Fleet v. United States Consumer Council, Inc. (In Re Fleet)

ORDER

AND NOW, this 11th day of January, 1989, upon consideration of the Opinion containing Proposed Findings of Fact, Conclusions of Law and Recommendations of Bankruptcy Judge of December 8, 1988, it. is hereby ORDERED AND DECREED as follows:

1. The Recommended Opinion and Proposed Findings of Fact and Conclusions of Law are ADOPTED by this court.

2. Judgment is entered in favor of the Plaintiff class and against Defendants UNITED STATES CONSUMER COUNCIL, INC. and JACK RHODE (hereinafter “the Defendants”), and in favor of Defendants BETTY ROSI and DEBORAH TAVARES.

3. The Defendants are determined to be liable to each member of the Plaintiff class in an amount equal to three times any amount paid by each member of the plaintiff class to the Defendants. The precise amounts of liability of the Defendants to each class member are to be determined by the bankruptcy court hereinafter in separate proceedings.

4. The Defendants are hereby enjoined from engaging in the following activities:

a. Providing counsel, advice, or recommendations concerning the laws of debtor-creditor relationships or of bankruptcy.

b. Providing counsel, advice, and recommendations with respect to the preparation by the debtor of bankruptcy petitions, statements and schedules or other legal pleadings.

c. Preparing or filing, either directly or indirectly, for any debtors of Chapter 7 or Chapter 13 petitions, statements, schedules or and Chapter 13 plans.

d. Soliciting clients for the purpose of providing the services referred to in paragraphs 4a through 4c above.

e. Misrepresenting the services that they can and will provide to consumers through either oral representations or any form of advertisement.

f. Using any emblem or insignia resembling the Great Seal of the United States or otherwise indicating an affiliation with the government.

g. Collecting of any fee in connection with services provided to consumers which is grossly in excess of the fair market value of the services provided.

5.The parties are directed to confer to resolve the issue of attorney’s fees due to the Plaintiffs’ counsel, but, if they are unable to do so, and the Plaintiffs have made a reasonable demand, the Plaintiffs’ counsel is accorded an opportunity to file a Motion in the bankruptcy court requesting attorney’s fees and costs, including compensation on the fee application, if such is necessary, per 15 U.S.C. § 1692k(a)(3) and 73 P.S. § 201-9.2(a), within thirty days of the Order of the District Court approving this Proposed Order, said Motion to be procedurally in conformity with In re Meade Land and Development Co., Inc., 527 F.2d 280 (3d Cir.1975); and In re Mayflower Associates, 78 B.R. 41 (Bankr.E.D. Pa.1987).

*323 OPINION CONTAINING PROPOSED FINDINGS OF FACT, CONCLUSIONS OF LAW, AND RECOMMENDATIONS OF BANKRUPTCY JUDGE

(Dated Dec. 8, 1988)

A. INTRODUCTION

The instant adversary proceeding, certified as a class action, has been pending in this court for over five and a half years and is finally ready for a substantially-final disposition. The proceeding was initiated to attack the practices of the United States Consumer Council (hereinafter referred to as “USCC”) and was brought against USCC and several individuals allegedly associated with it alleging that USCC was engaged in a variety of unfair and deceptive acts and practices in violation of the New Jersey law prohibiting unfair and deceptive acts and practices, N.J.S.A. 56:8-1, et seq. (hereinafter “NJ UDAP”). 1 The exact nature of the services advertised and provided by USCC is hotly disputed by the parties. The Defendants maintain that USCC attempted to negotiate payment plans with its clients’ creditors, and, if all' else failed, referred clients to an attorney to file a bankruptcy. The Plaintiffs maintain that the Defendants were operating nothing more than a grossly over-priced lawyer referral service soliciting and referring financially distressed consumers to designated. attorneys to file Chapter 13 bankruptcies and that no other services or alternatives were presented to consumers contacting USCC. The Plaintiffs further maintain that USCC only referred clients to attorneys with whom it had some sort of referral agreement and who paid USCC for such referrals.

The Plaintiffs argue that the conduct of the Defendants was unfair and deceptive in a number of respects. For the reasons discussed below, we hold that USCC did misrepresent the nature of its organization and the services that it provided and that its fees were unconscionable in light of the services that were in fact provided by it. We find that the conduct of USCC and its chief operating officer, JOHN RHODE, a/k/a JACK RHODE (hereinafter “Rhode”), was fraught with unconscionable commercial practices in violation of NJ UDAP. In addition to enjoining the Defendants from engaging in such deceptive practices and ordering that the Plaintiffs be reimbursed for any fees paid to USCC, we award Plaintiffs treble damages and attorney’s fees under NJ UDAP. N.J.S.A. 56:8-19. 2

B. PROCEDURAL HISTORY

The present action was instituted in a Complaint filed on March 31, 1983. The Plaintiffs alleged therein that the Defendants had, through their operation of USCC, committed acts which constituted unfair and deceptive acts and practices in violation of NJ UDAP and the Pennsylvania Unfair Trade Practices and Consumer Protection Law, 73 P.S. § 201-1, et seq. (hereinafter “PA UDAP”), and that the Defendants had charged undisclosed fees in connection with representation of debtors in bankruptcy proceedings in violation of 11 U.S.C. § 329. The Plaintiffs requested class certification and injunctive and declaratory relief, as well as damages and attorney’s fees.

The claims between these parties have been the subject of four reported Opinions to date, all involving USCC and Rhode. In *324 the first, on October 15,1985, our predecessor, the Honorable William A. King, Jr., denied the Defendants’ Motion to Dismiss the Complaint for lack of subject matter jurisdiction, lack of personal jurisdiction, and failure to state a cause of action upon which relief can be granted. In re Fleet, 53 B.R. 833 (Bankr.E.D.Pa.1985) (hereinafter “Fleet I”). In denying the Defendants’ Motion, Judge King concluded that the allegations of Plaintiffs’ Complaint, if proven, would establish an abuse of the bankruptcy court system. Id. at 839. He also determined that this proceeding was “non-core” and “related” to the Debtors’ bankruptcy case, rendering it necessary for us to submit proposed findings of fact and conclusions of law to the district court herein. Id. at 838-40. See Bankruptcy Rule (hereinafter “B.Rule”) 9033(a). In Fleet v. United States Consumer Council, Inc., 70 B.R. 845 (E.D.Pa.1987) (hereinafter “Fleet II”), the District Court on March 3, 1987, adopted, for the most part, our Recommendation that the Defendant’s belated Motion to set aside a default judgment which had been entered against USCC and Rhode should be denied. The plaintiff class was conditionally certified in a decision of August 18, 1987, found at In re Fleet, 76 B.R. 1001 (Bankr.E.D.Pa.1987) (hereinafter “Fleet III”). The conditional nature of this class certification was based upon our concern over the potential difficulty of identifying and administering relief to members of the plaintiff class. As a result, the Plaintiffs were directed to submit their proposal for addressing the unnamed parties’ claims, id. at 1012-13, which they subsequently proceeded to do. We also held that, due to the Plaintiffs’ delay in moving for class certification, the default judgment would apply to only the named Plaintiffs. Id. at 1007-08. Defendants Rhode and USCC and Rhode’s wife Lorraine were also defendants in a separate adversary brought by the present plaintiff class in which the District Court adopted our recommendation to set aside, as fraudulent transfers to avoid the potential judgment of the Plaintiffs, conveyances of the Rhodes’ present home from USCC to both Rhodes to Lorraine Rhode only. In re Fleet, 89 B.R. 420, 421 (E.D.Pa.1988) (hereinafter “Fleet IV”).

The tortuous procedural history in this case is recited in Fleet II, 70 B.R. at 846-50, and Fleet III, 76 B.R. at 1003-05, through August 18, 1987, and will not be reiterated here. After our Opinion and Order of August 18, 1987, the Plaintiffs submitted their proposal for identifying class members, and both parties filed cross-motions for reconsideration of our Opinion regarding class certification. These Motions were denied, and we found the Plaintiffs’ proposals adequate, resulting in an Order of October 1, 1987, that this matter could be maintained as a class action pursuant to Federal Rule of Civil Procedure (hereinafter “F.R.Civ.P.”) 23(b)(3). At that time, we also established a discovery schedule and scheduled the matter for trial on June 14, 1988. On October 21, 1987, the Defendants filed the long-awaited Answer to the class action Complaint.

Subsequent to our Order of October 1, 1987, the court was called upon to consider a number of discovery disputes, mainly involving the Plaintiffs’ efforts to locate class members through the attorneys who accepted referrals from USCC. On May 25, 1988, we granted the Plaintiffs’ unopposed motion to bifurcate the trial and limited the proceedings on June 14, 1988, to trial of issues of liability, postponing consideration of potential individual damages to be awarded to class members.. The matter did proceed to trial on June 14 and 17, 1988. After a brief extension of the briefing schedule established in an Order of June 10, 1988, the Plaintiffs submitted their trial Brief on September 6, 1988, and the Defendants submitted theirs on October 18, 1988. The Plaintiffs declined the opportunity afforded them in the Order to submit a reply brief.

As this is a non-core proceeding, we are obliged to submit proposed findings of fact and conclusions of law to the district court. Our specific Findings of Fact follow. Our Conclusions of Law are discussed under headnotes reciting each Conclusion.

*325 C. FINDINGS OF FACT

1. USCC was established in 1980 and is a corporation, registered in New Jersey.

2. USCC began doing business from a Moorestown, N.J., office in 1980. This office was subsequently relocated in Camden, N.J. Offices were also opened in Newark, N.J., in April, 1982, and in Washington, D.C., in July, 1982. The home office in Camden shared space and staff with a real estate business owned and operated by Rhode.

3. The Newark and Washington offices were closed in January, 1983, and the Camden office stopped seeing clients in February, 1983, and closed in March 1983.

4. While USCC has not been actively engaged in business since 1983, USCC has not been dissolved and still exists as a corporate shell.

5. Rhode was the founder and, at all times, the president and sole shareholder of USCC. In addition, Rhode was responsible for the overall operation of USCC, including the training and supervision of all USCC employees. In addition, he was in charge of all marketing and advertising.

6. Defendant DEBORAH TAVARES appears to have been an employee of USCC who met with some of the Plaintiffs at the USCC offices.

7. No evidence was presented regarding the identity of Defendant BETTY ROSI or her role in the operations of USCC.

8. Rhode was licensed as a real estate broker in New Jersey. Apart from his education and experience as a real estate broker, Rhode had no training or experience in consumer financing, bankruptcy, real estate foreclosures, consumer counseling, or other legal matters.

9. None of the employees of USCC had any training in consumer counseling other than as provided by Rhode.

10. Rhode and all of the other USCC employees were not qualified to provide legal advice regarding bankruptcies.

11. Nineteen (19) members of the plaintiff class (hereinafter “the Consumers”) testified at the trial. Each of the Consumers had contacted USCC seeking assistance between late 1980 and early 1983. At the time that they had contacted USCC, each of the Consumers had been facing serious financial difficulties, usually due to unemployment, illness, or marital separation.

12. The majority of the Consumers testified that they were in arrears on mortgage payments and that foreclosure proceedings had been instituted or were being threatened against them when they contacted USCC. Sheriff sales of the homes of several of the Consumers had been scheduled before they learned of USCC. Most of the Consumers expressed a fear of losing their homes, and contacted USCC to prevent such a loss.

13. The Consumers learned of the existence of USCC through newspaper, television, and radio advertisements. In addition, USCC sent direct mail solicitations to persons whose homes were scheduled to be sold at sheriffs sale.

14. USCC radio and television ads, of which a video presentation was shown at trial, indicated that USCC was a “financial counseling service” that could help consumers to “consolidate and erase almost any debt” and could arrange home mortgages and other refinancing. The advertisements also indicated that USCC could help stop sheriffs sales and repossessions. At least one of USCC’s newspaper ads indicated that a customer’s “initial consultation” was free.

15. Business cards for USCC indicated that they were involved in refinancing, second mortgages, business loans, and wage earner plans for Chapter 13 bankruptcies.

16. In the beginning of its operations, USCC used a circular emblem which resembled the Great Seal of the United States. The emblem contained an American eagle with stars and stripes across its chest clasping a sheaf of arrows in one talon and an olive branch in the other. This emblem was used on the USCC stationery, business cards, and client agreements and was displayed on the walls and doors of the USCC’s office.

*326 17. Sometime in late 1981, USCC discontinued use of the eagle emblem at the request of the Burlington County, New Jersey Office of Consumer Affairs (hereinafter “OCA”). The eagle emblem was replaced with a logotype which included a knight in armor, shield in hand, with the inscription “Champion: A person who fights for another or for a cause; defender; protector; supporter.”

18. USCC refused to discontinue including “United States” in its name, though requested to do so by the Burlington OCA.

19. The majority of the Consumers who testified indicated that they believed that USCC was a government agency or was affiliated with the federal government. Reasons given for this belief were the use of the name: “United States Consumer Council;” the use of the eagle emblem; and the fact that the USCC offices were located near other governmental agencies.

20. Many of the Consumers who contacted USCC did so to arrange to have their bills “consolidated” and a repayment plan negotiated with their creditors. 3 Those Consumers facing mortgage foreclosure contacted USCC to stop the foreclosure and save their homes.

21. The Consumers who contacted USCC were scheduled for an appointment at a USCC office. They were advised when they called or at the time of their appointment to bring in a fee and copies of their bills and deed.

22. The Consumers were told, when they called or came in for their appointments, that USCC could “help them” or “solve their problems” and that USCC could “consolidate” their bills. The consumers generally understood this to mean that USCC would negotiate payment agreements whereby their creditors would accept lower monthly payments.

28. USCC charged the Consumers fees ranging from $195.00 to $260.00. Some Consumers were also charged additional amounts by USCC for “filing fees” or were asked to bring in mortgage payments which many of the Consumers testified were never, in fact, sent to their mortgage company.

24. The Consumers were advised that they had to pay the fee to USCC before USCC would help them with their financial problems.

25. Some of the Consumers were advised that the fee paid to USCC was “to get the process started” or a “good faith payment to creditors” or for a “title search and survey.” In fact, none of these fees were paid to the Consumers’ creditors or for a title search.

26. The Consumers usually came to the USCC offices for but one appointment with a USCC employee. The appointment usually lasted approximately twenty minutes and the USCC employee took notes during their conversations. A few of the Consumers reported that the USCC interviewer with whom they met did not look at their bills or take any notes of their conversation.

27. During the USCC interview, the interviewer gathered information about the Consumer’s bills and discussed Chapter 13 bankruptcies generally. No “counseling” of consumers occurred during the course of these interviews.

28. Those Consumers who were eligible thereafter were never advised of the possibility of seeking an assignment of a mortgage insured by the Federal Housing Administration to the United States Department of Housing and Urban Development (hereinafter “HUD”), under the Mortgage Assignment Program. 4 Disabled consum *327 ers were not advised to apply for credit disability benefits or other financial assistance that may have been available to them. Consumers were not advised of the availability of free legal assistance from local legal service programs, nor were they advised of the availability of free lawyer referral services operated by local and state bar associations. Rhode testified that he was not aware of any of these programs, or of any federal or state programs available to help people with foreclosure problems, and therefore, it is unlikely that any employees of USCC were aware of them, or advised the Consumers about them.

29. The Consumers who retained the services of USCC signed an agreement which contained a disclaimer stating that USCC is “not a governmental agency.” Rhode testified that this disclaimer was included in the contract to prevent clients from “misconstruing” the “United States” in USCC’s name as indicating an affiliation in some way with the federal government.

30. The agreement provides that the consumer was retaining USCC as “exclusive financial consultant” for the “express purpose of arranging for a possible resolution of client’s financial condition.” The agreement further provides for payment to USCC of a non-refundable fee.

31. At the conclusion of the interview and after payment of the USCC’s fee, the Consumers were advised that a bankruptcy was the only means for them to effectively deal with their financial problems. The Consumers were then advised that they would be referred to one of USCC’s lawyers to file a bankruptcy. Some of the Consumers reported that they were told that they were being referred to attorneys who would “handle” their problems without being told that they were being referred there to file a bankruptcy.

32. Only Georgia Davis of the nineteen Consumers indicated that USCC had attempted any sort of negotiations with her creditors. All of the other consumers were referred to a USCC lawyer at or soon after their interview. Even with respect to Ms. Davis, no repayment plan was entered into and she too was referred to an attorney for bankruptcy on her third visit.

33. According to all of the Consumers, with the possible exception of Ms. Davis, apart from the interview and the referral to the attorney, USCC did nothing else on their behalf.

34. USCC did not stop sheriff sales or repossessions.

35. USCC referred all of its customers from southern New Jersey and Philadelphia, to David P. Daniels, Esquire, to file bankruptcies. Customers from northern New Jersey were referred to Dean Sutton, Esquire, and customers in the Washington, D.C. area were referred to Charles Broida, Esquire, also to file bankruptcies. (Hereinafter these attorneys are referred to individually or collectively as “the referral attorney(s)”). Consumers were not given a choice of which attorney to go to see.

36. Some of the Consumers stated that they were advised that they were being referred to “their,” i.e., USCC’s attorney. Many of the Consumers reasonably assumed that the referral attorneys were employees of or in some way affiliated with USCC.

37. Some of the Consumers were advised by USCC that the fee they paid to USCC would be credited toward the referral attorney’s fee. Others simply assumed that the fee would be so credited.

38. It appears that the referral attorneys filed Chapter 13 bankruptcies on behalf of each of the Consumers who was referred to them by USCC.

39. After being sent there by USCC, the Consumers met with the referral attorneys. The attorney generally did not have any background information regarding them, although, on some occasions, it appeared that the referral attorney did have the financial information previously provided to USCC.

40. When they were sent to the referral attorney, the Consumers were advised to bring an amount equal to one mortgage payment or a minimum of $300.00 (for consumers who did not have a mortgage) and a $60.00 filing fee. The Consumers indi *328 cated that, to the best of their knowledge, the “mortgage payments” that they paid to the referral attorney were never paid to their respective mortgage companies.

41. The Consumers testified that the referral attorneys charged fees for their services in handling their bankruptcies ranging from $400.00 to $1,500.00. None of the Consumers were given credit for any amounts previously paid to USCC by the referral attorneys.

42. Many of the Consumers indicated that they were greatly dissatisfied with the services provided by USCC and indicated that they felt they had been charged $195.00 to $260.00 simply to be referred to a lawyer. 5 It appears that if these consumers had known in advance what services would or would not be provided by USCC that they would not have agreed to pay the fee. 6

43. The testimony of the Consumers was consistent regarding their experiences with USCC and was very credible. The Consumers were candid regarding their recollections, and appeared to have good recall of the details, even though the events had occurred over five years before the trial. Their demeanor, as a whole, was totally uncontrived. The Consumers impressed the court as a group of average consumers who felt that they had been cheated by USCC.

44. Patricia Tuck, Director of the Camden County, New Jersey OCA, also testified in this matter on behalf of the Plaintiffs. Her agency had conducted an investigation of the operations of USCC after receipt of consumer complaints similar to those expressed by the Consumers here. According to complaints received by OCA, Rhode and other USCC employees had advised consumers that USCC was a federal program and that their credit would not be effected by filing for a Chapter 13 bankruptcy or could be re-established within six months of filing such a bankruptcy. Such statements would, of course, have not been true.

45. On April 22, 1983, Tuck participated in a meeting between Rhode and representatives of the New Jersey Office of Consumer Protection (hereinafter “NJ OCP”). Discussed at that time were concerns of the NJ OCP that the USCC name simulated a governmental agency and that USCC advertisements inferred that USCC possessed the ability to stop foreclosures and repossessions. Rhode advised the NJ OCP that USCC had ceased operations as of March 31, 1983; agreed to reimburse the fees paid by all known USCC customers; and agreed to set up an escrow account for unknown customers in an amount to be decided by the NJ OCP. No reimbursements or establishment of an escrow account or fund were ever accomplished.

46. The only witness for the Defendants was Rhode. No “satisfied” customers, nor other former employees of USCC were called to rebut the Plaintiffs’ evidence.

47. Rhode’s testimony contradicted that of the Consumers in several respects, most notably regarding the services provided by USCC. Rhode testified that USCC attempted to establish a repayment agreement with all of its clients’ creditors. According to Rhode, USCC initially wrote to the creditors and followed up its letters within a week. He stated that it was only if these efforts were unsuccessful that USCC would refer a client to an attorney for a bankruptcy. Rhode testified that all USCC clients were advised that letters would be sent to their creditors and that all of the Consumers who testified that they were not advised of such services were “in error.” Rhode did admit that re-payment agreements were rejected by creditors or *329 were not feasible for the majority of USCC clients.

48. Rhode provided the Camden OCA with copies of forms utilized by USCC. Included among these forms were blank Chapter 13 Statement forms with David P. Daniels’ name typed in as attorney for the debtor. At trial in this matter, however, Rhode denied use of these forms, indicating instead that USCC had transposed the questions from the Chapter 13 Statement onto another sheet of paper which was used during the interview and was provided to Daniels for the sake of “continuity.”

49. We find, however, that USCC employees were, at least in some cases, using the Chapter 13 Statements during the interviews with consumers. We believe that Rhode was unwilling to admit this practice in light of allegations that USCC was engaged in the unauthorized practice of law. Excluded from the forms provided to the Camden OCA were any of the letters which were purportedly sent to clients’ creditors, which suggests to us that such letters and services were non-existent.

50. Rhode’s testimony lacked the candor and sincerity of that of the Consumers. A particularly doubtful element of Rhode’s testimony concerns his contentions regarding payments made to him by Daniels. Admitted into evidence were a number of checks made payable from Daniels to USCC. These checks were written over a period from December, 1981, through March, 1983, and totalled $109,223.30, an average monthly payment of approximately $6,826.46. Rhode claimed that this was compensation for appraisals of the homes of USCC clients done in connection with their bankruptcies and for completion, by USCC, of the bankruptcy questionnaires that were provided to Daniels. We believe that it is most unlikely that such appraisals would be needed for all or most of the clients referred to Daniels. If these services were performed by Rhode personally, there is no reason why the payments were made to USCC. In addition, many of the Consumers testified that when they visited the referral attorney, that attorney had no background information on them whatsoever. We therefore disbelieve that such appraisals were the reason for the payments and that, in fact, these payments were referral fees paid to USCC from Daniels.

51.In addition, Rhode’s answers in other areas were often evasive and his manner often defensive. Numerous inconsistencies in his testimony appeared. For example, at depositions entered into evidence in this matter, Rhode indicated that he was unable to recall the last names of any of his employees at USCC. In defense of his poor memory, Rhode indicated that his employees were “minimum wage type” who never stayed long. At later trials, however, Rhode admitted that his brother and his children were among his employees and he denied that his employees were usually “minimum wage” employees. We simply do not believe that USCC’s business method was as he portrayed it, but that it was fraught with misrepresentation, as the Consumers portrayed it. Thus, we conclude here, as we have in other matters, that Rhode generally lacks credibility. See Fleet II, 70 B.R. at 849; and Fleet IV, 89 B.R. 426.

D. CONCLUSIONS OF LAW

I. THE RECORDS OF THE OCA’S AND THE NJ OCP WHICH WERE OFFERED INTO EVIDENCE BY THE PLAINTIFFS ARE ADMISSIBLE UNDER THE BUSINESS RECORD EXCEPTION OF THE HEARSAY RULE SET FORTH IN 803(6)

Initially, we must decide the admissibility of certain documents offered by the Plaintiffs in support of their case and objected to by the Defendants. These documents include: (1) A Complaint Form completed by a consumer-client of the Camden County OCA relating to USCC which had been submitted to it; (2) An OCA record of a complaint filed by a consumer against USCC; (3) A letter from the Director of the Burlington County OCA to an attorney regarding consumer complaints against USCC; (4) A letter from Daniels enclosing an agreement between USCC and a customer that was provided to USCC by the customer; and (5) A memorandum from the *330 NJ OCP describing a meeting with Rhode and his attorney. 7 The Defendants objected to these documents on the ground that they were each inadmissible hearsay. The Plaintiffs maintain that these exhibits are admissible as exceptions to the hearsay rule pursuant to Federal Rule of Evidence (hereinafter “FRE”) 803(6) relating to business records and FRE 803(8)(C) relating to public records. 8

We conclude that FRE 803(8)(C) is not applicable here, since that Rule pertains only to admission of factual findings resulting from an investigation conducted pursuant to law. While the NJ OCP may have been investigating USCC, none of the contested documents contain factual findings resulting from such investigation. Compare In re Japanese Electronic Products, 723 F.2d 238, 264 (3d Cir.1983); and Lloyd v. American Export Lines, Inc., 580 F.2d 1179, 1182-83 (3d Cir.1978). Thus, the present case is distinguishable from In re Gulph Woods Corp., 82 B.R. 373 (Bankr.E. D.Pa.1988), where we admitted, under FRE 803(8)(C), State Ethic Commission Orders containing factual conclusions which were issued after a formal hearing by that body.

However, FRE 803(6) provides for the admissibility of business records or data made from information transmitted by a person with knowledge thereof, if the record is kept in the regular course of business. The Plaintiffs maintain that the internal records of the OCA’s and the NJ OCP relating to their investigation are admissible so long as there are sufficient circumstances to indicate the trustworthiness of such documents. See United States v. Central Gulf Lines, Inc., 575 F.Supp. 1430 (E.D.La.1983). See also 5 WIGMORE ON EVIDENCE, § 1561(b) (Chadbourn rev.1974). Defendants maintain that the proferred records are not admissible business records since they were not prepared by employees of the OCA offices. See Johnson v. Lutz, 253 N.Y. 124, 170 N.E. 517 (1930). See also McCORMICK ON EVIDENCE, § 310, at 878-880 (3d ed. 1984); FRE 803, Advisory Committee Notes to Exception (6). Compare Lewis v. Baker, 526 F.2d 470, 472-74 (2d Cir.1975) (railroad company’s accident report admissible even though it contained an employees’ version of an accident where sufficient indicia of trustworthiness exists); and Gordon v. Robinson, 210 F.2d 192, 196-198 (3d Cir.1954) (officer’s testimony of records of accident he had not witnessed admissible; the important consideration is whether a business record is derived from an efficient clerical system).

We believe that the records offered here are admissible as business records pursuant to FRE 803(6). Despite the conflicting authorities considering the admissibility of business records containing information from an outside source, it seems clear that such records may be admissible where the outsider’s statements fall within another exception to the hearsay rule. United States v. Baker, 693 F.2d 183, 188 (D.C.Cir.1982); and McCORMICK, supra, § 310, at 878-880. To the extent that the *331 profered documents may be objectionable as “double hearsay,” it appears that, as long as both links in the evidentiary chain fall within exceptions to the hearsay rule, the evidence is not excludable. See FRE 805.

The Camden County OCA record of a consumer complaint, the second of the five items in issue, appears unobjectionable since it is an internal record produced by the OCA. The information provided by the consumer in the Complaint Form referenced in the first item related to representations made by employees of USCC, which would not be considered hearsay since it related admissions by a partyopponent. See FRE 801(d)(2). The third and the fifth items referenced above are simply admissible business records, irrespective of the fact that their “custodian” was not present to testify. See Mississippi River Grain Elevator, Inc. v. Bartlett & Company, Grain, 659 F.2d 1314, 1319 (5th Cir.1981) (trustworthy records are admissible under FRE 803(6) even when not introduced through testimony of their custodian). The fourth item, the letter from Daniels to OCA, does not appear objectionable as hearsay since it is not offered to establish the truth of the matters contained therein. See FRE 801(d).

The Defendants have not suggested anything about the circumstances of preparation of the proferred documents that would indicate a lack of trustworthiness and this is the key element of FRE 803(6). We note that the New Jersey OCAs and the NJ OCP are not parties to this action and have no bias or interest therein. Their records, as instrumentalities of the state, appear highly reliable. As a result, all of the proferred business records of these agencies will be admitted.

II. USCC’S MARKETING SCHEME MISREPRESENTED THE SERVICES ACTUALLY PROVIDED BY IT AND CONSTITUTED A DECEPTIVE TRADE PRACTICE IN VIOLATION OF THE NJ UDAP

New Jersey, like Pennsylvania and most other American jurisdictions, has enacted legislation which prohibits unfair or deceptive acts and practices utilized in connection with the advertisement and sale of goods and services. See In re Russell, 72 B.R. 855, 870 (Bankr.E.D.Pa.1987). 9 The NJ UDAP prohibits, at N.J.S.A. 56:8-2:

[T]he act, use or employment by any person of any unconscionable commercial practice, deception, fraud, false pretense, false promise, misrepresentation, or the knowing concealment, suppression or omission, in connection with the sale or advertisement of any merchandise or real estate, or with the subsequent performance of such'person as aforesaid, whether or not any person has in fact been misled, deceived or damaged thereby, ...

The NJ UDAP was designed to prevent sellers from overreaching. by prohibiting deceptive sales and advertising practices in connection with the marketing of goods and real estate. See Meshinsky v. Nichols Yacht Sales, Inc., 110 N.J. 464, 541 A.2d 1063, 1066 (1988); Fenwick v. Kay American Jeep, Inc., 72 N.J. 372, 371 A.2d 13, 15 (1977); D’Ercole Sales, Inc. v. Fruehauf Corp., 206 N.J.Super. 11, 501 A.2d 990, 996 (App.Div.1985). The Act is remedial and has been liberally construed in favor of protecting consumers. Barry v. Arrow Pontiac, Inc., 100 N.J. 57, 494 A.2d 804, 811 (1985). A violation of N.J UDAP may be established by a preponderance of the evidence. Hyland v. Aquarian Age 2,000, Inc., 148 N.J.Super. 186, 372 A.2d 370, 372 (Ch.Div.1977).

Deception or uneonseionability in advertising is gauged by the “capacity to mislead.” Fenwick, supra, 371 A.2d at 16; D'Ercole Sales, supra, 501 A.2d at 996 (App.Div.1985); and Matter of Shack, 177 N.J.Super. 358, 426 A.2d 1031, 1034 (App. Div.1981), certif. denied, 87 N.J. 352, 434 A.2d 95 (1981). Where the possibility of consumer deception is present, it need not be proven that a consumer has in fact been misled or deceived. Kugler v. Romain, 58 N.J. 522, 279 A.2d 640, 648 (1971); Barry, *332 supra, 494 A.2d at 810; and Skeer v. EMK Motors, 187 N.J.Super. 465, 455 A.2d 508, 511 (App.Div.1982). The issue to be resolved is whether an advertisement is misleading to the average consumer, not how it might be understood by a knowledgeable, sophisticated consumer. Barry, supra, 494 A.2d at 810; Chattin v. Cape May Green, Inc., 216 N.J.Super. 618, 524 A.2d 841, 852 (App.Div.1987), cert. denied,