Great Expectations Creative Management, Inc

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GREAT EXPECTATIONS CREATIVE MANAGEMENT, INC., ET AL. 449

449 Complaint

IN THE MATTER OF

GREAT EXPECTATIONS CREATIVE MANAGEMENT, INC., ET AL.

CONSENT ORDER, ETC., IN REGARD TO ALLEGED VIOLATION OF THE TRUTH IN LENDING ACT AND SEC. 5 OF THE FEDERAL TRADE COMMISSION ACT

Docket C-3604. Complaint, Aug. 11, 1995--Decision, Aug. 11, 1995

This consent order requires, among other things, the franchisor of video dating services and its four franchises to properly and accurately disclose the annual percentage rate ("APR") and other credit terms of financed memberships, as required by the federal Truth in Lending Act and requires the franchises to establish adjustment refund programs to compensate its past and current members who overpaid and were misled by the undisclosed finance charges and APRs. In addition, the consent order prohibits the respondents from providing franchises contracts with pre-printed APRs.

Appearances

For the Commission: Stephen Cohen, Judy Nixon and David Medine.

For the respondents: David Laufer, Kindel & Anderson, Woodland Hills, CA.

COMPLAINT

The Federal Trade Commission, having reason to believe that Great Expectations Creative Management, Inc. has violated the Federal Trade Commission Act ("FTC Act"), and that Great Expectations, Inc., GEC Illinois, Inc., GEC Tennessee, Inc., GEC Alabama, Inc., Great Southern Video, Inc., New West Video Enterprises, Inc., San Antonio Singles of Texas, Inc., Austin Singles of Texas, Inc., Great Expectations of Baltimore, Inc., Great Expectations of Washington, D.C., Inc., Great Expectations of Washington, Inc., Sterling Connections, Inc., Private Eye Productions, Inc., Great Expectations - Columbus, Inc., JAMS Financial, Inc., V.L.P. Enterprises, Inc., APM Enterprises - Minn Inc., KGE, Inc., G.E.C.H., Inc., MWVE, Inc., GREATEX Denver, Inc., Sun West Video, Inc., and TRIAAC Enterprises, Inc. (hereinafter sometimes referred to collectively as "Great

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Expectations") have violated the Truth in Lending Act ("TILA"), its implementing Regulation Z, and the FTC Act, and it appearing to the Commission that a proceeding by it in respect thereof would be in the public interest, hereby issues this complaint, and alleges as follows:

PARAGRAPH 1. Great Expectations Creative Management, Inc. ("GECM") is a corporation organized, existing, and doing business under and by virtue of the laws of the state of California, with its office and principal place of business located at 16830 Ventura Blvd., Suite P, Encino, CA.

PAR. 2. Great Expectations, Inc. ("GEI") is a corporation organized, existing, and doing business under and by virtue of the laws of the state of California, with its corporate office at 16830 Ventura Blvd., Suite P, Encino, CA, and its principal places of business located at 1640 S. Sepulveda Blvd., Suite 100, Los Angeles, CA, 17207 Ventura Blvd., Encino, CA, and 450 N. Mountain, Suite B, Upland, CA.

PAR. 3. GEC Illinois, Inc. ("GE Illinois") is a corporation organized, existing, and doing business under and by virtue of the laws of the state of Illinois, with its office and principal place of business located at 1701 E. Woodfield Dr., Suite 400, Schaumburg, IL.

PAR. 4. GEC Tennessee, Inc. ("GE Tennessee") is a corporation organized, existing, and doing business under and by virtue of the laws of the state of California, with its office and principal place of business located at 5552 Franklin Rd., Suite 200, Nashville, TN.

PAR. 5. GEC Alabama, Inc. ("GE Alabama") is a corporation organized, existing, and doing business under and by virtue of the laws of the state of Alabama, with its office and principal place of business located at 7529 S. Memorial Pkwy., Suite C & D, Huntsville, AL.

PAR. 6. Great Southern Video, Inc., doing business as Great Expectations of Dallas ("GE Dallas"), is a corporation organized, existing, and doing business under and by virtue of the laws of the state of Texas, with its office and principal place of business located at 14180 Dallas Pkwy., Suite 100, Dallas, TX.

PAR. 7. New West Video Enterprises, Inc., doing business as Great Expectations of Houston ("GE Houston"), is a corporation organized, existing, and doing business under and by virtue of the

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laws of the state of Texas, with its office and principal place of business located at 50 Briarhollow, Suite 100, Houston, TX.

PAR. 8. San Antonio Singles of Texas, Inc., doing business as Great Expectations of San Antonio ("GE San Antonio"), is a corporation organized, existing, and doing business under and by virtue of the laws of the state of Texas, with its corporate office at 10497 Town & Country Way, Suite 214, Houston, TX, and its principal place of business located at 8131 I.H. 10 West, Suite 225, San Antonio, TX.

PAR. 9. Austin Singles of Texas, Inc., doing business as Great Expectations of Austin ("GE Austin"), is a corporation organized, existing, and doing business under and by virtue of the laws of the state of Texas, with its corporate office at 10497 Town & Country Way, Suite 214, Houston, TX, and its principal place of business located at 9037 Research Blvd., Suite 130, Austin, TX.

PAR. 10. Great Expectations of Baltimore, Inc. ("GE Baltimore") is a corporation organized, existing, and doing business under and by virtue of the laws of the state of Virginia, with its office and principal place of business located at 40 York Rd., Suite 500, Towson, MD.

PAR. 11. Great Expectations of Washington, D.C., Inc. ("GE DC") is a corporation organized, existing, and doing business under and by virtue of the laws of the state of Maryland, with its office and principal place of business located at 8601 Westwood Center Dr., Vienna, VA.

PAR. 12. Great Expectations of Washington, Inc., doing business as Great Expectations of Raleigh/Durham ("GE Raleigh"), is a corporation organized, existing, and doing business under and by virtue of the laws of the state of Maryland, with its office and principal place of business located at 3714 Benson Dr., Suite 200, Raleigh, NC.

PAR. 13. Sterling Connections, Inc., doing business as Great Expectations of Seattle ("GE Seattle"), is a corporation organized, existing, and doing business under and by virtue of the laws of the state of Oregon, with its office and principal place of business located at 305 108th Ave., N.E., Suite 205, Bellevue, WA.

PAR. 14. Private Eye Productions, Inc., doing business as Great Expectations of Portland ("GE Portland"), is a corporation organized, existing, and doing business under and by virtue of the laws of the state of Oregon, with its office and principal place of business located at 5531 S.W. Macadam Ave., Suite 225, Portland, OR.

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PAR. 15. Great Expectations - Columbus, Inc. ("GE Columbus") is a corporation organized, existing, and doing business under and by virtue of the laws of the state of Ohio, with its corporate office at 11835 W. Olympic Blvd., Suite 490, Los Angeles, CA, and its principal place of business located at 1103 Schrock Rd., Suite 101, Columbus, OH.

PAR. 16. JAMS Financial, Inc., doing business as Great Expectations of Milwaukee ("GE Milwaukee"), is a corporation organized, existing, and doing business under and by virtue of the laws of the state of Wisconsin, with its corporate office at 11835 W. Olympic Blvd., Suite 490, Los Angeles, CA, and its principal place of business located at 16650 W. Bluemound, Suite 100, Brookfield, WI.

PAR. 17. V.L.P. Enterprises, Inc., doing business as Great Expectations of San Diego ("GE San Diego"), is a corporation organized, existing, and doing business under and by virtue of the laws of the state of California, with its office and principal place of business located at 3465 Camino Del Rio South, Suite 300, San Diego, CA.

PAR. 18. APM Enterprises - Minn Inc., doing business as Great Expectations of Minneapolis ("GE Minneapolis"), is a corporation organized, existing, and doing business under and by virtue of the laws of the state of Illinois, with its office and principal place of business located at 3300 Edinborough Way, Suite 300, Edina, MN.

PAR. 19. KGE, Inc., doing business as Great Expectations of Sausalito, Great Expectations of Mountain View, and Great Expectations of Walnut Creek (collectively referred to as "GE-SFA"), is a corporation organized, existing, and doing business under and by virtue of the laws of the state of California, with its corporate office at 1943 Landings Dr., Mountain View, CA, and its principal places of business located at 2401 Marinship Way, Suite 100, Sausalito, CA, 2085 Landings Dr., Mountain View, CA, and 1280 Civic Dr., Suite 300, Walnut Creek, CA.

PAR. 20. G.E.C.H., Inc., doing business as Great Expectations of Cherry Hill ("GE Cherry Hill"), is a corporation organized, existing, and doing business under and by virtue of the laws of the state of New Jersey with its office and principal places of business located at One Cherry Hill, Suite 600, Cherry Hill, NJ.

PAR. 21. MWVE, Inc., doing business as Great Expectations of Cleveland ("GE Cleveland"), is a corporation organized, existing, and

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doing business under and by virtue of the laws of the state of Ohio, with its office and principal place of business located at 6300 Rockside Rd., Suite 200, Cleveland, OH.

PAR. 22. GREATEX Denver, Inc., doing business as Great Expectations Video Dating, Ltd. ("GE-Denver"), is a corporation organized, existing, and doing business under and by virtue of the laws of the state of Washington, with its office and principal place of business located at 3773 Cherry Creek North Dr., Suite 140, Denver, CO.

PAR. 23. Sun West Video, Inc., doing business as Great Expectations for Singles ("GE Phoenix"), is a corporation organized, existing, and doing business under and by virtue of the laws of the state of Arizona, with its office and principal place of business located at 5635 N. Scottsdale Rd., Suite 190, Scottsdale, AZ.

PAR. 24. TRIAAC Enterprises, Inc., doing business as Great Expectations of Sacramento ("GE Sacramento"), is a corporation organized, existing, and doing business under and by virtue of the laws of the state of California, with its office and principal place of business located at 2277 Fair Oaks Blvd., Suite 195, Sacramento, CA.

RESPONDENTS' COURSE OF BUSINESS

PAR. 25. GECM is a video dating franchisor. It sells and services franchise operations throughout the United States. As part of its regular course of business, GECM has created and disseminated retail installment contracts (Exhibits 1 and 2) to the franchises described in paragraphs two through twenty-four. The GECM retail installment contracts purport to incorporate the disclosures required by the TILA.

PAR. 26. Respondents Great Expectations are video dating franchises. Respondents have provided financing to their members using retail installment contracts such as Exhibits 1 and 2 to disclose the terms of the financing.

PAR. 27. GECM's TILA disclosure (Exhibit 1) contains erroneous instructions for calculating and disclosing the finance charge and contains a pre-printed annual percentage rate ("APR") of 18%. In addition, Exhibit 1 fails to make the TILA disclosures in the format required by the TILA and fails to identify the creditor as required by the TILA.

PAR. 28. In 1988, GECM learned from its auditor that the calculations and disclosures contained in Exhibit 1 did not comply

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with the TILA. Nevertheless, it continued to disseminate Exhibit 1 to its franchisees and failed to notify them of the erroneous calculations and disclosures.

PAR. 29. In late 1990, GECM created a new retail installment contract, which also purported to incorporate the disclosures required by the TILA and which contained a pre-printed APR of 19.6% (Exhibit 2). Exhibit 2 fails to identify the creditor as required by the TILA and fails to provide the information required by the TILA in the itemization of the amount financed. Furthermore, GECM has disseminated Exhibit 2 to its franchisees but has failed to inform them to discontinue using the erroneous calculation and disclosure instructions that it had previously supplied in Exhibit 1.

PAR. 30. Respondents Great Expectations are creditors as that term is defined in the TILA and Regulation Z.

PAR. 31. The acts and practices of respondents Great Expectations and GECM alleged in this complaint have been and are in or affecting commerce, as "commerce" is defined in Section 4 of the FTC Act.

COUNT I

PAR. 32. Paragraphs one through thirty-one are incorporated herein by reference.

PAR. 33. Respondent GECM has furnished its franchises with TILA disclosures (Exhibits 1 and 2) that, on their face, violated the TILA. When used by respondents Great Expectations, Exhibits 1 and 2 have resulted in false and misleading disclosures of APRs and finance charges to consumers in violation of Section 5 of the FTC Act.

PAR. 34. In the course and practice of its business as described in paragraphs twenty-five through twenty-nine, and paragraph thirty-three, respondent GECM has provided respondents Great Expectations with the means and instrumentalities to violate the Section 5 of the FTC Act.

PAR. 35. The practices described in paragraph thirty-four constitute unfair or deceptive acts or practices in violation of Section 5(a) of the Federal Trade Commission Act, 15 U.S.C. 45(a).

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COUNT II

PAR. 36. Paragraphs one through thirty-one are incorporated herein by reference.

PAR. 37. Respondents GEI, GE Illinois, GE Tennessee, GE Alabama, GE Dallas, GE Houston, GE San Antonio, GE Austin, GE Baltimore, GE DC, GE Raleigh, GE Seattle, GE Portland, GE Columbus, GE Milwaukee, GE San Diego, GE Minneapolis, GE- SFA, GE Cherry Hill, GE Cleveland, GE Denver, GE Phoenix, and GE Sacramento have furnished their members with TILA disclosures that have failed to accurately calculate and disclose the APR. PAR. 38. The practice described in paragraph thirty-seven by respondents GEI, GE Illinois, GE Tennessee, GE Alabama, GE Dallas, GE Houston, GE San Antonio, GE Austin, GE Baltimore, GE DC, GE Raleigh, GE Seattle, GE Portland, GE Columbus, GE Milwaukee, GE San Diego, GE Minneapolis, GE-SFA, GE Cherry Hill, GE Cleveland, GE Denver, GE Phoenix, and GE Sacramento violates Sections 107(a) and (c) of the TILA, 15 U.S.C. 1606(a) and (c), and Sections 226.18(e) and 226.22 of Regulation Z, 12 CFR 226.18(e) and 226.22.

COUNT III

PAR. 39. Paragraphs one through thirty-one are incorporated herein by reference.

PAR. 40. Respondents GE Dallas, GE Houston, GE San Antonio, GE Austin, GE Baltimore, GE DC, GE Raleigh, GE Columbus, GE Milwaukee, GE-SFA, GE Cleveland, GE Phoenix, GE Sacramento, and GE San Diego have furnished their members with TILA disclosures that have failed to accurately calculate and disclose the finance charge.

PAR. 41. The practice described in paragraph forty by respondents GE Dallas, GE Houston, GE San Antonio, GE Austin, GE Baltimore, GE DC, GE Raleigh, GE Columbus, GE Milwaukee, GE-SFA, GE Cleveland, GE Phoenix, GE Sacramento, and GE San Diego violates Section 106 of the TILA, 15 U.S.C. 1605, and Sections 226.4 and 226.18(d) of Regulation Z, 12 CFR 226.4 and 226.18(d).

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COUNT IV

PAR. 42. Paragraphs one through thirty-one are incorporated herein by reference.

PAR. 43. Respondents GE Dallas, GE Houston, GE Seattle, GE Portland, GE Minneapolis, GE Cleveland, GE Denver, and GE Phoenix have furnished their members with TILA disclosures that have failed to disclose the finance charge more conspicuously than any other disclosure except the APR and the creditor's identity. PAR. 44. The practice described in paragraph forty-three by respondents GE Dallas, GE Houston, GE Seattle, GE Portland, GE Minneapolis, GE Cleveland, GE Denver, and GE Phoenix violates Section 122(a) of the TILA, 15 U.S.C. 1632(a), and Section 226.17(a)(2) of Regulation Z, 12 CFR 226.17(a)(2).

COUNT V

PAR. 45. Paragraphs one through thirty-one are incorporated herein by reference.

PAR. 46. Respondents GE Dallas, GE Houston, GE San Antonio, GE Austin, GE Baltimore, GE DC, GE Raleigh, GE Seattle, GE Portland, GE Minneapolis, GE Cleveland, GE Denver, GE Phoenix, and GE Sacramento have furnished their members with TILA disclosures that have failed to segregate the disclosures required by the TILA from all other information provided in connection with the transaction, including the itemization of the amount financed. PAR. 47. The practice described in paragraph forty-six by respondents GE Dallas, GE Houston, GE San Antonio, GE Austin, GE Baltimore, GE DC, GE Raleigh, GE Seattle, GE Portland, GE Minneapolis, GE Cleveland, GE Denver, GE Phoenix, and GE Sacramento violates Section 128(b)(1) of the TILA, 15 U.S.C. 1638(b)(1), and Section 226.17(a)(1) of Regulation Z, 12 CFR 226.17(a)(1).

COUNT VI

PAR. 48. Paragraphs one through thirty-one are incorporated herein by reference.

PAR. 49. Respondents GEI, GE Illinois, GE Tennessee, GE Alabama, GE Dallas, GE Houston, GE San Antonio, GE Austin, GE

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Baltimore, GE DC, GE Raleigh, GE Seattle, GE Portland, GE Columbus, GE San Diego, GE Minneapolis, GE-SFA, GE Cherry Hill, GE Cleveland, GE Denver, GE Phoenix, and GE Sacramento have failed to accurately disclose the itemization of the amount financed.

PAR. 50. The practice described in paragraph forty-nine by respondents GEI, GE Illinois, GE Tennessee, GE Alabama, GE Dallas, GE Houston, GE San Antonio, GE Austin, GE Baltimore, GE DC, GE Raleigh, GE Seattle, GE Portland, GE Columbus, GE San Diego, GE Minneapolis, GE-SFA, GE Cherry Hill, GE Cleveland, GE Denver, GE Phoenix, and GE Sacramento violates Section 128(a) of the TILA, 15 U.S.C. 1638(a), and Section 226.18(c) of Regulation Z, 12 CFR 226.18(c).

COUNT VII

PAR. 51. Paragraphs one through thirty-one are incorporated herein by reference.

PAR. 52. Respondents GEI, GE Illinois, GE Tennessee, GE Alabama, GE Dallas, GE Houston, GE San Antonio, GE Austin, GE Baltimore, GE DC, GE Raleigh, GE Seattle, GE Portland, GE Columbus, GE Milwaukee, GE San Diego, GE Minneapolis, GE- SFA, GE Cherry Hill, GE Cleveland, GE Denver, GE Phoenix, and GE Sacramento have failed to disclose the identity of the creditor.

PAR. 53. The practice described in paragraph fifty-two by respondents GEI, GE Illinois, GE Tennessee, GE Alabama, GE Dallas, GE Houston, GE San Antonio, GE Austin, GE Baltimore, GE DC, GE Raleigh, GE Seattle, GE Portland, GE Columbus GE Milwaukee, GE San Diego, GE Minneapolis, GE-SFA, GE Cherry Hill, GE Cleveland, GE Denver, GE Phoenix, and GE Sacramento violates Section 128(a)(1) of the TILA, 15 U.S.C. 1638(a)(1), and Section 226.18(a) of Regulation Z, 12 CFR 226.18(a).

COUNT VIII

PAR. 54. Paragraphs one through thirty-one are incorporated herein by reference.

PAR. 55. Respondents GE Dallas, GE Houston, GE San Antonio, GE Austin, GE Baltimore, GE DC, GE Raleigh, GE Seattle, GE Portland, GE Minneapolis, GE Cleveland, GE Denver, GE Phoenix,

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and GE Sacramento have furnished their members with TILA disclosures that have failed to provide a description of the amount financed.

PAR. 56. The practice described in paragraph fifty-five by respondents GE Dallas, GE Houston, GE San Antonio, GE Austin, GE Baltimore, GE DC, GE Raleigh, GE Seattle, GE Portland, GE Minneapolis, GE Cleveland, GE Denver, GE Phoenix, and GE Sacramento violates Section 128(a)(8) of the TILA, 15 U.S.C. 1638(a)(8), and Section 226.18(b) of Regulation Z, 12 CFR 226.18(b).

PAR. 57. Respondents GE Dallas, GE Houston, GE San Antonio, GE Austin, GE Baltimore, GE DC, GE Raleigh, GE Seattle, GE Portland, GE Minneapolis, GE Cleveland, GE Denver, GE Phoenix, and GE Sacramento have furnished their members with TILA disclosures that have failed to provide a description of the finance charge.

PAR. 58. The practice described in paragraph fifty-seven by respondents GE Dallas, GE Houston, GE San Antonio, GE Austin, GE Baltimore, GE DC, GE Raleigh, GE Seattle, GE Portland, GE Minneapolis, GE Cleveland, GE Denver, GE Phoenix, and GE Sacramento violates Section 128(a)(8) of the TILA, 15 U.S.C. 1638(a)(8), and Section 226.18(d) of Regulation Z, 12 CFR 226.18(d).

PAR. 59. Respondents GE Dallas, GE Houston, GE San Antonio, GE Austin, GE Baltimore, GE DC, GE Raleigh, GE Seattle, GE Portland, GE Minneapolis, GE Cleveland, GE Denver, GE Phoenix, and GE Sacramento have furnished their members with TILA disclosures that have failed to provide a description of the APR.

PAR. 60. The practice described in paragraph fifty-nine by respondents GE Dallas, GE Houston, GE San Antonio, GE Austin, GE Baltimore, GE DC, GE Raleigh, GE Seattle, GE Portland, GE Minneapolis, GE Cleveland, GE Denver, GE Phoenix, and GE Sacramento violates Section 128(a)(8) of the TILA, 15 U.S.C. 1638(a)(8), and Section 226.18(e) of Regulation Z, 12 CFR 226.18(e).

PAR. 61. Respondents GE Dallas, GE Houston, GE San Antonio, GE Austin, GE Baltimore, GE DC, GE Raleigh, GE Seattle, GE Portland, GE Minneapolis, GE Cherry Hill, GE Cleveland, GE Denver, GE Phoenix, and GE Sacramento have furnished their

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members with TILA disclosures that have failed to provide the total of payments and/or a description of the total of payments. PAR. 62. The practice described in paragraph sixty-one by respondents GE Dallas, GE Houston, GE San Antonio, GE Austin, GE Baltimore, GE DC, GE Raleigh, GE Seattle, GE Portland, GE Minneapolis, GE Cherry Hill, GE Cleveland, GE Denver, GE Phoenix, and GE Sacramento violates Section 128(a)(5) and/or (8) of the TILA, 15 U.S.C. 1638(a)(5) and/or (8), and Section 226.18(h) of Regulation Z, 12 CFR 226.18(h).

PAR. 63. Respondents GE Dallas, GE Houston, GE San Antonio, GE Austin, GE Baltimore, GE DC, GE Raleigh, GE Seattle, GE Portland, GE Minneapolis, GE Cherry Hill, GE Cleveland, GE Denver, GE Phoenix, and GE Sacramento have furnished their members with TILA disclosures that have failed to provide the total sale price and/or a description of the total sale price. PAR. 64. The practice described in paragraph sixty-three by respondents GE Dallas, GE Houston, GE San Antonio, GE Austin, GE Baltimore, GE DC, GE Raleigh, GE Seattle, GE Portland, GE Minneapolis, GE Cherry Hill, GE Cleveland, GE Denver, GE Phoenix, and GE Sacramento violates Section 128(a)(7) and/or (8) of the TILA, 15 U.S.C. 1638(a)(7) and/or (8), and Section 226.18(j) of Regulation Z, 12 CFR 226.18(j).

COUNT IX

PAR. 65. Paragraphs one through thirty-one are incorporated herein by reference.

PAR. 66. Respondents GE Dallas, GE Houston, GE Phoenix, GE San Antonio, GE Austin, GE Baltimore, GE DC, and GE Raleigh have failed to include set-up or other fees that are charged only to consumers who finance the costs of their memberships in the finance charge and the annual percentage rate disclosed to the consumer. They have also failed to exclude these finance charges from the amount financed that is disclosed to consumers. PAR. 67. The practices described in paragraph sixty-six by respondents GE Dallas, GE Houston, GE Phoenix, GE San Antonio, GE Austin, GE Baltimore, GE DC, and GE Raleigh violate Sections 106, 107, and 128(a) of the TILA, 15 U.S.C. 1605, 1606, and 1638(a), and Sections 226.4(b), 226.22, and 226.18(b), (d), and (e) of Regulation Z, 12 CFR 226.4(b), 226.22, and 226.18(b), (d), and (e).

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COUNT X

PAR. 68. Paragraphs one through thirty-one are incorporated herein by reference.

PAR. 69. Respondent GE San Diego has furnished its members with TILA disclosures that have failed to disclose the APR, the finance charge, the amount financed, the total of payments, and the total sales price.

PAR. 70. The practices described in paragraph sixty-nine by respondent GE San Diego violate Section 128(a) of the TILA, 15 U.S.C. 1638(a), and Section 226.18 of Regulation Z, 12 CFR 226.18.

COUNT XI

PAR. 71. Paragraphs one through thirty-one are incorporated herein by reference.

PAR. 72. Respondent GE Houston has furnished its members with TILA disclosures that have failed to disclose the amount financed.

PAR. 73. The practice described in paragraph seventy-two by respondent GE Houston violates Section 128(a) of the TILA, 15 U.S.C. 1638(a), and Section 226.18(b) of Regulation Z, 12 CFR 226.18(b).

COUNT XII

PAR. 74. Paragraphs one through thirty-one are incorporated herein by reference.

PAR. 75. Respondents GEI, GE Alabama, GE Illinois, GE Portland, GE Dallas, GE Houston, GE Cleveland, GE Phoenix, GE San Antonio, GE Austin, GE Seattle, GE Denver, GE Columbus, GE Milwaukee, GE San Diego, GE Minneapolis, GE SFA, GE Cherry Hill, GE Sacramento, GE DC, GE Baltimore, and GE Raleigh have disclosed understated APRs and finance charges to consumers that have resulted in consumers paying more in financing costs than the amount to which they originally agreed.

PAR. 76. The practices described in paragraph seventy-five are unfair or deceptive acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C. 45(a).

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EXHIBIT 1

Expectations RETAIL INSTALLMENT CONTRACT

Name - Last First Middle Age [illegible] 56 Present Address City State Zip [illegible] CO 80010 Social Security # Home Phone How Long At This Address How Long in Area [illegible] [illegible] 3 yrs 26 yrs Employed By Work Phone Present Position [illegible] Income All Sources Driver's License # Month Annual [illegible] Primary Bank accounts Savings Balance Checking Balance [illegible] Credit Reference - Banks Finance Co. Credit Unions Open Closed Limit 1 VISA 2 FIRST INTERSTATE BANK Open Closed Limit

The undersigned Great Expectations (Seller) hereby sells, and the undersigned Buyer, hereinafter referred to as "Member" purchase subject to the provisions of this contract, a MEMBERSHIP in Great Expectations and promises to pay to Great Expectations its assign the TOTAL PAYMENTS (Box 8) in accordance with the Payment Schedule hereinafter set forth

DESCRIPTION OF GOODS AND SERVICES SOLD:

Interviewing, Testing & Evaluating, Processing & Coding, Background check (if necessary), for the purpose of bringing in contact with the purchaser (client) suitable individuals with similar likes and dislikes, this description intended to be partial only, the purchase acknowledges receipt of application form, which is made a part hereto as though set out at length.

READ CAREFULLY AND SIGN ONLY WHEN COMPLETELY UNDERSTOOD

Buyer has compared and evaluated the terms of membership as set forth in Great Expectations Membership Agreement dated 10/31/91 and requests financing of the balance due. Acceptance of the terms of both agreements renders null and void any Buyer's right to cancel previously provided.

I understand that my failure to participate in Great Expectations does not relieve me of my obligation to pay this contract in full regardless of the circumstances. I understand that by signing this Agreement I am a Member of Great Expectations.

MEMBER SIGNATURE X ________________________________

NOTICE TO MEMBER: Upon request, Great Expectations must provide or make available for your examination a statement or table showing how the partial refund of the time price charge is to be computed if any balance of the contract should be prepaid. Member (Buyer) and Great Expectations (Seller) agree that the terms and conditions on the Member's Contract for Membership constitute a part of this contract and are incorporated herein by reference. If due to delinquency, it is necessary to refer this account for collection, then the balance due shall include actual attorney's fee and court costs. In the event Member fails to pay any installment payment when due, the entire balance then owing shall immediately become due and payable, without notice, at the option of Great Expectations or assignee, and Great Expectations shall not be required to provide any services to Member until Member's payment account is made current. If more than one person signs this contract then their obligation shall be joint and several.

ITEMIZATION OF THE AMOUNT FINANCED 1. Cash Price 1595 BALANCE 10. ANNUAL PERCENTAGE RATE 18% 2. Other : 0 1595 11 PAYMENT SCHEDULE:

3. Down Payment - 300 1295 5 successive monthly installments of $ 235 4 Paid 11 14 91 Second Interview - 100 1195 each, commencing 12/15 1991, and one in- 5 Other Payments Due 11 30 91 100 1095 [illegible] 6 Amt Financed (Unpaid Bal on Cash Price #3) 1095 1095 12. DELINQUENCY AND COLLECTION CHARGES: 7 Finance Charge (on Bal. at 1 1/2% x 5 ) no. of payments : 82.13 [illegible] 8 Total Payments (Bal 6 + 7) : 1177.13 13. [illegible] Deferred Payment Price (Bal. 2 + 8) 1677.13 [illegible] DIVIDE by number of payments to calculate [illegible] each installment and summarize on #11. [illegible]

"Notice to buyer: (1) Do not sign this agreement before you read it or if it contains any blank spaces to be filled in (2) You are entitled to a completely filled-in copy of this agreement. (3) You can prepay the full amount due under this agreement at any time (4) If you desire to pay off in advance the full amount due, the amount which is outstanding will be furnished upon request."

SELLER Great Expectations Signature of Member X [illegible] Business Member (Buyer) acknowledges receipt of an exact copy of this Address: 3773 Cherry Creek N. Dr. #440 instrument at the time of its execution Member (Buyer) further City & State: Denver, CO 8007 acknowledges that the blanks in this contract were completed as filled-in and that he has read the disclosures contained herein Authorized prior to signing this contract Signature [illegible] Date Signature of Member X [illegible] Exhibit 1

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EXHIBIT 2

Great Expectations RETAIL INSTALLMENT CONTRACT DATE ________ Name - Last ________________ First ________________ Middle ________________ Age ____ Present Address ________________________________________ City ________________ State ____ Zip ________ Social Security # ________________ Home Phone ________________ How Long At This Address ________ Date of Birth ________ Employed By - Name and Address: ________________________ Work Phone ________ Present Position ________________ Income All Sources Month ________ Annual ________ Driver's License # ________________ Primary Bank Accounts ________________ Checking [ ] Name ________________ Savings [ ] Name ________________ Account # ________________ Account # ________________ The undersigned Great Expectations (Seller) hereby sells, and the undersigned buyer (Member) purchases, subject to the provisions of this Co [illegible] MEMBERSHIP in Great Expectations and promises to pay to Great Expectations or its assigns the TOTAL PAYMENTS in accordance with the [illegible] Schedule hereinafter set forth.

DESCRIPTION OF GOODS AND SERVICES SOLD: Interviewing, Evaluating, Processing & Coding, Background Check (if necessary) and Plac [illegible] Video Library for the purpose of giving Member access to a Video Library or potentially suitable individuals with similar likes and dislikes, this de [illegible] [illegible] to be partial only.

READ CAREFULLY AND SIGN ONLY WHEN COMPLETELY UNDERSTOOD I have considered and evaluated the terms of membership as set forth in the Great Expectations Membership Agreement dated ________ And request financing of the balance due. I understand that my failure to participate in Great Expectations does not relieve me of my obligation to [illegible] at full. I understand that by signing this Contract, and the Membership Agreement, I am a Member of Great Expectations. MEMBER SIGNATURE X ________________ NOTICE TO MEMBER: Upon request, Great Expectations must provide or make available to you an examination a statement or table showing how th [illegible] [illegible] at the time and any change to be computed of any balances of the Contract should be prepaid. Member (Buyer) and Great Expectations (Seller [illegible] that the terms and conditions of the Great Expectations Membership Agreement constitute a part of this Contract and are incorporated herein by ref [illegible] In the event Member fails to pay any installment payment when due, the entire balance (less any unearned Finance Charge) then owing shall imm [illegible] become due and payable, without demand or notice, at the option of Great Expectations or assignee, and Great Expectations shall not be required to [illegible] any services to Member until Member's payment account is made current. PURCHASE PRICE: $ ________ payable in accordance with the Statement of Disclosure below. PAYMENT SCHEDULE: Member's payments hereunder shall be in equal consecutive monthly installments commencing on the ________ day of month after execution of this Contract and continuing on the same day of each month thereafter until paid in full. Interest on the unpaid balance shall be [illegible] both prior and after maturity.

FEDERAL TRUTH IN LENDING DISCLOSURES (Statement of Disclosure) | ANNUAL PERCENTAGE RATE | FINANCE CHARGE Line 4 | AMOUNT FINANCED Line 5 | TOTAL OF PAYMENTS Line 6 | TOTAL SALE PRICE | | The cost of my credit as a yearly rate | The dollar amount the credit will cost me | The amount of credit provided to me or on my behalf $ | The amount I will have paid after I have made all payments as scheduled $ | The total cost of my purchase on credit including my downpayment $ | | 19.6% | $ | $ | $ | (Line 1-6) | You the buyer have the right to receive at this time an itemization of the amount financed. ( ) I want an itemization. ( ) I do not want an itemization. Your payment schedule will be: | Payment Schedule | Up/Down? | | NUMBER OF PAYMENTS | AMOUNT OF PAYMENT | DATE PAYMENT DUE | | | $ | | DELINQUENCY AND COLLECTION CHARGES: If Buyer shall fail or neglect to pay any installment payment when the same shall become due and such delinquency shall continue for a period of more than 10 days, then in addition to the amount of such delinquent installment payment the Buyer shall pay to Seller, as a delinquency and collection charge, an amount equal to 5% of such payment except that such charge shall not exceed $5.00 or be less than $1.00. PREPAYMENT: If you pay off early, you will not have to pay a penalty and you may be entitled to a refund of part of the finance charge. See your Great Expectations Membership Agreement for any additional information about non-payment, default, any required repayment in full before the schedule date and prepayments, refunds and penalties. "ITEMIZATION OF AMOUNT FINANCED"

Prepayment Rebate 1. Total Cash Price $ ________ Buyer may prepay all or all of the unpaid ba [illegible] without penalty and 2. Less Downpayment - $ ________ payment in full Buyer be entitled to a refund of the unearned part 3. Amount Financed $ ________ of the Finance Ch [illegible] computed under the s [illegible] interest basis. How [illegible] 4. Finance Charge $ ________ there will be a min [illegible] Finance Charge of $ [illegible] and no refund if 5. Total of Payments $ ________ unearned charge is less [illegible] $1.00.

Waiver of any default by the Seller shall not operate as a waiver of [illegible] defaults.

Should the buyer default in the payment of any installment hereunder shall pay to Seller all actual and reasonable costs of collection and including reasonable Attorney fees and disbursements. Buyer will pay to the Seller a $10.00 charge for every dishonored or [illegible] other instrument.

Should any term hereof be invalid or unenforceable, the remaining term [illegible] be unaffected by such finding.

NOTICE TO BUYER:

1. Do not sign this agreement before you read it or if it co [illegible] any blank spaces to be filled in.

2. You are entitled to a completely filled in copy o [illegible] agreement.

3. You can prepay the full amount due under this agre [illegible] at any time.

4. If you desire to pay off in advance the full amount du [illegible] amount which is outstanding will be furnished on requ [illegible] Seller GREAT EXPECTATIONS Business Address: ________________________________________ City & State: ________________________________________ Authorized Signature: ________________________ Title ________ Signature of Member X ________________________ Member (Buyer) acknowledges receipt of an exact copy of this instru [illegible] the time of its execution. Member (Buyer) further acknowledges [illegible] blanks in this Contract were completed and filled-in and that s/he has [illegible] disclosures contained herein prior to signing the Contract. Routing: White—FINANCE: Pink—SELLER: Gold—CUSTOMER [illegible] Exhibit 2

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449 Decision and Order

DECISION AND ORDER

The Federal Trade Commission having initiated an investigation of certain acts and practices of Great Expectations Creative Management, Inc., Great Expectations, Inc., GEC Illinois, Inc., GEC Tennessee, Inc., and GEC Alabama, Inc., corporations, and respondents having been furnished thereafter with a copy of the draft of complaint that the Bureau of Consumer Protection proposed to present to the Commission for its consideration and which, if issued by the Commission, would charge respondents with violations of Section 5(a) of the Federal Trade Commission Act and the Truth in Lending Act; and

The respondents, their attorney, and counsel for the Commission having thereafter executed an agreement containing a consent order, an admission by 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 in such complaint, and waivers and other provisions as required by the Commission's Rules; and

The Commission having thereafter considered the matter and having determined that it had reason to believe that respondents have violated the said Acts, and that a complaint should issue stating its charges in that respect, and having thereupon accepted the executed consent agreement and placed such agreement on the public record for a period of sixty (60) days, now in further conformity with the procedure prescribed in Section 2.34 of its Rules, the Commission hereby issues its complaint, makes the following jurisdictional findings, and enters the following order:

1. Great Expectations Creative Management, Inc. ("G/ECM") is a corporation organized, existing, and doing business under and by virtue of the laws of the state of California, with its office and principal place of business located at 16830 Ventura Blvd., Suite P, Encino, CA.

2. Great Expectations, Inc. ("G/EI") is a corporation organized, existing, and doing business under and by virtue of the laws of the state of California, with its corporate office at 16830 Ventura Blvd., Suite P, Encino, CA, and its principal places of business located at

Decision and Order 120 F.T.C.

1640 S. Sepulveda Blvd., Suite 100 Los Angeles, CA, 17207 Ventura Blvd., Encino, CA, and 450 N. Mountain, Suite B, Upland, CA. 3. GEC Illinois, Inc. ("GE Illinois") is a corporation organized, existing, and doing business under and by virtue of the laws of the state of Illinois, with its office and principal place of business located at 1701 E. Woodfield Dr., Suite 400, Schaumburg, IL. 4. GEC Tennessee, Inc. ("GE Tennessee") is a corporation organized, existing, and doing business under and by virtue of the laws of the state of California, with its office and principal place of business located at 5552 Franklin Rd., Suite 200, Nashville, TN. 5. GEC Alabama, Inc. ("GE Alabama") is a corporation organized, existing, and doing business under and by virtue of the laws of the state of Alabama, with its office and principal place of business located at 7529 S. Memorial Pkwy., Suite C & D, Huntsville, AL.

6. The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of the respondents, and the proceeding is in the public interest.

ORDER

I.

It is ordered, That:

A. Respondent G/ECM, a corporation, its successors and assigns, and its officers, agents, representatives, and employees, directly or through any corporation, subsidiary, division, or other device, do forthwith cease and desist from:

1. Providing a retail installment contract or any other financial instrument or disclosure to its franchisees that violates the Truth in Lending Act ("TILA"), 15 U.S.C. 1601 et seq., and Regulation Z, 12 CFR 226;

2. Providing a retail installment contract or other TILA disclosure that contains a pre-printed annual percentage rate; 3. Providing instructions for calculating or disclosing the annual percentage rate, finance charge, or monthly payments that conflict with the TILA and Regulation Z;

4. Failing to take reasonable steps sufficient to ensure that its franchisees are complying with the TILA or Regulation Z including,

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449 Decision and Order

but not limited to, reviewing and randomly testing TILA disclosures used by its franchisees;

5. Failing to terminate, unless prohibited by state law, any franchise that G/ECM knows or should know does not comply with the TILA or Regulation Z;

6. Failing to make available to its franchisees a computer program or other comparable system that accurately calculates the disclosures required by the TILA and Regulation Z; and 7. Failing to provide Attachment 1 to all of its current franchisees;

B. Respondents G/EI, GE Illinois, GE Tennessee, and GE Alabama, their successors and assigns, and their officers, agents, representatives, and employees, directly or through any corporation, subsidiary, division, or other device, in connection with the offering of credit, do forthwith cease and desist from failing to accurately calculate and disclose the annual percentage rate, as required by Sections 107(a) and (c) of the TILA, 15 U.S.C. 1606(a) and (c), and Sections 226.18(e) and 226.22 of Regulation Z, 12 CFR 226.18(e) and 226.22;

C. Respondents G/EI, GE Illinois, GE Tennessee, and GE Alabama, their successors and assigns, and their officers, agents, representatives, and employees, directly or through any corporation, subsidiary, division, or other device, in connection with the offering of credit, do forthwith cease and desist from failing to make all disclosures in the manner, form, and amount required by Sections 122 and 128(a) of the TILA, 15 U.S.C. 1632 and 1638(a), and Sections 226.17 and 226.18 of Regulation Z, 12 CFR 226.17 and 226.18;

D. Respondents G/EI, GE Illinois, GE Tennessee, and GE Alabama, their successors and assigns, and their officers, agents, representatives, and employees, directly or through any corporation, subsidiary, division, or other device, in connection with the offering of credit, do forthwith cease and desist from failing to comply with the TILA, 15 U.S.C. 1601 et seq., and Regulation Z, 12 CFR 226.

Decision and Order 120 F.T.C.

II.

REFUND PROGRAM

It is further ordered, That:

A. Within sixty (60) days following the date of service of this order, respondents G/EI, GE Illinois, GE Tennessee, and GE Alabama shall:

1. For each TILA disclosure relating to any executory contract or any contract consummated within two years prior to July 20, 1994, determine to whom respondents disclosed on the original TILA disclosure an annual percentage rate that was miscalculated by more than one quarter of one percentage point below the annual percentage rate determined in accordance with Section 226.22 of Regulation Z, 12 CFR 226.22, or that disclosed a finance charge that was miscalculated by more than one dollar below the finance charge determined in accordance with Section 226.4 of Regulation Z, 12 CFR 226.4, so that each such person will not be required to pay a finance charge in excess of the finance charge actually disclosed or the dollar equivalent of the annual percentage rate actually disclosed, whichever is lower, plus a tolerance of one quarter of one percentage point; provided, however, that no determination need be made for any person that has already received a full refund of all finance charges paid to respondents;

2. Calculate a lump sum refund and a monthly payment adjustment, if applicable, in accordance with Section 108(e) of the TILA, 15 U.S.C. 1607(e);

3. Mail a refund check to each eligible consumer in the amount determined above, along with Attachment 2; provided, however, that should such consumer have a balance due and owing respondents and should respondents have a legal right to collect such balance under state law and under the terms of their contract with the consumer, the refund may be applied to that balance and the excess, if any, shall be refunded to each such consumer;

4. Provide the Federal Trade Commission with a list of each such consumer, the amount of the refund, the number of payments refunded, the amount of adjustment for future payments and the number of future payments to be adjusted;

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449 Decision and Order

B. No later than fifteen (15) days following the date of service of this order, respondents G/EI, GE Illinois, GE Tennessee, and GE Alabama shall provide the Federal Trade Commission with the name and address of three independent accounting firms, with which they, their officers, employees, attorneys, and agents, have no business relationship. Staff for the Division of Credit Practices of the FTC shall then have the sole discretion to choose one of the firms ("independent agent") and so advise respondents;

C. Within thirty (30) days following the date of adjustments made pursuant to this section, respondents G/EI, GE Illinois, GE Tennessee, and GE Alabama shall direct the independent agent to review a statistically-valid sample of refunds. Respondents shall provide the Federal Trade Commission with a certified letter from the independent agent confirming that respondents have complied with Part II. A. of this order;

D. All costs associated with the administration of the refund program and payment of refunds shall be borne by respondents G/EI, GE Illinois, GE Tennessee, and GE Alabama.

III.

It is further ordered, That respondents, their successors and assigns, shall maintain for at least five (5) years from the date of service of this order and, upon thirty (30) days advance written request, make available to the Federal Trade Commission for inspection and copying all documents and other records necessary to demonstrate fully their compliance with this order.

IV.

It is further ordered, That respondents, their successors and assigns, shall distribute a copy of this order to any present or future officers and managerial employees having responsibility with respect to the subject matter of this order and that respondents, their successors and assigns, shall secure from each such person a signed statement acknowledging receipt of said order.

Decision and Order 120 F.T.C.

V.

It is further ordered, That respondents, for a period of five (5) years following the date of service of this order, shall promptly notify the Commission at least thirty (30) days prior to any proposed change in their corporate structure such as dissolution, assignment, or sale resulting in the emergence of a successor corporation, the creation or dissolution of subsidiaries or affiliates, or any other change in the corporation that may affect compliance obligations arising out of the order.

VI.

It is further ordered, That respondents shall, within one hundred and eighty (180) days of the date of service of this order, file with the Commission a report, in writing, setting forth in detail the manner and form in which they have complied with this order.

ATTACHMENT 1

IMPORTANT NOTICE TO GREAT EXPECTATIONS' FRANCHISEES

We have reached a settlement with the Federal Trade Commission concerning their claims of alleged violations of the Truth in Lending Act and the Federal Trade Commission Act. The Federal Trade Commission believes that the retail installment contracts and the formula listed on them that we may have provided to you in the past may not comply with the Truth in Lending Act.

As part of our settlement, we agreed to alert you to immediately stop using any retail installment contracts we provided until you can verify that they comply with all local, state, and federal laws. As always, we recommend that you have your forms reviewed by your own attorney. We have a computer software program available for your use that can be used to help you make sure your disclosures are accurately calculated. To obtain a copy of this program, please contact Keith Granirer.

Jeffrey Ullman President Great Expectations Creative Management, Inc.

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449 Decision and Order

ATTACHMENT 2

Dear Great Expectations Member:

As part of our settlement with the Federal Trade Commission for alleged violations of the Truth in Lending Act, we are sending you the enclosed refund check in the amount of $_______. The refund represents the amount you may have been overcharged as a result of a possible error in calculating or disclosing the annual percentage rate or finance charge.

[In addition, your future monthly payments have been reduced. Starting immediately, your monthly payments will be $_______.]

We regret any inconvenience this may have caused you.

Great Expectations

Complaint 120 F.T.C.

IN THE MATTER OF

GREAT EXPECTATIONS OF COLUMBUS, INC.

CONSENT ORDER, ETC., IN REGARD TO ALLEGED VIOLATION OF THE TRUTH IN LENDING ACT AND SEC. 5 OF THE FEDERAL TRADE COMMISSION ACT

Docket C-3605. Complaint, Aug. 11, 1995--Decision, Aug. 11, 1995

This consent order requires, among other things, a video dating service franchise to properly and accurately disclose the annual percentage rate ("APR") and other credit terms of financed memberships, as required by the federal Truth in Lending Act, and requires the franchise to establish adjustment refund programs to compensate its past and current members who overpaid finance charges.

Appearances

For the Commission: Stephen Cohen, Judy Nixon and David Medine.

For the respondent: Alan Korpady, Murphy Desmond, Madison, WI.

COMPLAINT

The Federal Trade Commission, having reason to believe that Great Expectations Creative Management, Inc. has violated the Federal Trade Commission Act ("FTC Act"), and that Great Expectations, Inc., GEC Illinois, Inc., GEC Tennessee, Inc., GEC Alabama, Inc., Great Southern Video, Inc., New West Video Enterprises, Inc., San Antonio Singles of Texas, Inc., Austin Singles of Texas, Inc., Great Expectations of Baltimore, Inc., Great Expectations of Washington, D.C., Inc., Great Expectations of Washington, Inc., Sterling Connections, Inc., Private Eye Productions, Inc., Great Expectations - Columbus, Inc., JAMS Financial, Inc., V.L.P. Enterprises, Inc., APM Enterprises - Minn Inc., KGE, Inc., G.E.C.H., Inc., MWVE, Inc., GREATEX Denver, Inc., Sun West Video, Inc., and TRIAAC Enterprises, Inc. (hereinafter sometimes referred to collectively as "Great Expectations") have violated the Truth in Lending Act ("TILA"), its implementing Regulation Z, and the FTC Act, and it appearing to the