United States Postal Service(TM) 


 In the Matter of the Complaint Against: 

 KEVIN MICHAEL RHOADES
 and
 ASSOCIATED CAPITAL FINANCE, INC.,
 Suite 104, 2443 Fair Oaks Boulevard
 at
 Sacramento, CA  95825-7684

 P.S. Docket No. 37/10

 01/14/92

 Finn, James D., Jr., Associate Judicial Officer

 APPEARANCES FOR RESPONDENTS:  Robert J. Sullivan, Esq., Grant Herndon, Esq.,
 Nossaman, Guthner, Knox & Elliott, 915 L Street, Suite 1000,
 Sacramento, CA  95814-3701 

 APPEARANCES FOR COMPLAINANT:  Geoffrey A. Drucker, Esq., Edward Lawee, Esq.,
 United States Postal Service, Law Department,
 Washington, DC  20260-1140

POSTAL SERVICE DECISION ON BREACH OF SETTLEMENT AGREEMENT

On October 17, 199l, Complainant, the United States Postal Service filed a "Petition For Orders Based Upon Breach Of Consent Agreement" in which it alleged that Respondents have breached the terms of a Settlement Agreement executed on December 10, 1990, by Respondent Kevin Michael Rhoades, individually, and as President of Respondent Associated Capital Finance, Inc. ("ACF"). Complainant contends in its Petition that Respondents have resumed making certain of the representations which they agreed to discontinue. Specifically, Complainant alleges that Respondents' advertisement for credit card services violates paragraph 3 of the Settlement Agreement and paragraphs (d) and (g) of Cease and Desist Order No. CD-3064, which was issued on December 14, 1990, pursuant to the terms of the Settlement Agreement.

In the Petition, Complainant sought the issuance of a temporary detention order against mail addressed to Associated Capital Finance, Inc., at 2443 Fair Oaks Boulevard, Suite 104, Sacramento, CA 95825-7684; at 6060 Sunrise Vista Drive, Suite 1999, Citrus Heights, CA 95610-7004; at 1731 Howe Avenue, Suite 320, Sacramento, CA 95825-2210. On the basis of the information and documents contained in the Petition a temporary detention order was issued on October 21, 199l. The Order directed the detention of the mail to the above three addresses and granted Respondents ten days in which to respond to the Petition. Respondents thereafter filed a Motion for Revocation or Stay of Order and a brief in opposition to the Petition. In opposing the Petition Respondents requested a hearing on the matters raised in the Petition. By Order dated November 14, 199l, the request for hearing was denied. n1 However, the Order directed Complainant to respond to that portion of Respondents' opposition pertaining to the allegation that Complainant had failed to comply with the notice requirement of paragraph 5(e) of the Settlement Agreement. Complainant thereafter filed its response.

n1 Under paragraph 5(e) of the Settlement Agreement a hearing will not be held "unless the named party shows good cause why a hearing is warranted." Respondents did not establish that there were genuine issues of material fact or that good cause otherwise existed for a hearing to be held.

FINDINGS OF FACT

l. On December 10, 1990, Kevin Michael Rhoades, individually, and as President of ACF, signed a Settlement Agreement (hereafter "Agreement") in which he agreed that the Judicial Officer or Associate Judicial Officer could issue the proposed cease and desist order appended to the Agreement. Under paragraph 3 of the Agreement Respondents agreed to refrain from soliciting money through the mail in violation of the Order.

2. On December 14, 1990, the Associate Judicial Officer issued the Cease and Desist Order (No. CD-3064) proposed by the parties. Under its terms Respondents agreed in connection with advertising for credit card services for which remittances of money are sought through the mail to cease and desist from representing expressly or implicitly that:

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3. The Agreement also provided that in the event of breach of the Agreement the Judicial Officer (including Associate Judicial Officer) may issue an interim detention order as well as an order of the type described in 39 U.S.C. § 3005.

4. Respondents' advertisements and mailings distributed subsequent to the execution of the Agreement solicited remittances through the mail to the three addresses which are currently subject to the temporary mail detention order (Complainant's Exhibits (CX)-13, 20-22, 36).

5. Respondents' advertisement consists of two pages. Page one contains the following headlines in bold, dark type approximately l/4" high "No Savings Deposit Required]"; "Get Approved]"; "Or Your Money Back]". The introductory paragraph, headlined in dark print "ABSOLUTELY NO RISK]", states:

6. Page 2 of the advertisement likewise contains bold dark headlines such as "NO SAVINGS DEPOSIT REQUIRED]"; "ABSOLUTELY NO RISK]"; "GUARANTEED]"; "REGARDLESS OF CREDIT HISTORY"; "USING OUR SERVICES, IS AS EASY AS 1...2...3...]". An application form is included at the bottom of the page and requests payment in the amount of $69.95 or $78 to receive the names of five banks selected from Respondents' computerized data base that issue a VISA or MasterCard credit card. The advertisement again states that credit card approval is guaranteed or the applicant's money will be refunded. Page two, like page one, states in two separate places that it is possible to obtain credit even if previous credit problems exist such as judgments, liens or bankruptcy (CX-13).

7. The procedure for obtaining refunds is contained in extremely small print at the bottom of the application form. The refund procedure requires that a participant provide ACF with a letter of credit denial from each of the five banks within 90 days of receiving the list from ACF (CX-13). A failure to comply with the refund procedure serves as a basis for denying the refund request (CX-27, 35, 38).

8. Subsequent to submission of the completed application form and payment of the application fee participants in Respondents' program receive a notice from Respondents which contains the names and addresses of five banks which issue credit cards. A participant is advised that in order to receive a credit card he or she must apply directly to the bank. The notice also states that the banks are no more likely than any other banks to issue a VISA or MasterCard credit card if the participant has a bad credit rating. Additionally, the notice states that Respondent ACF is not affiliated or associated in any way with the listed banks (CX-15, 20).

DISCUSSION

The issue to be decided in connection with a Petition for Breach of a Consent Agreement is whether the party signing the agreement has breached its terms by continuing to make the representations which it agreed to discontinue. The determination of the truth or falsity of the representation is generally not in issue. Mark Eden v. Lee, 433 F.2d 1077 (9th Cir. 1970); Nancy Pryor, Inc. v. United States Postal Service, Civil Action No. 80-1933 (D.D.C. 1981); American Consumer, Inc. v. United States Postal Service, 427 F. Supp. 589 (E.D. Pa. 1977); The American Mint, P.S. Docket No. 23/110 (P.S.D. June 16, 1987).

In interpreting advertising representations the probable impact of the advertisement upon ordinary minds is the test to be applied. The impression of advertising on the ordinary mind may be determined by the trier of fact solely on the basis of the advertising itself. Vibra Brush Corp. v. Schaffer, 152 F. Supp. 46l, 468 (S.D.N.Y. 1957), rev'd on other grounds 256 F.2d 681 (2d Cir. 1958); Associated Telephone Directory Publishers, Inc., P.S. Docket No. 13/191 (P.S.D. Jan. 25, 1984). Deception may be present in advertisements when they contain untrue statements or when statements which ought to be contained are omitted. In considering the interpretation which ought to be given to advertising claims, the reasonable implications arising from the claims are to be given weight as well as those claims which are stated expressly. Donaldson v. Read Magazine, Inc., 333 U.S. 178 (1948); Spiegel, Inc. v. F.T.C., 411 F.2d 481 (7th Cir. 1969); Baslee Products Corp. v. United States Postal Service, 356 F. Supp. 841 (D.N.J. 1973); The American Mint, supra. Applying these principles to Respondents' advertising materials, it is concluded that Respondents have breached the Agreement.

Complainant contends that Respondents have violated the terms of the Agreement by continuing to make the representations prohibited by paragraphs (d) and (g) of Cease and Desist Order No. CD-3064. Respondents contend that these representations are not made in their recent advertisements and that Complainant has not made a sufficient evidentiary showing to support its Petition for Breach. Respondents also argue that Complainant has violated the notice provision of the Agreement and thus comes to this proceeding with unclean hands.

Complainant's first contention is that Respondents are continuing to represent that an applicant is likely to receive a Visa or MasterCard credit card regardless of his credit history. By the terms of the Agreement Respondents agreed to cease and desist from representing in their advertisements that "An applicant is likely to receive a VISA or MasterCard credit card even if he has credit history problems..." The language of Respondents' current advertisement, quoted in Findings of Fact nos. 6 and 7, clearly makes this representation. The import and meaning of the language used by Respondents in their current advertisement is unmistakable. The overall impression conveyed to the ordinary reader by such language is that by utilizing Respondents' program he or she would be likely to receive a credit card regardless of credit history. Such representation is prohibited by paragraph (d) of the Cease and Desist Order and constitutes a breach of the terms of the Agreement.

Respondents argue that there has been no violation of the Cease and Desist Order since its advertisement states on page one that the bank references supplied by Respondents "are no more likely than any other banks to issue a...credit card if for some reason you have a bad credit rating (or no credit rating)." Thus, argues Respondents, participants are fully advised that an applicant with a bad credit rating is unlikely to obtain a credit card. Respondents' argument is not persuasive. Respondents' repetitive representations in bold print that applicants may qualify for credit cards regardless of credit history, and even though they have no credit, bad credit, judgments or even bankruptcy, is not overcome by the confusing and somewhat smaller print references to bank policy appearing in the very middle of one paragraph of the advertisement. Thus, the language referred to by Respondents, even if considered a disclaimer, is so inconspicuous and confusing that it would not dispel the effect of the overall impression conveyed to the ordinary reader that applicants are likely to receive a credit card regardless of credit history problems. Kurzon v. United States Postal Service, 539 F.2d 788 (lst Cir. 1976); Lee Daboub, P.S. Docket No. 19/185 (P.S.D. July 10, 1986).

Complainant also contends that Respondents are continuing to represent that use of their services will increase an applicant's chances of obtaining a credit card. Under the Agreement and paragraph (g) of the Cease and Desist Order Respondents agreed to discontinue representing that "[u]tilizing a particular service will increase an applicant's likelihood of obtaining a credit card." The language of Respondents' advertisement, quoted in Findings of Fact nos. 6 and 7, conveys the impression to the ordinary reader that utilizing Respondents' services enhance an applicant's chance of obtaining a credit card. The high fee ($69.95 or $78) for the service reinforces that impression as credit card applications are readily available to the public without utilizing a service such as Respondents'. While Respondents generally deny that the advertisement makes the representation they have presented no persuasive argument or evidence in support of their position. Accordingly, it is concluded that Respondents continue to represent that the use of their service will increase the likelihood of obtaining a credit card.

Respondents additional arguments that the evidentiary showing in support of the Petition is inadequate and improper, and that Complainant itself has violated the terms of the Agreement are also without merit. As previously stated the impression of advertising on the ordinary mind may be determined solely on the basis of the advertising itself. Vibra Brush Corp. v. Schaffer, supra; Associated Telephone Directory Publishers, Inc., supra. Respondents' advertisement is contained in the record (CX-13; Respondents' Exhibit D) and its contents form the basis for the determination that the Agreement has been breached. While Respondents argue that Complainant failed to notify Respondents of the filing of the Petition as required by paragraph 5(e) n2 of the Agreement the uncontradicted statement of Complainant's counsel establishes that a copy of the Petition was mailed to Respondents on the same date it was filed with the Judicial Officer. Therefore, Complainant has not violated the terms of the Agreement.

n2 Paragraph 5(e) provides "On or before the date the petition is filed, Complainant will send a copy of the petition to either the named party [Respondents] or his attorney. The named party will have the right to reply to the petition in writing before the Judicial Officer [or Associate Judicial Officer] issues any final order(s)."

In summation, Respondents have breached the terms of paragraph 3 of the Agreement in the manner alleged in the Petition. Accordingly, pursuant to paragraph 5 of the Agreement the interim detention order will remain in effect and an Order under 39 U.S.C. § 3005 will be issued within 30 days from date of this Decision unless Respondents advise the Associate Judicial Officer that judicial review of the Decision has been sought.