Riley Manufactured Homes, Inc. and Company President Agree to Settle Truth in Lending Act Violations

Ads for Financing Lacked Key Disclosures

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Riley Manufactured Homes, Inc., an Urbana, Illinois-based seller of prefabricated housing, and company president, Dennis Ohnstad, have agreed to settle Federal Trade Commission charges that they violated the advertising provisions of the Truth in Lending Act (TILA) by failing to provide consumers with important information needed to evaluate advertised offers for financing the purchase of manufactured homes. The FTC charged that Riley failed to state a rate of finance charge and failed to state the rate as an annual percentage rate (APR) as required by the TILA and its implementing Regulation Z. The proposed settlement would prohibit the company and Ohnstad from violating any provisions of the TILA in the future.

According to the FTC, federal law requires that credit advertising containing certain "triggering" terms - such as downpayments, monthly payments, or the finance charge - must also disclose "clearly and conspicuously" certain other essential terms of the deal. The TILA and its implementing Regulation Z requires that ads for financed purchase plans using a triggering term also state clearly and conspicuously the amount or percentage of the downpayment, the terms of repayment, and the APR, which is a measure of the true cost of the financed purchase. These laws and regulations are designed to ensure that consumers are provided full, accurate, and understandable information about credit offers.

In its complaint, the FTC alleges that Riley and Ohnstad violated the TILA in their advertising by stating a rate of finance charge for financing the purchase of the advertised homes but failed to state the rate as an APR. In addition, the complaint alleges that Riley and Ohnstad placed ads stating "triggering" terms (the amount or percentage of any downpayment, the number

of payments, or the period of repayment; the amount of any payment; or the amount of any finance charge) but failed to disclose the information required by Regulation Z (the amount or percentage of the downpayment; the terms of repayment; and the APR).

The proposed settlement would prohibit Riley Manufactured Homes and Dennis Ohnstad from engaging in the practices alleged in the complaint and would require that they comply with all of the provisions of the TILA and its implementing Regulation Z in the future. The proposed

settlement also contains a number of recordkeeping and reporting requirements designed to assist the FTC with monitoring compliance with the order.

An announcement regarding the proposed consent agreement will be published in the Federal Register shortly. The agreement will be subject to public comment for 30 days, until July 13, after which the Commission will decide whether to make it final. Comments should be addressed to the FTC, Office of the Secretary, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The Commission vote to place the proposed consent agreement on the public record for comment was 5-0. The FTC's Midwest Region in Chicago handled this matter.

NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $11,000.

Copies of the complaint, proposed consent agreement, and an analysis of the agreement to aid in public comment are available from the FTC's web site at and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580; toll-free: 877-FTC-HELP (877-382-4357); TDD for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.

Howard Shapiro

Office of Public Affairs


John C. Hallerud or C. Steven Baker

Midwest Region

55 E. Monroe Street, Suite 1860

Chicago, Illinois 60603-5701


(FTC File No. 992 3202)

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