The nation's largest video dating franchiser, Great Expectations Creative Management Inc., and 23 of its franchises, including one in Vienna, have agreed to settle Federal Trade Commission allegations that they overbilled thousands of customers, the agency announced yesterday.
FTC officials said that members who financed their initial membership fees -- ranging from $975 to $3,100 -- were charged a higher rate of interest than the one disclosed on contracts.
The agency alleged that in financing contracts with the cited franchises, customers were told that they would pay 18 percent annual interest, but were billed at rates as high as 40 percent. Under terms of the settlement, individuals will be mailed refunds for the amount they overpaid. The FTC said the refunds would range from as little as $10 to as much as $195, depending on the length of membership and financing terms.
"The investigation has gone on for a couple years because there were so many violations at so many different franchises," said Stephen Cohen, an attorney at the FTC's division of credit practices.
The 23 Great Expectations franchises cited in the complaint agreed to hire an independent auditor to assess how much customers are owed. The FTC estimates that total refunds will exceed $200,000.
"The company never knowingly tried to misrepresent finance charges" said Keith Granirer, chief operating officer of Great Expectations International, which purchased the company in January.
Even members due tiny sums were angered to learn they have been paying more interest than their agreements specified. "It's kind of underhanded," said Stan Burek, a systems engineer in Alexandria who was overcharged by $1 dollar a month for his membership in Great Expectations in Vienna. "The amount is so minor, most people wouldn't bother with it. But if you do that with a few hundred customers, that's a nice piece of change."
The Great Expectations franchise in Vienna has more than 4,000 members, according to its owner, Ray Walker. In November 1993, the company agreed to refund nearly $25,000 to 28 Washington area customers who said they were pressured to purchase memberships or who never received promised services.
Some franchise owners argued that the amounts involved were too small to warrant a two-year government investigation. "We believe that the FTC made a bigger deal of this than they should have," said Richard Devine, vice president of Singles of Texas Inc., which owns Great Expectations franchises in San Antonio and Austin. "Some people have $5 to $10 coming back to them, but in most cases the postage will cost us more than the check we send out."
The FTC accused Great Expectations of a number of violations of the Truth in Lending Act. It stated that many operations levied a one-time set-up fee of $50, which was not included when interest charges were computed. Anyone who paid that $50 fee is owed, at minimum, that money with interest.
The agency also alleged that Great Expectations Creative Mangement was told by its auditor in 1988 that there were mistakes in its retail installment contract. According to the FTC's complaint, the company never advised franchises of the error. Also, the FTC alleged that the revised contract it sent out in 1990 violated the Truth in Lending Act by failing to properly itemize finance fees. Great Expectations has been matchmaking for 19 years. Today, it has more than 150,000 members in 50 franchises across the country and claims that its services lead to two marriages every day. The franchisor, based in Encino, Calif., owns 10 operations. The company arranges dates by having members browse through a video library of other members. Once two people say they'd like to meet, the company releases their names and phone numbers to each other.