In the Matter of the Complaint Against

SPECTRUM
120 Wall Street
New York, NY 10005

and

Jack W. Payne
6409 Parkwood Way
Paradise, CA 95969

P.S. Docket No. 13/154;

08/17/82

Mason, Randolph D.

APPEARANCE FOR COMPLAINANT:
Sand ra C. McFeeley, Esq.
Consumer Protection Division
Law Department
United States Postal Service
Washington, DC 20260

APPEARANCE FOR RESPONDENT:
Jack W. Payne
6409 Parkwood Way
Paradise, CA 95969

INITIAL DECISION

This proceeding was initiated on May 28, 1982, when the Consumer Protection Division, Law Department, U. S. Postal Service ("Complainant"), filed a Complaint which alleges that Respondents are engaged in conducting a scheme or device for obtaining money or property through the mails by means of false representations concerning loans in violation of 39 U.S.C. § 3005. Respondents' Answer generally denied any violation of the statute but specifically admitted certain portions of the Complaint. Respondents also indicated that they would not appear at the hearing.

On June 22, 1982, Respondents filed a Motion to Dismiss on the grounds of improper service, "insufficient evidence," and "inadequate investigation." By order dated June 28, 1982, the undersigned denied Respondents' Motion to Dismiss. I hereby reaffirm my ruling on that motion.

A hearing was held by the undersigned on July 1, 1982, in Washington, D.C. Respondents failed to appear and Complainant was permitted to introduce evidence and submit written proposed findings of fact and conclusions of law at the hearing. By order dated July 1, 1982, Respondents were provided an opportunity to submit written proposed findings of fact and conclusions of law; however, Respondents chose not to do so. Based on the entire record herein, including my observation of the witness and her demeanor, the exhibits and other relevant evidence adduced at the hearing, I make the following findings of fact and conclusions of law:

FINDINGS OF FACT

1. Spectrum is a business entity operated by Jack W. Payne (Ans. ? I). "Respondent" hereinafter refers to both Spectrum and Payne.

2. Respondent seeks remittances through the mail for loan information by means of the following advertisement (Exh. 1):

BORROW $1,000-$50,000 secretly - "over night." Anyone] Credit unimportant. Repay anytime. Incredibly low interest. No interviews, collateral, cosigners. Unique "Financier's Plan". Full infor mation. $2 (refundable). Spectrum, 120 Wall St., 2 FR, New York, NY 10005.

3. Persons respond to the above advertisement by sending $2 for information to a mail receiving service at 120 Wall Street, New York, New York. The mail receiving service then forwards responses to Respondent at 6409 Parkwood Way, Paradise, California (Ans. ? III). Respondent then sends its customers a four-page pamphlet entitled "The Financing Report." (Ans. ? IV(2); Tr. 6).

4. As alleged in paragraph IV(1) of the Complaint, Respondent represents that it will furnish complete information and details which will enable the "ordinary person" to obtain a loan with certain characteristics. In this regard, the word "Anyone]" in the advertisement clearly encompasses the ordinary person. In addition, the words "credit unimportant," and "no interviews, collateral, cosigners," lead ordinary persons to respond to the advertisement.

5. As alleged in paragraph IV(1) of the Complaint, Respondent represents in the advertisement (Exh. 1) that:

1. Respondent will provide complete information and details ("full information") which will enable the ordinary person to obtain a loan with some or all of the following characteristics:

(a) loans from "$1,000 - $50,000;"

(b) obtained "overnight;"

(c) regardless of borrower's previous credit history or background ("credit unimportant");

(d) repaid at borrower's convenience ("repay anytime");

(e) below prevailing interest rates ("incredibly low interest");

(f) without interviews, collateral or cosigners.

6. Complainant alleges in paragraph IV (2) of the Complaint that Respondent represents that Respondent has a unique financing plan that will enable the ordinary person to obtain a loan with the characteristics identified above. Respondent admits making this representation if "ordinary person" can be read as "persons." Having previously decided that the entire advertisement is directed to the "ordinary person," I find this representation is made in the advertisement (Exh. 1). The latter explicitly refers to a "Unique Financier's Plan."

7. Contrary to the allegation made in paragraph IV (3) of the Complaint, Respondent does not represent, either expressly or implicitly, that it is the source of the loans referred to in the advertisement.

8. Respondent falsely represents that it will provide complete information and details which will enable the ordinary person to obtain a loan with some or all of the characteristics listed in paragraph IV (1) (a) through (f) of the Complaint. Respondent admits, and the "Financing Report" (Exh. 2) reveals, that "some degree of sophistication and negotiating and bargaining ability is essential before being able to benefit from Respondent's information." (Ans. ? IV(1)). Obviously, an ordinary person would not benefit from the information.

9. Moreover, although Respondent's advertisement promises "full information" that would enable anyone to obtain loans with certain extremely attractive terms (see Complaint, ? IV (2)). Readers of the advertisement reasonably expect to receive a "financier's plan" providing details of how to obtain the attractive loans. Such details are not provided (Exh. 2). Instead, the pamphlet makes cryptic references to numerous financing methods and instructs the reader to "investigate" (id.). The pamphlet also lists the names and addresses of a number of financial institutions; however, several were out of business, and none of the companies (or their successors) made loans under the terms set forth in paragraph IV (1) (a)-(f) of the Complaint (Tr. 8, 25, 12-24; Exh. 2).

10. Respondent falsely represents that it has a unique financing plan that will enable the ordinary person to obtain a loan with the characteristics identified in paragraph IV (1) of the Complaint. Respondent admitted that such a representation would be false; it is clear that an "ordinary person" would not benefit from the information (Ans. ? IV (2)).

11. The false representations set forth above are material since they tend to induce readers to purchase Respondent's pamphlet.

CONCLUSIONS OF LAW

1. Respondent's advertisement is to be considered as a whole and the meaning is to be determined in light of the probable impact of these materials on a person of ordinary mind. Donaldson v. Read Magazine, 333 U.S. 178, 189 (1948); Peak Laboratories, Inc. v. U. S. Postal Serv., 556 F.2d 1387, 1389 (5th Cir. 1977). The impression of advertising on the ordinary mind is a question of law for the presiding officer to determine and testimony on interpretation is not required to make that determination. Vibra-Brush v. Schaffer, 152 F. Supp. 461 (S.D.N.Y. 1957). Express misrepresentations are not required. It is the net impression that the advertisement is likely to make upon individuals to whom it is directed that is important, and even if an advertisement is so worded as not to make an express representation, if it is artfully designed to mislead those responding to it, the false representation statute is applicable. G. J. Howard Co. v. Cassidy, 162 F. Supp.568 (E.D.N.Y. 1958); see also, Virginia State Board of Pharmacy v. Virginia Citizens Consumer Council, 425 U.S. 748 (1976).

2. Applying the foregoing standards, I find that Respondent's advertisement makes the representations alleged in paragraphs IV (1) and IV (2) of the Complaint. However, Respondent did not make the representation alleged in paragraph IV (3) of the Complaint.

3. The representations found are materially false in fact.

4. Complainant has established its case by a preponderance of the reliable and probative evidence of record. S.E.C. v. Savoy Industries, 587 F.2d 1149, 1168 (D.C. Cir. 1978).

5. Respondent's advertisement indicates that the $2 is refundable. However, the promise of a refund will not dispel the effect of false advertisements. Farley v. Heininger, 105 F.2d 79 (D.C. Cir. 1939); Borg-Johnson Electronics, Inc. v. Christenberry, 169 F. Supp. 746 (S.D. N.Y. 1959).

6. Respondent is engaged in the conduct of a scheme for obtaining remittances of money through the mails by means of materially false representations in violation of 39 U.S.C. § 3005.

7. An order pursuant to 39 U.S.C. § 3005, in the form attached, should be issued against Respondent.