined in Regulation Z, respondents have caused and are causing their customers to enter into contracts for the sale of respondents’ goods and services. On these contracts, hereinafter referred to as “the contract,” respondents provide certain consumer credit cost information. Respondents provide these customers with no evidence of or information concerning the credit transaction, other than on the contract and the right of rescission form. PAR. 5. By and through the use of the contract set forth in Paragraph Four respondents have:

1. Failed to obtain new contract forms or to alter their existing stock of contract forms prior to, during and subsequent to the period beginning July 1, 1969 and ending December 81, 1969, as required by Section 226.6 (k) of Regulation Z.

2. Failed to use the term “cash downpayment” to disclose and describe the amount of the downpayment in money made in connection with the credit sale, as required by Section 226.8 (c) (2) of Regulation Z. 3. Failed to use the term “unpaid balance of cash price” to disclose and describe the difference between the cash price and the cash downpayment, trade-in or total downpayment, as required by Section 226.8 (c) (8) of Regulation Z.

4, Failed to use the term “amount financed” to disclose and describe the amount of credit which the customer had the actual use of, as required by Section 226.8 (c) (7) of Regulation Z. 5. Failed to use the term “total of payments” to disclose and describe the sum of the payments scheduled to repay the indebtedness, as required by Section 226.8 (b) (8) of Regulation Z. PAR. 6. In the ordinary course of their business as aforesaid, and subsequent to July 1, 1969, respondents caused newspaper advertisements to be published as “advertisement” is defined in Regulation Z. These advertisements aided, promoted or assisted directly or indirectly in extensions of consumer credit in connection with the sale of respondents’ goods and services. By and through the use of the advertisements, respondents:

Stated that “Ist Payment in 6 months—Call or Write Now!” and “NO DOWN PAYMENT—3 YEARS TO PAY”; thereby implying and stating that no downpayment was required in connection with consumer credit transactions, without also stating all of the following items in BEAUTY-STYLE MODERNIZERS, INC., ET AL. 1763 1761 Initial Decision terminology prescribed under Section 226.8 of Regulation Z, as required by Section 226.10 (d) (2) thereof: (i) The cash price;

(Gi) The number, amount, and due dates or period of payments scheduled to repay the indebtedness if the credit is extended; (iii) The amount of the finance charge expressed as an annual percentage rate; and (iv) The deferred payment price.

PAR.7. Pursuant to Section 103 (q) of the Truth in Lending Act, respondents’ aforesaid failures to comply with the provisions of Regulation Z constitute violations of that Act and pursuant to Section 108 thereof, respondents have thereby violated the Federal Trade Commission Act.

INITIAL DECISION BY HARRY R. HINKES, ADMINISTRATIVE LAW JUDGE AUGUST 31, 1973 PRELIMINARY STATEMENT The Federal Trade Commission issued its complaint in this proceeding on Sept. 18, 1972, charging the respondents with failure to comply with the provisions of Regulation Z, the implementing regulation of the Truth in Lending Act, duly promulgated by the Board of Governors of the Federal Reserve System and, pursuant to Section 108 of said Act, with having violated the Federal Trade Commission Act. By answer duly filed respondents admitted only that they are and were engaged in the sale of home improvement materials, supplies and installation services to the public. Otherwise, respondents’ answer either denied, or neither admitted nor denied, all of the other allegations of the complaint. Respondents also interposed “substantial compliance” as a special defense. By order dated January 17, 1973, the undersigned ruled that Paragraphs I and III of the complaint be deemed admitted because of the respondents’ failure to conform to the requirements of Section 3.12(b)(1)(ii) of the Rules of Practice of the Commission by neither admitting nor denying the allegations contained in those paragraphs. In addition, respondents’ special defense of “substantial compliance” with the requirements of Regulation Z of the Truth in Lending Act was stricken as insufficient at law or as failing to state a legal defense. On April 5, 1973, counsel to the parties in this proceeding executed an “Agreed Upon Statement of Relevant Facts and Documentary Evidence.” This was supplemented by another statement executed by counsel to the parties on April 10, 1973. At around the same time Initial Decision 83 F.T.C.

counsel to the parties also executed a stipulation specifying the contested issues of fact and law in this proceeding: 1. Whether respondents failed to obtain new contract forms prior to, during or subsequent to the period beginning July 1, 1969 and terminating December 31, 1969, which were in compliance with the requirements of Regulation Z.

2. Whether the retail installment contract forms as altered for the period July 1, 1969 to December 31, 1969, complied with the requirements of Regulation Z.

3. Whether respondents authorized, approved or ratified, expressly or impliedly, the publication of the various advertisements identified as Commission Exhibits 9(a), 9(b), and 9(c).

Evidentiary hearings were held at the New York Regional Office of the Federal Trade Commission on June 5, 6, and 7, 1973. Briefs have been submitted by the parties and have been given careful considera- ' tion. Any motions not heretofore or herein specifically ruled upon, either directly or by the necessary effect of the conclusions in this initial decision are hereby denied. To the extent the proposed findings, conclusions and briefs submitted by the parties have not been adopted by this decision in the form proposed or in substance, they are rejected as not supported by the evidence or immaterial.

References to the record are made in parentheses using the following abbreviations:

CX—Commission’s Exhibit RX—Respondents’ Exhibit RAC—Respondents’ Answer to Complaint Stip—Agreed upon statement of fact and evidence Tr.—Transcript of testimony Having reviewed the record in this proceeding with care and having considered the demeanor of the witnesses as they testified, together with the proposed findings, conclusions and briefs submitted by the parties, I make the following:

FINDINGS OF FACT 1. Respondent Beauty-Style Modernizers, Inc., is a corporation organized, existing and doing business under and by virtue of the laws of the State of New York, with its principal office and place of business located at 432 Central Avenue, Newark, N.J. (Order of Jan. 17, 1973 and Stip. 1).

2. Respondent Morris Jakel is an individual who is president of the corporate respondent. He formulates, directs and controls the consumer credit policies, acts and practices of the corporate respondent, including BEAUTY-STYLE MODERNIZERS, INC., ET AL. 1765 1761 Initial Decision the acts and practices of the corporate respondent (Order of Jan. 17, 1978).

3. Respondent Saul Jakel is an individual and the general manager of the corporate respondent. He formulates, directs and controls the consumer credit policies, acts and practices of the corporate respondent, including the acts and practices set forth in the complaint. His address is the same as that of the corporate respondent (Order of Jan. 17, 1973 and Stip. 2).

4. Respondents are now, and for sometime last past have been, engaged in the sale of home improvement materials, supplies and installation services to the public (Stip. 8; RAC). 5. In the ordinary course and conduct of their business as aforesaid, respondents regularly arrange for the extension of consumer credit, as “consumer credit” and “arrange for the extension of consumer credit” are defined in Regulation Z, the implementing regulation of the Truth in Lending5 1 2 4 5 2 762 1071 76 39 96.137733 Act,5 1 2 4 5 3 867 1070 79 40 96.004135 duly5 1 2 4 5 4 970 1068 233 42 96.253693 promulgated5 1 2 4 5 5 1229 1068 45 40 96.835777 by5 1 2 4 5 6 1298 1068 57 32 96.495323 thes 1 2 4 5 7 1382 1067 109 32 96.190948 Boards 1 2 4 5 8 1517 1067 36 31 96.830887 of5 1 2 4 5 9 1574 1066 190 32 95.848198 Governors5 1 2 4 5 10 1790 1064 36 32 95.848198 of5 1 2 4 5 11 1846 1064 59 31 96.351700 thea 1 2 4 6 0 586 1115 1084 44 -1 5 1 2 4 6 1 586 1120 142 31 96.624962 Federal5 1 2 4 6 2 745 1120 151 32 96.562775 Reserves 1 2 4 6 3 913 1119 137 40 92.644279 Systems 1 2 4 6 4 1066 1118 97 40 92.040916 (Stip.5 1 2 4 6 5 1183 1118 29 39 96.726669 4;5 1 2 4 6 6 1231 1118 109 31 96.866440 Orders 1 2 4 6 7 1354 1117 37 32 96.275177 of5 1 2 4 6 8 1402 1117 73 32 96.275177 Jan.5 1 2 4 6 9 1498 1118 48 37 96.379219 17,5 1 2 4 6 10 1567 1115 103 37 87.410988 1978).3 1 2 5 0 0 583 1164 1325 245 -1 4 1 2 5 1 0 627 1164 1278 45 -1 5 1 2 5 1 1 627 1170 27 31 95.962090 6.5 1 2 5 1 2 683 1169 215 40 96.712212 Subsequent5 1 2 5 1 3 908 1172 36 28 96.381874 to5 1 2 5 1 4 954 1169 79 39 96.301613 July5 1 2 5 1 5 1048 1170 27 36 96.996147 1,5 1 2 5 1 6 1092 1169 89 37 96.867577 1969,5 1 2 5 1 7 1194 1167 34 32 96.918083 in5 1 2 5 1 8 1240 1167 58 32 96.827904 thes 1 2 5 1 9 1310 1167 156 39 96.674667 ordinary5 1 2 5 1 10 1477 1175 119 22 96.953789 courses 1 2 5 1 11 1608 1165 35 32 96.711601 of5 1 2 5 1 12 1651 1164 89 32 96.651375 theirs 1 2 5 1 13 1750 1164 155 31 96.646744 business4 1 2 5 2 0 583 1213 1321 44 -1 5 1 2 5 2 1 583 1229 37 22 96.206772 as5 1 2 5 2 2 634 1219 178 38 96.273003 aforesaid,5 1 2 5 2 3 826 1219 66 32 96.367935 ands 1 2 5 2 4 905 1219 34 31 96.563599 in5 1 2 5 2 5 952 1218 193 33 96.155617 connections 1 2 5 2 6 1158 1217 81 31 96.637184 with5 1 2 5 2 7 1251 1217 91 31 95.469612 theirs 1 2 5 2 8 1353 1216 106 32 96.204834 credits 1 2 5 2 9 1471 1216 87 32 96.904465 sales5 1 2 5 2 10 1572 1225 35 22 97.011963 as5 1 2 5 2 11 1621 1214 125 31 94.974129 “credits 1 2 5 2 12 1759 1214 106 31 91.434105 sales”5 1 2 5 2 13 1876 1213 28 32 96.866440 is4 1 2 5 3 0 584 1263 1324 46 -1 5 1 2 5 3 1 584 1269 135 32 96.246529 defined5 1 2 5 3 2 732 1269 33 31 96.246529 in5 1 2 5 3 3 780 1269 201 40 93.282562 Regulations 1 2 5 3 4 994 1269 37 38 91.453163 Z,5 1 2 5 3 5 1046 1268 224 40 96.780571 respondents5 1 2 5 3 6 1283 1268 87 31 96.850143 have5 1 2 5 3 7 1384 1266 121 32 96.490700 caused5 1 2 5 3 8 1519 1265 64 32 96.718231 ands 1 2 5 3 9 1597 1274 58 22 96.277260 ares 1 2 5 3 10 1669 1264 137 39 96.869629 causing5 1 2 5 3 11 1817 1263 91 32 96.732231 their4 1 2 5 4 0 585 1313 1321 43 -1 5 1 2 5 4 1 585 1322 186 29 96.582390 customers5 1 2 5 4 2 785 1322 36 28 96.963196 to5 1 2 5 4 3 835 1322 99 28 96.610840 enters 1 2 5 4 4 945 1319 70 31 96.415199 into5 1 2 5 4 5 1030 1320 166 30 96.339737 contracts5 1 2 5 4 6 1211 1318 53 32 96.920998 for5 1 2 5 4 7 1276 1317 58 32 96.966850 thes 1 2 5 4 8 1348 1317 69 32 96.956177 sales 1 2 5 4 9 1432 1317 34 31 97.007820 of5 1 2 5 4 10 1476 1315 233 41 96.072365 respondents’5 1 2 5 4 11 1723 1313 103 41 96.086815 goods5 1 2 5 4 12 1842 1313 64 31 96.792320 anda 1 2 5 5 0 584 1368 600 41 -1 5 1 2 5 5 1 584 1369 147 32 93.281250 services5 1 2 5 5 2 749 1369 98 40 92.143806 (Stip.5 1 2 5 5 3 867 1371 28 36 96.806847 5;5 1 2 5 5 4 915 1369 59 32 91.519623 CX5 1 2 5 5 5 991 1368 193 36 43.034992 6(a)—6(iii)).3 1 2 6 0 0 583 1412 1324 142 -1 4 1 2 6 1 0 627 1412 1280 43 -1 5 1 2 6 1 1 627 1418 124 31 89.274391 7..Thes 1 2 6 1 2 772 1420 168 29 96.330803 contracts5 1 2 6 1 3 962 1416 175 33 96.298286 described5 1 2 6 1 4 1158 1416 32 31 96.397247 in5 1 2 6 1 5 1212 1416 145 39 96.738861 Findings 1 2 6 1 6 1375 1416 19 30 96.413689 65 1 2 6 1 7 1414 1415 106 31 96.367577 above5 1 2 6 1 8 1541 1424 90 21 96.910385 were5 1 2 6 1 9 1653 1412 116 40 96.459854 signed5 1 2 6 1 10 1789 1412 46 40 93.297829 by5 1 2 6 1 11 1855 1422 52 21 93.211754 re-4 1 2 6 2 0 585 1461 1322 47 -1 5 1 2 6 2 1 585 1469 196 39 92.518570 spondents,5 1 2 6 2 2 801 1468 89 31 96.347015 theirs 1 2 6 2 3 908 1468 203 39 96.347015 employees,5 1 2 6 2 4 1131 1470 119 36 96.680611 agents5 1 2 6 2 5 1269 1476 38 21 97.015854 or5 1 2 6 2 6 1324 1465 193 32 96.651115 authorized5 1 2 6 2 7 1534 1462 288 41 96.568939 representatives5 1 2 6 2 8 1841 1461 66 32 96.683258 anda 1 2 6 3 0 583 1512 1308 42 -1 5 1 2 6 3 1 583 1518 59 31 96.787392 thes 1 2 6 3 2 654 1520 186 29 93.362984 customers5 1 2 6 3 3 853 1517 174 31 96.830246 identified5 1 2 6 3 4 1038 1516 141 32 95.719597 thereon5 1 2 6 3 5 1191 1515 73 37 93.272858 (CX5 1 2 6 3 6 1276 1515 181 39 53.419437 6(a)-6(iii);5 1 2 6 3 7 1471 1514 84 40 89.193047 Stip.5 1 2 6 3 8 1573 1515 46 37 95.001839 18;5 1 2 6 3 9 1634 1512 57 33 93.221375 CX5 1 2 6 3 10 1706 1512 97 39 92.220032 11(a),5 1 2 6 3 11 1818 1512 73 36 89.818558 (b)).3 1 2 7 0 0 583 1561 1327 342 -1 4 1 2 7 1 0 625 1561 1279 44 -1 5 1 2 7 1 1 625 1567 28 30 95.959831 8.5 1 2 7 1 2 682 1566 96 31 96.862167 Prior5 1 2 7 1 3 796 1569 46 36 96.200493 to,5 1 2 7 1 4 865 1566 122 39 96.618134 during5 1 2 7 1 5 1006 1566 58 30 96.977425 thes 1 2 7 1 6 1084 1565 208 40 96.730133 subsequent5 1 2 7 1 7 1312 1567 34 29 96.730133 to5 1 2 7 1 8 1365 1564 59 31 96.953178 thes 1 2 7 1 9 1442 1563 116 39 96.897247 periods 1 2 7 1 10 1579 1562 181 40 96.275024 beginning5 1 2 7 1 11 1776 1561 79 38 96.897522 July5 1 2 7 1 12 1878 1562 26 37 96.800781 1,4 1 2 7 2 0 587 1608 1320 48 -1 5 1 2 7 2 1 587 1617 79 30 96.321083 19695 1 2 7 2 2 682 1616 65 31 96.490593 ands 1 2 7 2 3 767 1616 123 40 96.399689 ending5 1 2 7 2 4 907 1616 79 31 95.681190 Dec.5 1 2 7 2 5 1007 1616 51 37 96.553436 31,5 1 2 7 2 6 1081 1616 89 37 96.553436 1969,5 1 2 7 2 7 1189 1614 35 31 97.011154 in5 1 2 7 2 8 1240 1614 60 31 96.896423 thes 1 2 7 2 9 1316 1613 128 32 96.891159 normal5 1 2 7 2 10 1462 1623 117 21 96.978371 courses 1 2 7 2 11 1597 1612 36 32 96.646507 of5 1 2 7 2 12 1645 1611 90 32 96.646507 theirs 1 2 7 2 13 1751 1608 156 34 96.897911 business4 1 2 7 3 0 584 1663 1324 43 -1 5 1 2 7 3 1 584 1667 179 38 96.445900 activities,5 1 2 7 3 2 786 1667 225 39 96.758774 respondents5 1 2 7 3 3 1034 1665 134 31 95.997162 utilized5 1 2 7 3 4 1190 1665 33 30 96.797676 in5 1 2 7 3 5 1245 1665 59 30 96.922501 thes 1 2 7 3 6 1327 1664 197 40 96.225777 completion5 1 2 7 3 7 1547 1663 36 31 96.225777 of5 1 2 7 3 8 1602 1665 168 29 93.135124 customers 1 2 7 3 9 1792 1671 116 30 91.089172 agree-4 1 2 7 4 0 584 1711 1323 46 -1 5 1 2 7 4 1 584 1720 110 29 96.214500 ments5 1 2 7 4 2 710 1727 20 21 92.840630 a5 1 2 7 4 3 740 1717 136 40 92.840630 printed5 1 2 7 4 4 892 1719 151 29 96.447273 contracts 1 2 7 4 5 1055 1716 86 31 96.942650 forms 1 2 7 4 6 1154 1715 174 31 96.603828 identified5 1 2 7 4 7 1342 1725 37 21 96.873398 as5 1 2 7 4 8 1395 1714 58 32 96.699684 CX5 1 2 7 4 9 1468 1715 28 37 96.181297 2,5 1 2 7 4 10 1513 1716 36 29 95.791687 to5 1 2 7 4 11 1562 1713 106 31 96.875938 which5 1 2 7 4 12 1683 1711 224 41 96.553879 respondents4 1 2 7 5 0 583 1761 1327 45 -1 5 1 2 7 5 1 583 1767 65 31 96.205925 had5 1 2 7 5 2 665 1767 98 31 96.356049 made5 1 2 7 5 3 778 1767 167 31 95.610619 additions5 1 2 7 5 4 962 1767 44 39 96.878136 by5 1 2 7 5 5 1023 1776 115 21 96.247215 means5 1 2 7 5 6 1154 1765 36 32 96.821671 of5 1 2 7 5 7 1202 1776 20 21 96.777359 a5 1 2 7 5 8 1236 1765 127 32 96.682335 rubber5 1 2 7 5 9 1378 1767 109 37 95.194046 stamps 1 2 7 5 10 1503 1764 34 31 95.194046 in5 1 2 7 5 11 1552 1773 42 22 96.336342 an5 1 2 7 5 12 1610 1765 146 37 96.282341 attempts 1 2 7 5 13 1771 1764 34 29 96.918068 to5 1 2 7 5 14 1822 1761 88 32 96.973640 alter4 1 2 7 6 0 583 1809 1322 44 -1 5 1 2 7 6 1 583 1815 58 30 93.270348 thes 1 2 7 6 2 654 1815 178 30 92.581978 contract’s5 1 2 7 6 3 844 1815 124 30 96.402908 formats 1 2 7 6 4 979 1817 35 28 97.002541 to5 1 2 7 6 5 1025 1814 60 31 96.802254 thes 1 2 7 6 6 1096 1813 245 40 96.521904 requirements5 1 2 7 6 7 1354 1812 37 31 96.232063 of5 1 2 7 6 8 1400 1811 200 40 93.272469 Regulations 1 2 7 6 9 1612 1810 23 31 92.614372 Z5 1 2 7 6 10 1648 1809 98 40 92.614372 (Stip.5 1 2 7 6 11 1761 1809 28 38 96.920502 8;5 1 2 7 6 12 1804 1809 58 31 96.963860 CX5 1 2 7 6 13 1875 1809 30 37 96.955704 2,4 1 2 7 7 0 583 1863 748 40 -1 5 1 2 7 7 1 583 1865 121 37 39.948105 6(fff'1,5 1 2 7 7 2 722 1866 45 37 92.686653 2),5 1 2 7 7 3 786 1865 113 38 86.686005 6(hhh,5 1 2 7 7 4 921 1866 27 36 96.271149 1,5 1 2 7 7 5 967 1865 44 37 93.037331 2),5 1 2 7 7 6 1030 1863 93 39 62.619305 6(iii),5 1 2 7 7 7 1144 1863 96 38 92.853752 11(a),5 1 2 7 7 8 1259 1863 72 36 89.174637 (b)).3 1 2 8 0 0 583 1910 1326 95 -1 4 1 2 8 1 0 625 1910 1284 44 -1 5 1 2 8 1 1 625 1915 28 30 96.000175 9.5 1 2 8 1 2 683 1914 237 40 96.472275 Respondents5 1 2 8 1 3 939 1913 178 32 96.460968 continued5 1 2 8 1 4 1135 1913 58 31 96.625389 thes 1 2 8 1 5 1210 1923 61 21 96.504929 uses 1 2 8 1 6 1289 1913 36 31 95.765862 of5 1 2 8 1 7 1339 1912 60 32 96.673058 CX5 1 2 8 1 8 1417 1913 19 29 96.233086 25 1 2 8 1 9 1453 1922 36 22 95.962402 as5 1 2 8 1 10 1508 1911 129 32 95.962402 altered5 1 2 8 1 11 1655 1912 36 29 96.944099 at5 1 2 8 1 12 1708 1910 85 31 96.559959 least5 1 2 8 1 13 1810 1919 45 29 96.828209 up5 1 2 8 1 14 1873 1911 36 29 97.009201 to4 1 2 8 2 0 583 1962 871 43 -1 5 1 2 8 2 1 583 1965 83 31 96.673965 Feb.5 1 2 8 2 2 689 1965 78 31 93.249794 19705 1 2 8 2 3 783 1965 99 40 92.177910 (Stip.5 1 2 8 2 4 901 1965 29 38 96.747879 9;5 1 2 8 2 5 950 1964 58 32 92.029907 CX5 1 2 8 2 6 1025 1964 78 38 91.646835 6(a),5 1 2 8 2 7 1123 1963 59 38 92.392189 (b),5 1 2 8 2 8 1201 1964 67 37 59.224648 (c),;5 1 2 8 2 9 1288 1962 83 40 92.626862 Stip.5 1 2 8 2 10 1393 1963 61 35 95.416214 18).3 1 2 9 0 0 582 2009 1328 191 -1 4 1 2 9 1 0 607 2009 1302 46 -1 5 1 2 9 1 1 607 2016 46 30 95.795700 10.5 1 2 9 1 2 682 2014 216 41 96.594055 Subsequent5 1 2 9 1 3 909 2017 35 29 96.744217 to5 1 2 9 1 4 958 2014 81 31 96.912926 Feb.5 1 2 9 1 5 1055 2015 29 37 96.965401 7,5 1 2 9 1 6 1102 2014 89 38 96.925072 1970,5 1 2 9 1 7 1204 2013 225 40 96.518311 respondents5 1 2 9 1 8 1441 2012 83 32 96.742653 used5 1 2 9 1 9 1536 2011 34 31 96.982254 in5 1 2 9 1 10 1581 2011 58 31 96.950455 thes 1 2 9 1 11 1651 2009 127 32 96.685791 normal5 1 2 9 1 12 1790 2019 119 22 96.636070 course4 1 2 9 2 0 583 2058 1324 44 -1 5 1 2 9 2 1 583 2063 37 32 97.005890 of5 1 2 9 2 2 629 2063 91 32 96.980125 theirs 1 2 9 2 3 733 2063 155 32 96.655067 business5 1 2 9 2 4 904 2073 19 22 96.570541 a5 1 2 9 2 5 936 2073 74 21 96.307968 news 1 2 9 2 6 1024 2062 135 40 96.307968 printed5 1 2 9 2 7 1174 2064 149 29 96.540596 contracts 1 2 9 2 8 1337 2061 86 32 96.037514 forms 1 2 9 2 9 1436 2060 175 32 96.478226 identified5 1 2 9 2 10 1624 2070 37 21 96.803032 as5 1 2 9 2 11 1677 2058 58 33 93.217133 CX5 1 2 9 2 12 1750 2058 79 38 92.301529 3(a),5 1 2 9 2 13 1846 2058 61 38 92.211372 (b),4 1 2 9 3 0 582 2108 1328 44 -1 5 1 2 9 3 1 582 2114 34 30 96.609344 in5 1 2 9 3 2 632 2114 195 31 96.739746 connections 1 2 9 3 3 845 2114 81 31 96.448235 with5 1 2 9 3 4 942 2113 91 32 96.090614 theirs 1 2 9 3 5 1048 2123 177 21 96.791466 consumers 1 2 9 3 6 1240 2112 87 31 96.847847 sales5 1 2 9 3 7 1344 2114 215 38 93.297638 agreements5 1 2 9 3 8 1576 2109 97 40 91.310974 (Stip.5 1 2 9 3 9 1694 2110 28 38 93.615227 9;5 1 2 9 3 10 1742 2109 58 31 93.152496 CX5 1 2 9 3 11 1819 2108 91 36 45.001724 6(d)-4 1 2 9 4 0 583 2163 161 37 -1 5 1 2 9 4 1 583 2163 161 37 57.558105 6(aaa-1).3 1 2 10 0 0 582 2208 1328 95 -1 4 1 2 10 1 0 607 2208 1303 45 -1 5 1 2 10 1 1 607 2214 46 30 95.873329 11.5 1 2 10 1 2 682 2213 190 40 96.256493 Beginning5 1 2 10 1 3 886 2213 80 39 96.256493 July5 1 2 10 1 4 988 2214 26 37 96.778511 1,5 1 2 10 1 5 1038 2213 80 30 96.987579 19695 1 2 10 1 6 1135 2211 66 32 96.619629 ands 1 2 10 1 7 1220 2211 193 40 96.567146 continuing5 1 2 10 1 8 1430 2214 35 28 96.860481 to5 1 2 10 1 9 1483 2213 36 29 96.508072 at5 1 2 10 1 10 1537 2210 85 32 96.813766 least5 1 2 10 1 11 1639 2208 79 40 96.934265 July5 1 2 10 1 12 1740 2208 89 38 96.420479 1972,5 1 2 10 1 13 1850 2208 60 31 96.918709 thea 1 2 10 2 0 582 2263 584 40 -1 5 1 2 10 2 1 582 2263 224 40 96.361816 respondents5 1 2 10 2 2 825 2274 43 21 96.361816 on5 1 2 10 2 3 883 2263 91 32 96.630669 theirs 1 2 10 2 4 989 2265 177 29 94.755920 contracts:3 1 2 11 0 0 582 2308 1328 142 -1 4 1 2 11 1 0 625 2308 1285 45 -1 5 1 2 11 1 1 625 2314 45 36 96.602257 (a)5 1 2 11 1 2 696 2313 63 32 96.897545 Did5 1 2 11 1 3 773 2317 59 28 96.650757 not5 1 2 11 1 4 844 2324 62 21 96.537445 uses 1 2 11 1 5 919 2313 58 32 96.721039 thes 1 2 11 1 6 991 2313 135 40 70.246979 specifics 1 2 11 1 7 1139 2316 88 28 95.617760 terms 1 2 11 1 8 1240 2313 96 31 95.617760 “cash5 1 2 11 1 9 1350 2310 277 41 95.931755 downpayment”5 1 2 11 1 10 1641 2313 35 28 96.650490 to5 1 2 11 1 11 1689 2309 142 32 96.920525 discloses 1 2 11 1 12 1845 2308 65 32 96.909660 anda 1 2 11 2 0 582 2356 1328 44 -1 5 1 2 11 2 1 582 2361 153 32 96.450653 describes 1 2 11 2 2 751 2362 59 31 96.646446 thes 1 2 11 2 3 825 2365 138 28 96.882423 amounts 1 2 11 2 4 978 2361 35 31 95.880333 of5 1 2 11 2 5 1024 2361 59 31 95.880333 thes 1 2 11 2 6 1099 2361 259 39 96.047684 downpayments 1 2 11 2 7 1372 2360 34 31 96.017563 in5 1 2 11 2 8 1420 2369 119 29 96.017563 moneys 1 2 11 2 9 1555 2358 97 32 96.058716 made5 1 2 11 2 10 1667 2358 32 31 96.623581 in5 1 2 11 2 11 1714 2356 196 33 96.525887 connection4 1 2 11 3 0 583 2407 1187 43 -1 5 1 2 11 3 1 583 2412 82 31 96.697128 with5 1 2 11 3 2 680 2412 59 31 96.697128 thes 1 2 11 3 3 756 2412 107 31 96.547333 credits 1 2 11 3 4 879 2412 80 38 96.913521 sale,5 1 2 11 3 5 979 2412 60 31 96.352982 but5 1 2 11 3 6 1054 2411 85 32 96.891800 used5 1 2 11 3 7 1155 2411 58 31 96.683723 thes 1 2 11 3 8 1229 2411 165 39 96.683723 languages 1 2 11 3 9 1411 2409 150 40 93.212212 “deposits 1 2 11 3 10 1576 2407 194 39 92.259598 herewith;” Initial Decision 83 F.T.C.

(b) Did not use the specific term “unpaid balance of cash price” to disclose the difference between the “cash price” and the “cash downpayment,” trade-in, or total downpayment but used the language “cash balance;”

(c) Did not use the specific term “amount financed” to disclose and describe the amount of credit which the customer had actual use of, but used the language “cash balance;” and (d) Did not use the specific term “total of payments” to disclose and describe the sum of the payments scheduled to repay the indebtedness, but used the langauage “time balance” (Stip. 10; CX 2, 3; 6). 12. Respondents were advised that their contract did not conform with the requirements of Regulation Z. Thus, respondent Saul Jakel was asked:

Q. Now, was anything told to you by anyone as to the use or in the industry as to the use of contract number 2 after the date of July 1? . Yes.

. What was that? . There was a six month grace period allowed to contractors from July 1, 1969. To do what? . To January 1, 1970.

To do what? To use up their old contracts, provided that they put a stamp on the contract. Did you? Yes I did.

What was that stamp? . The stamp showed the deferred payment price the annual percentage rate (Tr. 176). POPOPOPOPO>D Similarly, Mr. Jakel was visited by a representative of the Federal Trade Commission in April or May of 1970 and described the visit as follows:

A. She told me that the contracts were in violation. Q. Of what sir, do you know? A. The terminology used in the financing portion of the contract were not as required by law.

Q. What happened next? A. I then went over this with her.

Q. How did you do this sir? ;

A. Well she showed me the wording that was required (Tr. 145). ok ok aft Be ok oe ok Q. (By Judge Hinkes) Now did she show you a written document containing those—containing that language? Yes.

. Or did she just simply tell you? . She showed me a document, your honor.

. Now do you remember what the document was entitled? —_ Or what it looked like? OPOro> DWAUVULIDOLILE WUYUOININIGDNO, LINU., Dl ALL L(O¢ 1761 Initial Decision A. Can I have that book please? Mr. Gelber: The witness is requesting Regulation Z. A. She showed me this terminology here that should have been in place of the— Judge Hinkes: Well, the witness is referring to a form marked Exhibit C in Regulation Z on page 22 which includes typical formats of disclosures under the Regulation (Tr. 147). Mr. Jakel continued:

A. The second time she visited me she told me what the violations were. We went over them. The violations seemed very minor— Q. To you? A. Yes. Since the essence of the law was in the contract as I had it. The important parts.

Q. What was wrong with your contract? A. Ok. On number 2 under the Heading of “Time Payment” in my contract, I used the expression “Deposit herewith” next to which I have the words “Check and Cash” with a box to be checked, you know, depending upon what the salesman received from the customer.

Q. Did she say there was anything deficient or defective about that? A. Yes.

Q. What? A. She said that should “Cash Downpayment.” Q. What else? A. Where I have on here number 3 where I have “Balance, Amount Financed,” she said that the law required it to read “Unpaid Balance of Cash Price.” Under item number 5 where I have “Time Balance” she said it had to read “Total Payments.” A. Well I pointed out to her that in essence I was complying with the law, that everything the law required was in here, although the phraseology was slightly different * * * and she agreed * * * she said “I agree with you that the differences are slight but the law is specific as to what is required.” * * * + cr * Ea . Well, was anything said about the further use of your contracts by her? Yes. .

What? . She indicated to me that I could use up my contracts. . And how did she convey that to you? . She said “Well, you can use these contracts unless you hear further from us.” (Tr. 154-159).

POrPOPO Mr. Jakel also testified that this representative of the Federal Trade Commission visited him another time in May 1970 and again spoke to him about the improper language in the respondents’ contracts that were in use (Tr. 178). Shortly thereafter Mr. Jakel received a letter from the Federal Trade Commission (RX 1) dated May 18, 1970. In it the respondents were informed:

Although you recently printed new retail installment contracts, we still must require your immediate compliance with the above requirements. Willful and knowing failure to comply Initial Decision 83 F.T.C.

with Truth in Lending may result in criminal liability * * * failure to respond to the above requests within 10 days will result in formal administrative action. Sometime during the summer of 1970, Mr. Jakel received a telephone call from a different representative of the Federal Trade Commission who also advised him that the contract in use was in violation of the Truth in Lending Act (Tr. 346). Mr. Jakel said that he would like to continue to use the contract until the stock was depleted but the Commission representative told him “I don’t know who could authorize you to continue to use a contract in violation of a Federal law” (Tr. 347). Mr. Jakel was later visited by this representative and, according to Mr. Jakel, was told that the representative would go back to the office to find out if he couldn’t get Mr. Jakel an extension of time to use up his contracts. Mr. Jakel admitted, however, that: He said that he couldn’t get me any more delays on the use of the contract and that if I didn’t change the contract and sign the affidavit or sign the consent order * * * that they were going to start proceedings against me. Q. And what was your response? A. My response was that I would change the contracts but I would not sign any affidavit.

Q. And did you do so? A. No.

Q. You did not do what? A. I did not print the new contracts (Tr. 199). 13. It does not appear that the respondents took bona fide steps prior to July 1, 1969 to order contract forms which would satisfy the requirements of Regulation Z.

Mr. Jakel was asked:

Q. Were you told by anybody including the bank that you were required under the law to make efforts to obtain new printed forms to be used prior to January 1, 1970 during the period from July 1, 1969 through December 31 1969? Were you told by anyone? A. Not that I recall.

Q. Did you have knowledge that this was required? A. No sir.

* * * * * * * Judge Hinkes: Mr. Jakel did you take any steps before July 1, 1969? A. Idon’t remember. I don’t think so, because my understanding of the law was that it wasn’t necessary to have the new contracts before 1970. * * * * * * * Q. And you said three months before December 31, [1969] approximately, you did in any event order new contracts for the purpose of complying? A. Yes. I mean I say that I believe that that’s probably when I took the step to order it. I would have allowed myself that much time (Tr. 247Z-31-Z-37). 14. The respondents’ newspaper advertisements directly or BEAUTY-STYLE MODERNIZERS, INC., ET AL. 1769 1761 Initial Decision indirectly aid, promote or assist in extensions of consumer credit in connection with the sale of respondents’ goods and services (Step. 15). 15. The following is language excerpted from an advertisement placed by the respondents in the New York Sunday News, Passaic- Bergen edition, on Dec. 7, 1969:

Easy Payments Arranged * * * First payment in 6 months * * * Beauty-Style Modernizers, Inc. 482 Central Avenue, Newark (CX 7). 16. In placing advertisements in the New York Sunday News, Passaic-Bergen edition, the respondents deal and have dealt directly with the advertising department of that newspaper. Respondents do not employ any agency or intermediary. Copies of the advertising contracts covering the period beginning Jan. 1, 1968 through Jan. 11, 1971 are identified as Commission Exhibits 8(a), (b), (c). (Stip. 17). 17. Following the publication of the Dec. 1969 ad in the Sunday News, respondents were informed by the Federal Trade Commission that the advertising in that issue was in violation of Regulation Z. Mr. Jakel was asked:

Q. And will you explain to the court what about that ad was brought to your attention by the Federal Trade Commission letter which you then acted upon? A. May I take a moment to read the letter? Q. Of course.

A. The first payment in six months was objected to. Q. Anything else? A. I believe the easy payments arranged phrase also was objected to (Tr. 134-135; see also RX 3).

18. Advertisements appeared in the Sunday Star Ledger on the dates indicated below and employed the quoted language as indicated: (a) Aluminum Combination Windows and One Door * * * No Downpayment * * * Three years to pay * * * Beauty-Style Modernizers, Inc., 432 Central Avenue, Newark. This ad appeared on June 14, 21, and July 5, 1970 (CX 9(a), (b), and (c). 19. The advertisements described in Paragraph 18 above which appeared in the Sunday Star Ledger were prepared and placed by P & G Advertising Agency, 33 Evergreen Place, East Orange, N.J., for and in behalf of respondents (Stip. 20). According to respondents’ clerk, Saul Jakel and P & G Advertising Agency prepared the copy for the ads jointly (Tr. 107).

20. The advertisements described in Paragraph 15 and 18, appearing in the Sunday Star Ledger and Sunday News failed to state: (a) The cash price;

(b) The number, amount and due dates or period of payments, scheduled to repay the indebtedness if the credit is extended; (c) The amount of the finance charge expressed as an annual percentage rate; and Initial Decision 83 F.T.C.

(d) The deferred payment price (Stip. 21).

CONTENTIONS AND CONCLUSIONS Counsel for the respondents contend that the respondents have not | violated Regulation Z in either their contracts for the sale of their goods and services or in their advertising of their goods and services. . The Contracts In this connection three specific time periods are involved: The period prior to July 1, 1969 when the Truth in Lending Act became effective, the period beginning July 1, 1969 and ending Dee. 31, 1969, and the period subsequent to Dec. 31, 1969.

Section 226.6(k) of Regulation Z is particularly pertinent to both the period preceding July 1, 1969 and the period between July 1, 1969 and Dec. 31, 1969. It states:

(k) Transition period. Any creditor who can demonstrate that he has taken bona fide steps, prior to July 1, 1969, to obtain printed forms which are necessary to comply with the requirements of this Part may, until such forms are received but in no event later than December 31, 1969, utilize existing supplies of printed forms for the purpose of complying with the disclosure requirements of this Part, other than the requirements of paragraph (b) of Section 226.9:

Provided, That such forms are altered or supplemented as necessary to assure that all of the items of information the creditor is required to disclose to the customer are set forth clearly and conspicuously.

The meaning of this section is obvious. It simply permits a creditor to continue using his existing supplies of printed forms after July 1, 1969, provided he can demonstrate that he took bona fide steps before July 1, 1969 to obtain printed forms complying with requirements of Regulation Z and provided further that such forms are amended as necessary to convey all of the information the creditor is required to disclose to the customer. There is no doubt that here respondents continued to use their existing supply of forms after July 1,.1969 and indeed at least until Feb. 1970. Their use of such forms, assuming that they were altered to convey the required information, was proper only if the respondents had taken bona fide steps before July 1, 1969 to obtain printed forms which did comply. This the respondents did not do. Indeed, Saul Jakel admitted that he thought it wasn’t necessary to have the new contracts before 1970 and ordered new contracts around Sept. 1969. He could riot remember taking any such steps before July 1, 1969 nor could he recall any instructions to make such effforts (See Finding 13 above). Respondents’ continued use of their old contract forms was therefore improper and illegal after July 1, 1969, unless, of course, such contract forms contained the disclosures required by Regulation Z. This was also true of the new contract forms adopted by the respondents in 1970. BEAUTY-STYLE MODERNIZERS, INC., ET AL. 1771 1761 Initial Decision Section 226.8(c) of Regulation Z requires the disclosure of certain specified items among which are:

(1) The cash price of the property or service purchased, using the term “eash price.” (2) The amount of the downpayment itemized, as applicable, as downpayment in money, using the term “cash downpayment,” * * * (3) The difference between the amount described in subparagraphs (1) and (2) of this paragraph, using the term “unpaid balance of cash price.” (4) All other charges * * * (5) The sum of the amount determined under subparagraphs (3) and (4) of this paragraph.

(6) Any amounts required to be deducted under paragraph (e) of this Section * * * (7) The difference between the amount determined under subparagraphs (5) and (6) of this paragraph, using the term “amount financed.” Section 226.8(b) (3) of Regulation Z requires the disclosure of scheduled repayments:

(3) The number, amount, and due dates or periods of payments scheduled to repay the indebtedness and * * * the sum of such payments using the term, “total of payments.” It has been stipulated that respondents’ contracts did not use the specific terms “cash downpayment,” “unpaid balance of cash price,” “amount financed” or “total of payments.” Instead, respondents’ contracts used other language. Respondent contends, however, that the quoted language that was not used in their forms is not required by the terms of Regulation Z and that their use of different language was sufficient to disclose all of the credit terms to the customer. Counsel for the respondents cites Section 122(a) of the Truth in Lending Act: (a) Regulations of the Board need not require that disclosures pursuant to this chapter be made in the order set forth in this chapter, and may permit the use of terminology different from that employed in this chapter ifit conveys substantially the same meaning. Counsel for the respondents argues that respondents’ use of language differing from that quoted in Regulation Z but conveying the same meaning should therefore be considered compliance with Regulation Z. I do not agree.

A close reading of Section 122 of the Truth in Lending Act makes it clear that the Board is empowered to permit different terminology than that used in the Truth in Lending Act. The Board, however, in its issuance of Regulation Z specified exactly what language was permissible. Here, too, a close reading of 226.8 of that regulation makes it obvious that the Board required the specific language stated therein. I note, for example, that the Board requires the disclosure of certain “terms” and encloses such “terms” in quotation marks. If the Board had intended the use of language conveying a similar meaning it would have been simple to have said so or at least to have omitted the quotation Initial Decision 83 F.T.C.

marks around the language which was to be used. Moreover, Section 226.6 of Regulation Z requires the “terminology prescribed:” (a) Disclosure: General Rule. The disclosures required to be given by this part shall be made clearly, conspicuously, in meaningful sequence, in accordance with the further requirements of this Section, and at the time and in the terminology prescrbed in applicable sections. (Emphasis supplied) Nor can such a requirement be deemed arbitrary and unreasonable. Uniform disclosure language is less apt to be subject to varying interpretations and impressions which would lessen the intended effectiveness of the Truth in Lending Act.

The case of Richardson v. Time Premium Co. reported in CCH Consumer Credit Guide, Par. 99, 273 is particularly apposite. There, as here, a defendant’s form statement failed to use the quoted terminology of Regulation Z at Section 226.8 and it was argued that the use of the specific terms was not mandatory. The court disagreed: It is, first of all, clear that the Regulations do make the use of specific terminology mandatory. 12 CFR 226.2(a) [226.6(a)] reads in part, “The disclosures required to be given by this part shall be made * * * in the terminology prescribed in applicable sections.” 12 CFR 226.8 in describing what disclosure is required repeatedly uses the format “shall be disclosed: * * * using the term [with applicable term stated in quotation marks].” (Bracketed portion in original) There, too, it was argued that Section 122 of the Truth in Lending Act contradicted any interpretation requiring the use of specific terminology. The Court held, however:

The following language of 15 USC 1632 is cited to support that position. “Regulations of the Board [* * *] may permit the use of terminology different from that employed in this part if it conveys substantially the same meaning.” We do not read this language as a limitation upon the broad power to prescribe regulations as contained in 15 USC 1604 but as a limitation upon the discretion which the Board may allow creditors, which discretion it is not required to “permit” at all.

The conclusion is inescapable that respondents’ failure to use the specific terms required by Regulation Z as set forth in the Findings above violated the provisions of that Regulation and of the Truth in Lending Act.

The Advertisements Counsel for the respondents concedes that “the ads did appear as alleged in the complaint.” He defends, however, on the ground that “respondent did not cause these ads to be so placed.” He cites the fact that the Dec. 1969 ad appearing in the News was corrected after the Federal Trade Commission representative called its irregularities to the attention of the respondents. He goes on, however, to argue that “thereafter the ad reappeared inadvertently in format used before the BEAUTY-STYLE MODERNIZERS, INC., ET AL. Lita 1761 Initial Decision change. This was obviously an inadvertent placement of the ad * * * and not through the action of respondent.” The record, however, does not support this argument.

The Dec. 1969 ad appearing in the News spoke of “Rasy payments arranged—First payment in 6 months.” The ads which appeared in June and July 1970 in the Star Ledger used different language stating “No downpayment—3 years to pay.” The format was obviously not that of the old ad.

Nor can the respondents escape responsibility for the 1970 ads simply because they were placed through their advertising agency, P & G Advertising Agency. It has been stipulated that the ads were placed by that advertising agency “for and on behalf of the respondents.” Moreover, the testimony of respondents’ clerk makes it quite clear that the copy for ads was created by both Saul Jakel and a representative from P & G. The relationship of principal and agent is, therefore, conclusively established (See Libby-Ownes-Ford Glass Co. 63 FTC 746, 772).

That the ads violated Regulation Z is also incontrovertible. Section 226.10(d) of that Regulation provides:

No advertisement to aid, promote, or assist directly or indirectly any credit sale * * * shall state * * * (2) the amount of the downpayment required or that no downpayment is required, the amount of any installment payment, the dollar amount of any finance charge, the number of installments or the period of repayment, or that there is no charge for credit, unless it states all the following items in terminology prescribed under Section 226.8:

(i) the cash price or the amount of the loan, as applicable; (ii) the amount of the downpayment required or that no downpayment is required, as applicable;

(iii) the number, amount and due dates or period of payments scheduled to repay the indebtedness if the credit is extended;

(iv) the amount of the finance charge expressed as an annual percentage rate. The advertisements itemized in the findings above, while speaking of downpayments and the period of repayment, were deficient in one or more of the required disclosures and were, therefore, violative of Regulation Z.

THE REMEDY Having found that the respondents have violated the Federal Trade Commission Act by failing to comply with the provisions of Regulation Z, the implementing regulation of the Truth in’ Lending Act, I shall order that they cease and desist from engaging in such illegal activities. Complaint counsel have proposed an order similar to that proposed by the Commission in its complaint. In addition, complaint counsel suggest additional provisions. One would require the furnishing of specific information to the Commission in the event the named individual. re- Initial Decision 83 F.T.C.

spondents discontinue their present business. This additional provision appears to be appropriate and consistent with the established practice of the Commission. Complaint counsel also propose a provision in the order requiring respondents to file a compliance report within 60 days. This, however, appears superfluous as the requirement is already spelled out in Section 3.61 of the Commission’s Rules of Practice, reference to which is hereby made.

Complaint counsel have also proposed an addition to the order as follows:

It is further understood that nothing contained in this order shall be construed to imply that any past or future conduct of respondents is subject to and complies with the rules and regulations of, or the statutes administered by the Federal Trade Commission. Complaint counsel seek the inclusion of the above paragraph because of the “proclivity of the respondent Saul Jakel demonstrated during the evidentiary hearing of deliberately misconstruing the plain meaning of both oral and written communications from the Commission.” I do not think such a provision in the order to be issued is necessary or appropriate. It is difficult to perceive how such a hortatory admonition could prevent misunderstanding or misconstruction on the part of a respondent. The order to be entered herein is, in the opinion of the undersigned, specific and concise and is not subject to the implications feared by complaint counsel. Even if it were so subject, a statement to the effect that it is not to be construed as implying that the respondents have complied with the Federal Trade Commission’s Regulations and Statutes, would not, in my opinion, add anything to the force and effect of the order. The omission of the proposed paragraph could not relieve the respondents from the consequences of any other wrongful acts. ORDER It is ordered, That respondents, Beauty-Style Modernizers, Inc., a corporation, its successors and assigns, Morris Jakel, individually, and as an officer of said corporation, and Saul Jakel, individually, and as general manager of said corporation, and respondents’ officers, agents, representatives and employees directly or through any corporation, subsidiary, division or other device, in connection with any consumer credit sale 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, in any consumer credit transaction or advertisement, to make all disclosures determined in accordance with Sections BEAUTY-STYLE MODERNIZERS, INC., ET AL. 1775 1761 Initial Decision 226.4 and 226.5 of Regulation Z, in the manner, form and amount required by Sections 226.6, 226.7, 226.8, 226.9 and 226.10 of Regulation Z.

2. Failing to use the term “cash downpayment” to disclose and describe the amount of the downpayment in money made in connection with the credit sale, as required by Section 226.8(¢)(2) of Regulation Z.

3. Failing to use the term “unpaid balance of cash price” to disclose and describe the difference between the cash price and the cash downpayment, trade-in or total downpayment, as required by Section 226.8(c)(8) of Regulation Z.

4. Failing to use the term “amount financed” to disclose and describe the amount of credit which the customer has the actual use of, as required by Section 226.8(c)(7) of Regulation Z. , 5. Failing to use the term “total of payments” to disclose and describe the sum of the payments scheduled to repay the indebtedness, as required by Section 226.8(b)(3) of Regulation Z. 6. Representing, directly or by implication, in any advertisement as “advertisement” is defined in Regulation Z the amount of the downpayment required or that no downpayment is required, the amount of any installment payment, the dollar amount of any finance charge, the number of installments or the period of repayment, or that there is no charge for credit, unless all of the following items are stated in terminology prescribed under Section 226.8 of Regulation Z:

(i) The cash price;

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

(iii) The number, amount and due dates or period of payments scheduled to repay the indebtedness if the credit is extended;

(iv) The amount of the finance charge expressed as an annual percentage rate; and (v) The deferred payment price.

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 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 each 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 Opinion 83 F.T.C.

employment. Such notice shall include respondents’ current business address and a statement as to the nature of the business or employment in which he is engaged as well as a description of his duties and responsibilities.

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 any other change in the corporation which may affect compliance obligations arising out of the order.

OPINION OF THE COMMISSION By THOMPSON, Commissioner:

This matter is before the Commission on appeal from an initial decision of an administrative law judge in which it was found that respondents have violated the Truth in Lending Act (15 U.S.C. §§1601, et seg.) and the Federal Trade Commission Act (15 U.S.C. §45(a)) in failing to disclose certain consumer credit information in connection with their advertising and sale of various home-improvement materials, supplies and installation services. The order issued by the law judge would require respondents to disclose certain credit terms and information in accord with the specific requirements of the Truth in Lending Act and the Federal Reserve Board of Governors’ Regulation Z implementing said Act (12 C.F.R. §266, et seq.). The law judge found that respondents had failed to make the required disclosures (a) in their printed contract forms and (b) in certain newspaper advertisements placed, in part, by an advertising agency. In the former, respondents omitted the required terms “cash downpayment,” “unpaid balance of cash price.” “amount financed,” and “total of payments,” substituting therefor the terms “deposit herewith,” “cash balance” (twice), and “time balance.” CX 1 (c)(d). In certain of its newspaper advertisements, respondent Beauty-Style advertised that no downpayment was required under its credit plan but failed to disclose, as required by Regulation Z, (a) the cash price, (b) the number, amount, and due dates or periods of payments scheduled to repay the indebtedness where such credit is extended, (c) the finance charge expressed as an annual percentage rate, and (d) the deferred payment price. CX 1()). Respondents’ major contentions on this appeal are (1) that the terms they used in their printed forms were in fact more informative than those required by the regulation in question; (a) that the efforts they made to comply with the statute after its effective date of July 1, 1969 fully satisfied the “transition period” duties specified in the regulation; N BEAUTY-STYLE MODERNIZERS, INC., ET AL. 1777 1761 Opinion (3) that Federal Trade Commission personnel approved the use of the printed forms found unlawful here; (4) that complaint counsel failed to prove a principal-agent relationship between Beauty-Style and the advertising agency that caused the publication of the advertisements in question; and (5) that the Federal Reserve Board exceeded the authority delegated to it by Congress in issuing the regulation they are charged with violating (Regulation Z).

The parties agreed prior to trial that the issues to be resolved were as follows: ' 1. Whether respondents failed to obtain new contract forms prior to, during or subsequent to the period beginning July 1, 1969 (effective date of the statute) and terminating December 31, 1969 which were in compliance with the requirements of Regulation Z. 2. Whether the retail installment contract forms as altered for the period July 1, 1969 to December 31, 1969 complied with the requirements of Regulation Z.

3. Whether respondents authorized, approved or ratified, expressly or impliedly, the publication of the various advertisements identified as Commission Exhibits 9(a), 9(b), and 9(c).

The parties also agreed upon most of the facts of the case prior to trial (CX 1(a-1)),2 and it was essentially on an evaluation of these pretrial agreements that the law judge based his decision.* With regard to the first of the issues, the law judge noted that Section 226.6(k) of Regulation Z provided a “transition period” on the following terms:

Transition period. Any creditor who can demonstrate that he has taken bona fide steps, prior to July 1, 1969, to obtain printed forms which are necessary to comply with the requirement of this Part may, until such forms are received but in no event later than December 31, 1969, utilize existing supplies of printed forms for the purpose of complying with the disclosure requirements of this Part, other than the requirements of paragraph (b) of §226.9: Provided, That such forms are altered or supplemented as necessary to assure that all of the items of information the creditor is required to disclose to the customer are set forth clearly and conspicuously. (Emphasis supplied.) The law judge interpreted this provision as requiring that respondents undertake to order new conforming printed contracts prior to July 1, 1969, the effective date of the Truth in Lending Act, in order to ' “Agreed Upon Contested Issues of Fact and Law.” This document appears in the exhibit binder unnumbered, but was made part of the record of the proceeding in this case by Judge Hinkes’ “Order on Results of Prehearing Conference,” dated April 12, 1973.

» Abbreviations: - CX—Commission Exhibit RAB-Respondents’ Appeal Brief RX—Respondents’ Exhibit Tr.—Transcript * Complaint counsel rested their case upon the judge’s acceptance of these two agreements (tr. 5). Opinion 83 F.T.C.

qualify themselves for the special dispensation afforded by that “transition” language. (Tr. 2472-33, 34.) On the second of these stipulated issues, the law judge ruled that the altered forms utilized by respondents subsequent to July 1, 1969 were not in conformance with the specific disclosure requirements of the Act, which he held mandatory. The language of Section 226.6 permits, in his view, no deviation from the terms prescribed: (a) Disclosures; general rule. The disclosures required to be given by this Part shall be made clearly, conspicuously, in meaningful sequence, in accordance with the further requirements of this section, and at the time and in the terminology prescrb ed in applicable sections. * * * (Emphasis supplied.) The law judge also ruled against respondents on the third of those three stipulated factual issues, respondents’ approval or ratification of the published advertisements. Two local newspapers were used, the Sunday News and the Sunday Star Ledger. Respondents dealt with the former directly and hence could hardly deny responsibility for the ad in question.? While an advertising agent acted as intermediary in the placement of the two challenged ads in the second of these publications,°® the law judge concluded that there was a principal-agent relationship involved and hence that the legal responsibility for their content rested with respondents.

RESPONDENTS’ APPEAL There is little in the way of a significant dispute on the facts before us and the various legal arguments raised by respondents turn largely on the quite specific and unambiguous language of the Truth in Lending Act and its implementing Regulation Z. The law judge was plainly correct in holding that the terms prescribed by the latter are mandatory, i.e., it is not open to a creditor to substitute terms that, in his view, are “superior” to those laid down in that Regulation.® In Zale Corp., et al., 78 FTC 1195 (1971), for example, the respondents urged that while their disclosures were not in the specific language of the Act as implemented in Regulation Z, the phraseology used accomplished the same purpose. We disagreed: “Clearly such specificity is authorized under the broad statutory authority granted.” [bid., p. 1223. See also 4 CX 7. This ad appeared in the News on December 7, 1969 and contained the language “Easy Payments arranged * * * Ist Payment in 6 months.”

3 CX 9(a-c). These ads appeared in the Ledger on June 14, June 21, and July 5, 1970 and offered: “No downpayment * 4 #3 years to pay.” CX 1(i), Gj); CX M%a~c). ® Respondents raise (RAB, p. 9) the point that Section 122 of the Act (15 U.S.C. §1632) allows the Federal Reserve Board's Governors to promulgate, by regulation, forms of credit disclosure couched in words other than those spelled out in the statute, so long as such substitute terms convey substantially the same meaning. We need only pvint out, however, that the regulation which the Board did promulgate requires the exact language which had originally been set out in the Act. Whatever regulation the Board might have adopted, the one actually before us is unambiguous. 1761 Opinion Richardson v. The Time Premium Co., CCH Consumer Credit Guide Par. 99278 at p. 89, 240 (S.D. Fla. 1971),” Nor is there any dispute in this record.on the point that respondents were repeatedly advised by the Commission’s staff that their contract forms failed to make consumer-credit disclosures in the precise language required and therefore that the use of those forms violated the Act. (Tr. 144, 145, 154, 157, 178, 183, 199, 2472-11 and 12, 272, 311, 316, 346, 347; RX 1.) ® Indeed, respondents’ counsel conceded in argument before the law judge that his clients had not used the prescribed language in making the disclosures required by the regulation in question. (Tr. 376.) His argument, rather, was to the effect that they were nonetheless in “substantial” complaince with the statute. There is no such thing as “substantial” compliance with the Truth in Lending Act and the regulation that implements it. Either you are or you aren’t. The purpose of that statute is to permit the ordinary consumer, without regard to the degree of his commercial sophistication, to receive the kind of credit information that will allow him effectively to compare the credit terms being offered in the marketplace and thus to “shop” for the most favorable terms available. (15 U.S.C. §1601.) Only uniform terms, universally used, would allow the kind of credit comparison mandated by the Act. (See Zale Corp., et al., 78 FTC 1195, 1228 (1971); H.R. Rep. No. 1040, 90th Cong., 1st Sess. 18 (1967).) The Act was concerned not only with the substance of disclosure but, for purposes of consumer comparison shopping, was concerned as well with the form of that disclosure. We agree with the administrative law judge, therefore, that respondents’ contracts were in violation of the Truth in Lending Act and Regulation Z in the particulars set out in the stipulated facts (CX 1(c), (d)).

Nor do we find any error in the law judge’s ruling on the deficiencies in respondents’ newspaper advertisements. According to respondents, the allegedly illegal advertisement in the News (CX 7) was placed “inadvertently” (RAB, p. 11), and once respondents’ attention was called to it, was withdrawn and never again appeared. With regard to the June 14, June 21 and July 5, 1970 advertisements in the Ledger (CX 9(a-c), respondents deny liability because the ads were placed by an advertising agency after the agency had been instructed to correct the 7 This view is also underscored in the Federal Reserve Board’s own publication, “What You Ought to Know About Federal Reserve Regulation Z” 7 (1969), of which respondents’ counsel caused the judge to take official notice (tr. 116). * Respondents contend that staff members of the Federal Trade Commission approved the use of their altered sales contract forms through 1969 (tr. 159, 195). The record itself indicates, however, only that one staff member promised to make inquiry of his superiors regarding the physical arrangement on the forms of some particular terms of credit information (tr. 318, 317). Direct testimony of two staff members as well as documentary evidence amply supports complaint counsel’s argument that respondents were repeatedly informed of the non-conformance of their contracts to the requirements of the law and were never, at any time, given permission to continue use of the altered but non-conforming forms. (Tr. 274, 292, 298, 311, 316, 346, 347, 372.) In fact, one staff member testified that he informed Mr. Jakel, “{W]e can’t authorize you to continue to use a contract in violation of a federal law.” (Tr. 347.) Opinion 83 F.T.C.

advertisements by Beauty-Style’s office clerk (tr. 94, 101, 130, 169, 170, 223, 2472-22, 43. 379).

The same general legal principles which govern the consumer credit disclosures on written contracts also govern in situations where advertising of credit terms is undertaken. As we observed in Zale: * * * The advertising provision of the Truth in Lending Act and Regulation Z are directly parallel to the other substantive sections which require disclosures. Wherever applicable, ‘the same terminology mandated in the contract forms is mandated in the advertising. ‘Given the purpose of the statute, to enhance competition among financial institutions and other firms extending consumer credit and to increase the informed use of credit by consumers (§102, Title I), and the structure of the regulation, the advertising provisions of the Act are clearly part and parcel of the general disclosure scheme. (78 FTC 1242.) It is undisputed that the December 7, 1969 advertisement in the News and the June 14, June 21 and July 5, 1970 advertisements in the Ledger failed to make certain credit term disclosures (tr. 128, 134, 135, 247-z-42, 48; RX 8). Nor is it disputed that these violations were brought to the attention of the respondents, both orally and in writing, including personal visitation by Commission staff members (tr. 93, 94, 127, 134, 185, 164, 168, 169, 247z-22, 279, 308; RX 3). Respondent Jakel, who was generally in charge of Beauty-Style’s advertising, conceded that he did not check the Ledger to determine whether the agency had, in fact, altered the suspect advertising. Nor did respondents’ clerk check the Ledger (tr. 97, 247-z-19-22, 25). Respondents’ advertising agency was stipulated to have acted “for and on behalf of the respondents” in its placing of advertising generally (CX 1()). Respondent Jakel and representatives of the agency were joint draftsmen of the advertising copy in question (tr. 107, 108). When the nonconforming advertisements were run, respondents became liable by virtue of their principal-agent relationship (see Libby-Owens-Ford Glass Co., 683 FTC 746, 772 (1963)). We therefore agree with the administrative law judge’s conclusion that all the respondents’ advertisements in question violate Section 226.10(d) of Regulation Z. The time-frame issue runs throughout this case and has to do with three crucial deadlines for respondents’ compliance with the several aspects of Truth in Lending. The Federal Reserve Board’s own pamphlet, explaining the requirements of Section 226.6(k) of Regulation Z, sets forth these basic time obligations under the Act: If you have taken the proper steps to get any new credit forms before July 1, 1969, and find they cannot be delivered to you by that date, then you may be able to use your existing forms. But they must show clearly the information a customer must be given under Regulation Z. You may do this by adding to or altering your forms. However, after December 31, 1969, you may no longer do this. (“What You Ought to Know About Federal Reserve Regulation Z” 4 (1969).) (161 Opinion It is uncontested that respondents undertook no steps to secure new contract forms until late in 1969 (tr. 2472-31-37). They were therefore in violation of the statute from the first day of its effectiveness (see Kroll v. Cities Service Oil Company, CCH Consumer Credit Guide Par. 99102 at 88,794-95 (N.D. Ill. 1972)). Further, the respondents continued to be in violation of the statute throughout 1969 because the altered forms they used did not, as noted, make the required disclosures in the form prescribed by law (CX l(c), CX 2). New printed forms were not available for use until February 1970 (CX 1(c), CX 3(a)(b)). And the precise disclosures required by the Act did not appear in them until at least July 1972 (CX 1(c)(d)).

Finally, respondent have raised for the first time on appeal the question of the validity of the delegation to the Board of Governors of the Federal Reserve Board the power to formulate regulations administering the Act (RAB, pp. 7-11). In respondents’ view, the Federal Reserve Board, in requiring the specific disclosure language set out in Regulation Z, has exceeded the congressional mandate of its delegated power as spelled out in the Act.

Section 104 of Truth in Lending provides:

The Board shall prescribe regulations to carry out the purposes of this chapter. These regulations may contain such classification, differentiations, or other provisions, and may provide for such adjustments and exceptions for any class of transactions, as in the judgment of the Board are necessary or proper to effectuate the purposes of this subchapter to prevent circumvention or evasion thereof, or to facilitate compliance therewith. (15 U.S.C. §1604.) Congress is free to delegate legislative authority provided it has exercised “the essentials of the legislative function—of determining the basic legislative policy and formulating a rule of conduct” (Yakus v. United States, 311 U.S. 414, 424 (1944)). A delegation of legislative power is proper “if Congress shall lay down by legislative act an intelligible principle” to which the official or agency must conform (H. ampton v. United States, 276 U.S. 394, 409 (1928)).

One seeking to challenge the legality of a delegation of legislative authority to an agency bears the burden of showing in the delegation such an absence of standards for agency conduct as to frustrate the ability of Congress to determine if its policy is being effectuated (A malgamated Meat Cutters v. Connally, 337 F. Supp. 737, 746, 747 (D.D.C. 1971)).° In Zale Corp., et al., infra, and Charnita, Inc., et al., 80 FTC 892 (1972), the Commission recognized the validity of the particular This5 1 5 1 1 2 662 2271 45 13 96.554665 cases 1 5 1 1 3 721 2265 94 20 96.809189 involved5 1 5 1 1 4 831 2272 11 13 96.888870 a5 1 5 1 1 5 857 2266 103 25 96.158051 challenges 1 5 1 1 6 975 2269 20 17 96.131500 to5 1 5 1 1 7 1012 2268 34 18 93.118607 thes 1 5 1 1 8 1060 2268 125 19 92.897644 President’s5 1 5 1 1 9 1199 2268 103 25 96.639290 authority5 1 5 1 1 10 1318 2272 19 17 96.735229 to5 1 5 1 1 11 1354 2271 66 19 96.087013 freeze5 1 5 1 1 12 1435 2277 67 18 96.697830 wages5 1 5 1 1 13 1518 2272 37 19 96.864403 ands 1 5 1 1 14 1570 2272 66 24 95.190872 prices5 1 5 1 1 15 1652 2273 64 20 96.780563 under5 1 5 1 1 16 1730 2274 34 19 96.727554 thes 1 5 1 1 17 1780 2274 107 19 96.714325 Economic4 1 5 1 2 0 559 2297 1326 34 -1 5 1 5 1 2 1 559 2297 136 20 96.068062 Stabilization5 1 5 1 2 2 704 2299 39 19 96.255966 Acts 1 5 1 2 3 752 2300 22 18 96.765488 of5 1 5 1 2 4 784 2300 53 23 96.639824 1970,5 1 5 1 2 5 848 2301 68 19 96.915009 where5 1 5 1 2 6 925 2301 35 19 96.915009 thes 1 5 1 2 7 969 2301 115 24 96.664955 delegation5 1 5 1 2 8 1094 2302 21 18 96.891426 of5 1 5 1 2 9 1123 2308 69 18 97.008293 powers 1 5 1 2 10 1201 2308 40 13 96.377914 was5 1 5 1 2 11 1252 2303 86 20 96.970078 couched5 1 5 1 2 12 1348 2304 19 19 96.945984 in5 1 5 1 2 13 1377 2306 64 17 96.934975 terms5 1 5 1 2 14 1450 2305 22 18 96.330200 of5 1 5 1 2 15 1478 2305 36 19 93.306175 thes 1 5 1 2 16 1522 2305 125 21 89.274391 President’s5 1 5 1 2 17 1657 2313 68 18 96.885811 powers 1 5 1 2 18 1733 2308 32 18 96.655945 “to5 1 5 1 2 19 1774 2307 55 20 96.655945 issues 1 5 1 2 20 1837 2308 48 19 96.403015 such4 1 5 1 3 0 558 2331 1328 34 -1 5 1 5 1 3 1 558 2331 69 19 96.634071 orders5 1 5 1 3 2 637 2332 38 18 96.964035 ands 1 5 1 3 3 685 2332 124 24 96.698730 regulations5 1 5 1 3 4 818 2340 21 13 96.698730 as5 1 5 1 3 5 850 2334 24 19 96.782051 he5 1 5 1 3 6 884 2340 44 18 97.000420 may5 1 5 1 3 7 938 2334 59 19 96.995865 deems 1 5 1 3 8 1005 2335 129 24 95.803413 appropriate5 1 5 1 3 9 1144 2337 21 17 95.803413 to5 1 5 1 3 10 1173 2336 91 19 96.940414 stabilize5 1 5 1 3 11 1273 2339 63 21 96.342194 rents,5 1 5 1 3 12 1347 2343 75 19 96.794434 wages,5 1 5 1 3 13 1432 2339 38 18 96.976471 ands 1 5 1 3 14 1479 2339 103 19 96.861725 salaries.”5 1 5 1 3 15 1591 2340 43 19 97.011162 Thes 1 5 1 3 16 1642 2340 114 25 96.507584 delegation5 1 5 1 3 17 1765 2341 18 18 96.962044 in5 1 5 1 3 18 1791 2340 95 25 96.573174 question4 1 5 1 4 0 557 2364 417 27 -1 5 1 5 1 4 1 557 2364 57 19 96.658676 there5 1 5 1 4 2 625 2370 41 14 96.637138 was5 1 5 1 4 3 674 2365 75 24 96.942528 upheld5 1 5 1 4 4 760 2367 44 20 92.995270 (3375 1 5 1 4 5 815 2367 22 19 87.647369 F.5 1 5 1 4 6 850 2367 61 24 96.603302 Supp.5 1 5 1 4 7 923 2368 51 21 96.603027 744). - 1782 F£DERAL TRADE COMMISSION DECISIONS Final Order 83 F.T.C.

delegation of power in issue here. In Zale, for example, the law judge found that the Board, “in the valid exercise of its expert discretion,” could “very properly require” specific phraseology it “regards as important,” and “since the words (required by Regulation Z) are reasonably adopted to the enforcement of the Act and their use does not contravene some other requirement of the law, the regulation must be followed” (ibid. ).

Respondents’ counsel advised us during oral argument that, if “every creditor must use these ‘X’ words and ‘B’ words, then we simply will fold our tents and go to whatever forum is available * * * .” 10 Believing as we do that the statute before us is of the malum prohibitum character and therefore leaves no room for the substituting of Y words for X words, we can only hope that respondents will strike their legal tents in an appropriately poetic spirit: “And the night shall be filled with music, And the cares that infest the day, Shall fold their tents like the Arabs, And as silently steal away.”* The decision of the administrative law judge will be affirmed and adopted as the decision of the Commission.

Commissioner Nye did not participate.

FINAL ORDER This matter having been heard by the Commission upon respondents’ appeal from the administrative law judge’s initial decision, and upon briefs and oral argument in support thereof and in opposition thereto; and the Commission having rendered its decision denying the appeal and adopting the initial decision:

It is ordered, That respondents, Beauty-Style Modernizers, Inc., Morris Jakel and Saul Jakel 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 thy have complied with the order to cease and desist.

Commissioner Nye not participating.

Transcript of Oral Argument before the Commission (March 6, 1974), p. 26. * Henry Wadsworth Longfellow, “The Day Is Done,” stanza 2. * Complaint