ANALYSIS OF PROPOSED CONSENT ORDER
TO AID PUBLIC COMMENT

The Federal Trade Commission has accepted an agreement, subject to final approval, to a proposed consent order from Fleet Finance, Inc., Home Equity U.S.A., Inc. (Rhode Island), and Home Equity U.S.A., Inc. (Delaware) (collectively referred to as "respondents").

The proposed order would settle charges that Fleet Finance, Inc., incorporated in Delaware ("Fleet Finance"), and a related, now-defunct corporation, Fleet Finance, Inc., which was incorporated in Rhode Island, violated the Truth in Lending Act ("TILA"), and its implementing Regulation Z, and the Federal Trade Commission Act ("FTC Act"). The TILA and Regulation Z require creditors to provide consumers with written disclosures of the costs and terms of consumer credit transactions and also establish various substantive protections for consumers, including the right of rescission in certain mortgage transactions. Section 5 of the FTC Act prohibits, inter alia, deceptive acts or practices in or affecting commerce.

The proposed order has been placed on the public record for sixty (60) days for reception of comments by interested persons. Comments received during this period will become part of the public record. After sixty (60) days, the Commission will again review the agreement and the comments received and will decide whether it should withdraw from the agreement or make final the agreement's proposed order.

The complaint alleges that Fleet Finance(1) has extended consumer credit transactions in which Fleet Finance acquired or retained a security interest in the consumers' principal dwellings and failed to provide the consumers with the right to rescind the credit transactions by: (a) failing to provided consumers with notices of the right to rescind; (b) waiving consumers' right to rescind, and disbursing funds, pursuant to rescission waivers that were insufficient; and (c) failing to take actions terminating the security interest and returning any money and property given by the consumers when consumers exercise their right to rescind. According to the complaint, these practices violate Sections 125(a), (b) and (d) of the TILA, 15 U.S.C.  1635(a), (b), and (d); and Sections 226.23(a), (b), (c), (d) and (e) of Regulation Z, 12 C.F.R.  226.23(a), (b), (c), (d) and (e); and constitute deceptive acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C.  45(a). The complaint also alleges that Fleet Finance purchased consumer loan transactions through assignments in which Fleet Finance acquired or retained security interests in the consumers' principal dwellings that failed in these same ways to provide the consumers with the right to rescind the credit transactions. The complaint alleges that, based on Fleet Finance's assignee liability in Section 131 of the TILA, 15 U.S.C.  1641, such purchases violate these same sections of the TILA and Regulation Z; and constitute deceptive acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C.  45(a).

The complaint alleges that, in extending consumer credit transactions, Fleet Finance also has failed to provide consumers with all TILA disclosures of the costs and terms of credit and/or to provide all TILA disclosures prior to consummation of credit transactions. According to the complaint, these failures violate Sections 121 and 128 of the TILA, 15 U.S.C.  1631 and 1638; and Sections 226.17 and 226.18 of Regulation Z, 12 C.F.R.  226.17 and 226.18 of Regulation Z, 12 C.F.R.  226.17 and 226.18; and constitute deceptive acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C. 45(a). The complaint also alleges that Fleet Finance has purchased consumer credit transactions through assignments that failed to provide all the TILA disclosures of the costs and terms of credit and/or failed to provide all the disclosures prior to consummation of credit transactions. According to the complaint, based on Fleet Finance's assignee liability in Section 131 of the TILA, 15 U.S.C.  1641, such purchases violate Sections 121 and 128 of the TILA, 15 U.S.C.  1631 and 1638, and Sections 226.17 and 226.18 of Regulation Z, 12 C.F.R.  226.17 and 226.18 of Regulation Z, 12 C.F.R.  226.17 and 226.18; and constitute deceptive acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C. 45(a).

The complaint further alleges that Fleet Finance, in consumer credit transactions that it extended, has failed to provide or failed to provide accurately certain TILA disclosures, including but not limited to the annual percentage rate; the number, amount, and timing of payments scheduled to repay the obligation; and the total of payments. These failures allegedly violate Sections 107 and 128 of the TILA, 15 U.S.C. 1606 and 1638; and Sections 226.18(e), (g) and (h) and 226.22 of Regulation Z, 12 C.F.R.   226.18(e), (g) and (h) and 226.22; and constitute deceptive acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C.  45(a). The complaint also alleges that Fleet Finance purchased consumer credit transactions through assignments that failed to provide or failed to provide accurately the TILA disclosures listed above in this paragraph. The complaint alleges that, based on Fleet Finance's assignee liability in Section 131 of the TILA, 15 U.S.C.  1641, such purchases violate Section 128 of the TILA, 15 U.S.C. 1638, and Sections 226.18(a), (g) and (h) of Regulation Z, 12 C.F.R.   226.18(a), (g) and (h); and constitute deceptive acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C.  45(a).

The complaint also alleges that, in consumer credit transactions it extended, Fleet Finance has failed to retain TILA disclosures, TILA notices of the right to rescind, promissory notes and/or other evidence of the terms and conditions of consumer credit transactions for two years after the date disclosures are required to be made or action is required to be taken concerning the transaction. The complaint alleges that these acts and practices violate Section 226.25(a) of Regulation Z, 12 C.F.R.  226.25(a). The complaint further alleges that Fleet Finance has purchased consumer credit transactions through assignments that failed to retain the documents and other evidence described above in this paragraph. According to the complaint, based on Fleet Finance's assignee liability in Section 131 of the TILA, 15 U.S.C.  1641, such purchases violate Section 226.25(a) of Regulation Z, 12 C.F.R.  226.25(a).

To remedy the violations charged and to prevent respondents from engaging in similar acts and practices in the future, the proposed order contains a consumer redress program and injunctive provisions. The order requires respondents to pay $1.3 million for the redress program and administrative costs. Specific aspects of the redress program are contained in Appendix A to the proposed order. The program applies to certain consumers whose mortgage loans were originated or purchased by Fleet Finance, or Fleet Finance incorporated in Rhode Island ("Fleet Finance (RI)"), during January 1, 1990 - December 31, 1993. It covers certain consumers whose mortgage loans, inter alia, were either paid off to or written off by Fleet Finance, Fleet Finance (RI), or Fleet Financial Group, Inc. ("FFG"), a parent corporation, except by foreclosure ("eligible consumers" or "ECs"), or were paid off by foreclosure by Fleet Finance, Fleet Finance (RI), or FFG ("eligible foreclosed consumers" or "EFCs"), or who contact an 800-number set up under the proposed order and who provide information showing they are, in essence, ECs or EFCs ("qualified consumers" or "QCs").(2)

Within ten business days after service of the order, respondents will deliver to the independent agent that will conduct the redress program two lists of the ECs and EFCs in their records.(3) The independent agent will then add those consumers, who are not on such lists, that the Division of Enforcement of the Commission's Bureau of Consumer Protection ("DOE") specifies are ECs or EFCs and provides to the independent agent (i.e., consumers who have contacted Commission staff in the past several years regarding such loans). The independent agent will mail to all consumers on the two enhanced lists a letter substantially identical to the letter attached as Appendix B to the order ("Appendix B letter") and a claim form substantially identical to the form attached as Appendix C to the order ("Claim Form"). Consumers receiving the Appendix B letter and the Claim Form will have sixty days from the date on their Appendix B letter to return their Claim Form to the independent agent.

As noted above, the order also permits consumers who learn about this settlement and think they might fall within the definitions of either an "eligible consumer" or an "eligible foreclosed consumer" (even though they are not on the two enhanced lists) to call an 800-number staffed by the independent agent within sixty days after the date of the order.(4) The independent agent will inform the consumers that they must submit to the independent agent, within ninety days after the date of the order, documents showing that they meet the definition of an EC or an EFC (even though they are not on the two enhanced lists). Within 120 days after the date of the order, the independent agent will review any documents submitted, decide which consumers, if any, qualify for a redress payment, and submit to DOE a list of those consumers for that Division's approval. If the independent agent is unable to decide whether a particular consumer qualifies, the independent agent will forward the consumer's documents to DOE, who will make the determination.

After receiving the list of consumers whom DOE has deemed "qualified consumers," the independent agent will calculate, and submit to DOE for approval, the amount of redress that, according to the independent agent, should go to each consumer ("proposed amount"). This proposed amount will be the same for each consumer who receives a redress payment. The independent agent will calculate the proposed amount by dividing the "total available redress" by the number of consumers permitted to receive a redress payment. The "total available for redress" will be the $1.3 million paid by respondents, minus: the amount of the independent agent's estimated fees; $10,000 to be reserved for contingencies; and an additional amount, if the independent agent deems it appropriate, to be reserved to pay the redress fund's tax liabilities.(5) The number of consumers permitted to receive a redress payment will be the total of (1) those consumers who were sent an Appendix B letter and submitted a Claim Form, and (2) those consumers who were deemed qualified consumers under Paragraph VIII of Appendix A. The amount of the redress payment to each consumer will not exceed $1000. In addition, no consumer will receive more than one payment, regardless of the number of transactions he or she may have had that were either extended or purchased by Fleet Finance or Fleet Finance (RI).(6)

After DOE reviews the proposed amount, makes any necessary corrections, and informs the independent agent of the approved amount, the independent agent will mail checks in the approved amount to all consumers permitted to receive a redress payment. Along with each check, the independent agent will mail a letter substantially identical to the letter attached to the order as Appendix D and the Commission's consumer education pamphlet pertaining to home equity loans. Consumers will have ninety days after their checks are mailed to cash them.(7)

Those consumers who are not deemed "qualified consumers" by DOE will receive a letter substantially identical to the letter attached to the order as Appendix E. The independent agent will maintain a toll-free number for consumers covered by the order that will be included on all Appendix B, D, and E letters.

The order prohibits respondents from communicating with ECs or EFCs concerning the redress program, except to refer consumers to the 800-number provided by the independent agent, until the Commission staff have notified respondents that the redress program has been completed.

The proposed order prohibits respondents from misrepresenting the following in connection with any extension of consumer credit or advertisement to promote any extension of credit: the annual percentage rate; the number, amount, and timing of payments scheduled to repay the obligation and the total of payments; the right to rescind the credit transaction; or any term or condition of financing for any consumer credit transaction. The injunctive provisions also require respondents to make all the disclosures required by the provisions of the TILA, as amended, and Regulation Z and the Regulation Z Commentary, as amended, that govern credit transactions, such as the annual percentage rate, the total of payments, and the number, amount, and timing of scheduled payments.

In connection with rescindable credit transactions under Regulation Z, as amended, the proposed order prohibits respondents from: (1) failing to deliver to consumers two copies of a proper Notice of Right to Rescind, as required by Regulation Z, as amended; (2) modifying or waiving a consumer's right to rescind the transaction unless and until the consumer gives the applicable respondent a dated written statement that describes a bona fide personal financial emergency, specifically modifies or waives the right to rescind the credit transaction, and bears the signature of all consumers entitled to rescind the credit transactions, as required by Regulation Z, as amended; (3) disbursing any money (other than to escrow), performing any service, or delivering any material unless and until (a) time has expired for receipt of the rescission notice and the applicable respondent has not received notice of the rescission from the consumer, (b) consumers entitled to waive their right to rescind do so during the three-day rescission period, or (c) after midnight of the third business day following the later of consummation of the credit transaction, delivery of the rescission notice, or delivery of all material disclosures required by the TILA and Regulation Z, as amended, the applicable respondent obtains a signed written statement from all consumers entitled to rescind the credit transaction stating that three business days have passed since the later of consummation of the credit transaction, delivery of the rescission notice or delivery of all material disclosures, and no consumer has rescinded the credit transaction; and (4) failing to take all actions necessary to terminate the security interest created under the consumer's credit transaction and return any money that the consumer has given in connection with the credit transaction when the consumer exercises his or her right to rescind, as required by Regulation Z, as amended.

The proposed order also prohibits respondents from failing to make all disclosures, and in the manner, required by the TILA and Regulation Z, as amended, and from failing in any other manner to meet the requirements of the TILA and Regulation Z, as amended, including but not limited to 15 U.S.C.  1615, as amended.

The proposed order also prohibits respondents from purchasing any consumer credit transaction in which the disclosures required by Sections 121, 122, 125, and 128 of the TILA, 15 U.S.C.   1631, 1632, 1635, and 1638, as amended, violate, on their face, any provision of the TILA, Regulation Z and the Commentary, as amended, by, for example, inaccuracies or incompleteness or absence of disclosures required by the TILA, Regulation Z, and the Regulation Z Commentary.

The purpose of this analysis is to facilitate public comment on the proposed order, and it is not intended to constitute an official interpretation of the agreement and proposed order or to modify its terms in any way.


1. Fleet Finance is the entity charged in the complaint as engaging in specified violations of the TILA, Regulation Z and the FTC Act. Fleet Finance, as well as successor corporations, Home Equity U.S.A., Inc. (Rhode Island) and Home Equity U.S.A., Inc. (Delaware), are respondents in the Agreement Containing Consent Order.

2. See proposed order, definition nos. 10-11. Such consumers must meet definition nos. 9(a) and 9(c), or definition nos. 10(a) and 10(c). Such consumers need not meet definition nos. 9(b) or 10(b), which require consumers' names to be reflected in certain records.

3. If, before the date of service of the order, respondents have provided final copies of such lists, they will submit a sworn statement to that effect and need not provide additional lists after the order is served.

4. The "date of the order" refers to the date when the order is served on respondents, which will not occur until after the end of the sixty-day comment that begins today.

5. See Appendix A, Par. IX.

6. If all consumers permitted to receive a redress payment have received the $1000 maximum and funds remain after payment of administrative costs, the remaining funds will be paid to the United States Treasury.

7. The independent agent will redeposit the funds from any undeposited checks into the redress fund. If DOE determines that the redress fund has enough money to merit a second-round distribution to consumers, DOE will instruct the independent agent to conduct such a distribution. If a second-round distribution is not feasible, the independent agent will pay the funds from the undeposited checks to the Treasury instead.