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February 24, 1994

THOMAS S. KEDZIORA, et al., Plaintiffs,

The opinion of the court was delivered by: MILTON I. SHADUR

 Thomas and Merrilou Kedziora ("Kedzioras" *fn1" ) have sued Citicorp National Services, Inc. ("Citicorp" *fn2" ), claiming that automobile leases issued by Citicorp have violated the Consumer Leasing Act, 15 U.S.C. §§ 1657-1667e (the "Act" *fn3" ) and its implementing regulations. *fn4" Jurisdiction is grounded both in 28 U.S.C. § 1331 and in Section 1667d(c).

 This Court has earlier (in the "Opinion," 780 F. Supp. 516 (N.D. Ill. 1991)) granted Citicorp's motion to dismiss as to much (though not all) of Kedzioras' original Complaint. What remains in the case, as now set forth in Kedzioras' Second Amended Complaint ("SAC"), are their contentions that Citicorp's leases allow it:

1. to impose a penalty on early termination by inflating the depreciation component of the lease payments, while setting too small a figure for the interest component that is subject to credit or to rebate to the lessee (SAC PP 22-28),
2. to collect unearned interest charges by using the Rule of 78's, also known as the Sum-of-the-Digits method, to calculate the amount of interest to be credited or rebated (SAC PP 29-30), *fn5" and
3. to charge for greater than normal usage of leased cars by imposing excess mileage charges (SAC PP 31-32),

 all in violation of Section 1667b(b). For its part Citicorp has brought a counterclaim demanding payment by Kedzioras of the remaining amounts allegedly due under Citicorp's lease agreement with Kedzioras (the "Lease"). And this Court (in a brief October 15, 1992 order) has granted Kedzioras' Fed. R. Civ. P. ("Rule") 23 motion for class certification. *fn6"

  Citicorp has now moved under Rule 56 for summary judgment against Kedzioras on their remaining claims and on its own counterclaim. *fn7" For the reasons set forth in this memorandum opinion and order, Citicorp's motion is denied.


 On September 1, 1988 Thomas Kedziora entered into the Lease for a 1989 Pontiac Grand Prix (the "Car") with a car dealer (the "Dealer"), and the Lease was assigned to Citicorp immediately after its execution (D. 12(m) PP 4-5). That assignment was expressly contemplated in the Lease, which states that its disclosures are made on behalf of Citicorp and that the Dealer intends to assign the Lease to Citicorp as soon as it is signed by the lessee (Lease introductory language; P. 12(n)(2) P 10).

 Dealer and Kedzioras agreed upon the selling price of the Car as $ 15,581.94, with Citicorp having no role in negotiating that amount (P. 12(m) PP 17, 22). *fn8" Under the Lease Kedzioras owed monthly lease payments that comprised both a depreciation component and an interest charge component (D. 12(m) P 16): *fn9"

1. As for the depreciation component, that constitutes Citicorp's "cost of acquiring the lease" less what was stated as the anticipated "Residual Value" of the car upon expiration of the Lease. In turn, Citicorp's cost was the sum of what it denotes as the "Selling price" ($ 15,581.94), the "Initial taxes" ($ 926.06) and the "Assignment fee" ($ 375)--a total of $ 16,883 (D. 12(m) P 17). "Residual Value" was computed at 40% of the "Manufacturer's Suggested Retail Price" ("MSRP") of $ 15,905--thus as $ 6,362 (D. 12(m) P 20). Consequently the total depreciation component under the Lease was $ 16,883 less $ 6,362, or $ 10,521 (D. 12(m) P 17). On an assumption of straight line depreciation over the Lease's 60-month term, the depreciation component of each monthly payment was $ 175.35 (id.).
2. As for the monthly interest charge (called the "lease charge" by Citicorp), that was determined by applying a "money factor" of 0.00445 to the sum of Citicorp's "cost of acquiring the lease" ($ 16,883) plus the "Residual Value" ($ 6,362)--a figure of $ 103.44 (D. 12(m) P 23).

 Each monthly payment thus amounted to $ 278.79--the sum of $ 175.35 and $ 103.44 (D. 12(m) P 25).

 Citicorp paid the Dealer $ 15,929.21 for the Lease, a figure derived by subtracting from what Citicorp terms its "gross capitalized cost" of $ 16,508 *fn10" the amounts that the Dealer had received directly from Kedzioras under the Lease--a security deposit of $ 300 and the first monthly payment of $ 278.79 (D. 12(m) P 18). If Kedzioras had made all of the payments required under the Lease, they would have paid a total of $ 16,727.40--$ 10,521 allocable to depreciation and $ 6,206.40 in interest charges (D. 12m P 26).

 But on August 19, 1990 the Car was totally destroyed in an accident, an event that constituted a default and triggered the early termination of the Lease (D. 12(m) PP 6, 8). Early termination of the Lease required Kedzioras to pay an early termination charge made up of (Lease P 17; D. 12(m) P 9):

1. all past-due unpaid amounts;
2. all remaining monthly payments due on the Lease after the date of termination, reduced by both:
(a) the unearned amount of interest calculated in accordance with the Rule of 78's and
(b) all sales, use and rental taxes due on those remaining monthly payments;
3. the disposition charge;
4. the estimated wholesale value of the Car at the end of the originally-agreed-upon Lease term ...

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