Analysis of Proposed Consent Order to Aid Public Comment

The Federal Trade Commission has accepted an agreement to a proposed consent order from Riley Manufactured Homes, Inc., and its president, Dennis Ohnstad ("respondents").

The proposed consent order has been placed on the public record for thirty (30) days for reception of comments by interested persons. Comments received during this period will become part of the public record. After thirty (30) days, the Commission will again review the agreement and the comments received and will decide whether it should withdraw from the agreement and take other appropriate action or make final the agreement's proposed order.

The Commission's complaint alleges that respondents' credit advertisements violated Section 144 of the Truth in Lending Act, ("TILA"), 15 U.S.C. § 1664, and Section 226.24 of Regulation Z, 12 C.F.R. §§ 226.24. Congress established statutory disclosure requirements for credit advertising under the TILA and directed the Federal Reserve Board ("Board") to promulgate a regulation implementing such statute - - Regulation Z. See 15 U.S.C. §§ 1601-1667e; 12 C.F.R. Part 226.

According to the complaint, respondents' advertisements stated a rate of finance charge for financing the purchase of manufactured homes but did not properly disclose the rate as an annual percentage rate, as required by Regulation Z. The complaint also alleges that respondents' credit advertisements stated a monthly payment amount or other "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 following information required by Regulation Z: the amount or percentage of the downpayment; the terms of repayment; and the annual percentage rate.

The proposed consent order contains provisions designed to remedy the violations charged and to prevent the proposed respondents from engaging in similar acts in the future. In particular, Part I of the proposed order prohibits respondents from: (A) stating a rate of finance charge without disclosing the APR; (B) using triggering terms without providing the additional disclosures required by Regulation Z; and (C) failing to comply with TILA and Regulation Z. Part II of the proposed order requires respondents to maintain and make available records of compliance for five years. Part III requires respondents to distribute copies of the order to company personnel. Part IV requires respondents to notify the Commission of changes in corporate structure that may affect compliance obligations under the proposed order. Part V requires the individual respondent to notify the Commission of changes in his employment status for three years. Part VI requires respondents to file compliance reports. Finally, Part VII sunsets the proposed order after twenty years.

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 in any way their terms.