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The full case caption appears at the end of this opinion. Posner, Chief Judge. The complaint inthis class action suit against anautomobile dealer and a finance company(and some associated individuals)charges, in 136 paragraphs, violations ofthe Truth in Lending Act, RICO, and stateconsumer-protection laws. 15 U.S.C.sec.sec. 1601 et seq.; 18 U.S.C. sec.sec.1961 et seq.; 815 ILCS 505/2; 205 ILCS660/8.5. Because the district judgedismissed the suit for failure to state aclaim, we take the facts alleged in thecomplaint to be true, though of coursewithout vouching for their truth. Three practices are challenged. First,when the dealer arranges financing withthe finance company, and the amount ofthe loan exceeds the retail value of theautomobile by more than 20 percent, thefinance company levies an additionalcharge on the dealer, who raises theprice of the car to cover the additionalcharge. The addition is not listed as afinance charge on the Truth in Lendingdisclosure form that the dealer isrequired to give the purchaser and sodoes not increase the interest ratedisclosed on the form. Yet it is afinance charge–labels don’t control–andso it must be disclosed. Walker v.Wallace Auto Sales, Inc., 155 F.3d 927,931-34 (7th Cir. 1998); Gibson v. BobWatson Chevrolet-Geo, Inc., 112 F.3d 283,284-85 (7th Cir. 1997); see also Williamsv. Chartwell Financial Services, Ltd.,204 F.3d 748, 753-54 (7th Cir. 2000);Adams v. Plaza Finance Co., 168 F.3d 932,934 (7th Cir. 1999); Cowen v. Bank Unitedof Texas, FSB, 70 F.3d 937, 942 (7th Cir.1995). Against this conclusion thedefendants’ only argument is that thecomplaint, despite its verbosity, doesnot actually allege that the dealerincreases the price only of the cars thatare financed, as opposed to those thatare sold for cash. We think it does,because it alleges that the sale price ofthe financed cars substantially exceedsthe price at which comparable vehiclesare sold for cash, as in Walker v.Wallace Auto Sales, Inc., supra, 155 F.3dat 931-32. Yet at argument theplaintiff’s lawyer, not content withpointing this out, also argued that hedoes not have to prove that the dealeradded the finance charge to the price ofonly the financed cars, not of cars soldfor cash as well. We disagree. Supposethe additional finance charge were onaverage $50 and were imposed in 80percent of the dealer’s sales. Andsuppose that instead of adding $50 to theprice of the financed cars the dealeradded $40 to the price of all cars. Therewould be no violation of the Truth inLending Act, because the credit purchaserwould not be paying any more than thecash purchaser. See id. at 931-32, 934;Gibson v. Bob Watson Chevrolet-Geo, Inc.,supra, 112 F.3d at 287. A finance charge is a charge that isavoidable by paying cash, 12 C.F.R. sec.226.4(a), and in our example the chargeis not so avoidable and therefore is nota finance charge, even though itoriginates in a practice of selling oncredit. The Act’s purpose is to enableborrowers to determine the cost of creditso that they can decide, in the case ofa purchase (as distinct from a free-standing loan), whether to pay cash or toborrow from or through the seller or fromanother lender (and thus pay cash to theseller), who may charge a lower interestrate. 15 U.S.C. sec. 1601(a); Mourning v.Family Publications Service, Inc., 411U.S. 356, 364-68 (1973); Smith v. CashStore Management, Inc., 195 F.3d 325, 332(7th Cir. 1999); Walker v. Wallace AutoSales, Inc., supra, 155 F.3d at 930, 932-34. That purpose is not engaged when thesame charge is imposed on cash purchasersand on credit purchasers. With the chargethe same, the purchaser’s choice betweenpaying cash to the seller (and perhapsborrowing from someone else) and buyingfrom the seller on credit is notinfluenced. If the plaintiff in this case, standingby his guns, declared that he would nottry to prove that the dealer does notfold the additional finance charge intohis cash price, then we would affirm thedismissal of this part of the complaint.But at argument the plaintiff’s lawyermade clear that he does intend to provethis if we reject his broader theory (aswe have just done), and the narrowertheory is alleged and is in any eventconsistent with the complaint, which isall that matters. E.g., Highsmith v.Chrysler Credit Corp., 18 F.3d 434, 439-40 (7th Cir. 1994). Second, the finance company charges thedealer a $50 “acceptance fee” for everyretail sales contract that it agrees tofinance, but waives the fee if the dealersells membership in the “Continental CarClub,” which the finance company owns, tothe purchaser of the car. Membership,which entitles the member to a bond cardso that he doesn’t have to surrender hisdriver’s license should he be ticketedfor a traffic offense, is sold only tocredit customers of the dealer. Theplaintiff was charged $60 for membershipin the Continental Car Club and thecharge was not included in the financecharge. The plaintiff is prepared to prove thatthe value of the bond card isconsiderably less than $60, and indeed isprobably little more than $10, in whichevent the membership fee is rathertransparently in lieu of a $50 financecharge. The dealer changes a $50 financecharge, which if listed as such wouldcause the disclosed interest rate torise, into a $60 fee for a nonfinanceservice, namely the bond card. Althoughthe service is worth only about $10, thebuyer doesn’t care that he’s paying $60for it, because he is also getting adiscount of $50 and thus paying a net ofonly $10. It seems, therefore, that $50of the $60 membership fee is a disguisedfinance charge, and the disguise violatesthe Act. See 12 C.F.R. sec.sec. 226.4(a),(b)(6); Walker v. Wallace Auto Sales,Inc., supra, 155 F.3d at 931-34; Gibsonv. Bob Watson Chevrolet-Geo, Inc., supra,112 F.3d at 284-85; see also Adams v.Plaza Finance Co., supra, 168 F.3d at935-37. Against this the defendants again pointto the language of the complaint. Thecomplaint does not allege that the buyeris forced to buy a Continental Car Clubmembership (and it is conceded that he isnot), or that the $50 finance charge isimposed if the buyer refuses to buy themembership, or even that the financecharge is ever imposed–maybe the dealerswallows it; not all costs are passed onby a middleman to his customers. If thefinance charge is either never imposed,or not imposed on those car buyers who donot buy the membership, then themembership fee cannot be a charge in lieuof a finance charge, because it is notavoidable by paying cash. But again theplaintiff has offered to prove that thefinance charge is imposed on buyers whodo not buy the membership and not onthose who do, and this possibility is notexcluded by any of the allegations of thecomplaint, unlike the situation in Damatov. Hermanson, 153 F.3d 464, 473 (7th Cir.1998). The fact that membership in the club isnot mandatory is not a defense. Considerthis variant of our earlier example: Themembership is worth $11, and as beforethe fee is $60. Then the car buyer whobuys the membership, and so (we areassuming) avoids the $50 finance charge,is $1 to the good; for when the dust hascleared he has paid an extra $10 (the $60membership fee, which he has paid, minusthe $50 finance charge, which he hassaved) for a benefit worth $11. Ineffect, he has paid a finance charge of$49–but the lower charge has not beendisclosed, either. Cf. McGee v. Kerr-Hickman Chrysler Plymouth, Inc., 93 F.3d380, 384 (7th Cir. 1996). Although both alleged violations of theTruth in Lending Act were committed bythe dealer in the first instance, sinceit is the dealer who through the rusesalleged is concealing the true interestrate from the buyer, the finance company,as assignee of the retail sales contractwhich it is financing, is liable for anyviolation that is apparent on the face ofthe contract. 15 U.S.C. sec. 1641(a). Thecases are very strict in theirinterpretation of this provision. Sowhile it is true that by looking at thecontract the finance company here couldtell that the $60 membership fee, whichit knew to be far in excess of the valueof the membership (for remember that theContinental Car Club is owned by thefinance company, and so the company knowswhat membership in the club is worth),was an undisclosed finance charge,something that is “apparent” only byvirtue of special knowledge, whetherabout the practices of other firms, as inTaylor v. Quality Hyundai, Inc., 150 F.3d689, 694 (7th Cir. 1998), and Green v.Levis Motors, Inc., 179 F.3d 286, 295(5th Cir. 1999), or its own practices, asin Ellis v. General Motors AcceptanceCorp., 160 F.3d 703, 709-10 (11th Cir.1998), is not apparent on the face of thecontract itself. Even more clearly, thefinance company could not tell by lookingat the retail sales contract that its 20percent additional finance charge hadbeen passed on to the buyer. Theplaintiff’s reliance on 16 C.F.R. sec.433.2 and the saving provision in 15U.S.C. sec. 1610(d) is unavailing for thereasons explained in Green v. LevisMotors, Inc., supra, 179 F.3d at 296. The third violation alleged, not of theTruth in Lending Act but under thefederal mail and wire fraud statutes, isa breach of fiduciary duty by the dealer.Those statutes are criminal and do notcreate civil liability directly, but theyare among the statutes the violation ofwhich is a “predicate act” upon which acivil RICO claim can be based. 18 U.S.C.sec. 1961(1)(B); Midwest Grinding Co.,Inc. v. Spitz, 976 F.2d 1016, 1019 (7thCir. 1992). The allegation here is thatwhile the finance company has agreed tofinance the dealer’s retail salescontracts at a particular interest rate,when the dealer is able to negotiate ahigher interest rate with the buyer ofthe car the dealer and the financecompany split the additional interest.The plaintiff describes the dealer’s cutas a “kickback” from the finance companyand argues that undisclosed self-dealingby an agent is a serious violation offiduciary duty–which it is. Doner v.Phoenix Joint Stock Land Bank, 45 N.E.2d20, 24 (Ill. 1942); Meinhard v. Salmon,164 N.E. 545 (N.Y. 1928) (Cardozo, C.J.);Gagnon v. Coombs, 654 N.E.2d 54, 62(Mass. App. 1995); Restatement of Agency(Second) sec.sec. 387, 388 (1958). But anautomobile dealer is not its customers’agent, obviously not in selling cars butonly a little less obviously in arrangingfinancing. If the buyer pays cash andarranges his own financing, the dealer isnot in the picture at all. If the buyerwants to buy on credit, he recognizesthat his decision does not change thearms’ length nature of his relation tothe dealer. He knows, or at least has noreason to doubt, that the dealer seeks aprofit on the financing as well as on theunderlying sale. Restatement, supra, sec.1, illustration 2. This is in general, not in every case;it is a question of fact whether thecontract express or implied between aparticular dealer and a particularcustomer constitutes the former an agentfor the latter in procuring financing.Cf. American Ins. Corp. v. Sederes, 807F.2d 1402, 1405-06 (7th Cir. 1986);Restatement, supra, sec. 1(1). But thereis no suggestion that the dealer hererepresented that he would act as thebuyer’s agent in dealing with the financecompany, no indication therefore that anagency relationship was created. If therewere such a relationship it would meanthat the buyer could tell the dealer toshop the retail sales contract amongfinance companies and to disclose thevarious offers the dealer obtained tohim, and no one dealing with anautomobile dealer expects that kind ofservice. The conclusion that the plaintiff hasfailed to allege a breach of fiduciaryobligation is not the end of the RICOclaim. For while acknowledging thatviolations of the Truth in Lending Actare not predicate acts, the plaintiffargues that they become such when mailand wire communications are used tofurther them. It is a rare case ofextension of credit that does not involvemail or wire communications, and so thepractical effect of the plaintiff’sargument would be to criminalize theTruth in Lending Act–for remember thatit is through the mail and wire fraudstatutes, which are criminal, that theplaintiffs seek to convert TILA into abasis for RICO liability. What is true is that conduct inviolation of TILA might constitute ascheme to defraud within the meaning ofthe mail and wire fraud statutes, butthis must be separately alleged.Concealing from credit purchasers thetrue cost of credit might be part of ascheme to defraud–or, if it resultedsimply from a misunderstanding of acomplex statute, might not be. Thedistrict court was right to think that ifthe defendants had not violated the Truthin Lending Act, a fortiori they had notengaged in criminal fraud. Since therewas a violation, that ground is notrobust. But as we read the complaint andthe plaintiff’s briefs in this court, hisonly theory of a violation of RICO (apartfrom breach of fiduciary obligation,which we have rejected) is that aviolation of the Truth in Lending Actthat is accomplished through mail or wirecommunications is a predicate act, andthis theory is clearly unsound. So we affirm the dismissal of the RICOclaim, and of the Truth in Lending Actclaim against the finance company; but weremand the other TILA claims to thedistrict court for further proceedingsconsistent with this opinion. We alsodirect that court to reinstate, at leastprovisionally, the supplemental state lawclaims that it relinquished jurisdictionover when it decided that the plaintiffhad failed to state a federal claim. Affirmed in Part, Reversed in Part, and Remanded.
Balderos v. City Chevrolet In the United States Court of Appeals for the Seventh Circuit Gregory Balderos, on behalf of himself and all others similarly situated, Plaintiff-Appellant, v. City Chevrolet, et al., Defendants-Appellees. No. 98-1944 Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 97 C 2084–George M. Marovich, Judge. Argued: November 8, 1999 Decided: May 26, 2000 Before: POSNER, Chief Judge, and RIPPLE and WOOD, Circuit Judges.
 
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