dealers in which: 1) MFC Illinois would purchase retail installment contracts at a specific rate of less than (in plaintiff's case) 41.04%: 2) MFC Illinois allowed the dealers to charge their customers more than MFC Illinois' interest rates the the dealers; 3) MFC Illinois and the dealers would "split the difference," and; 4) the dealer's customers would not be told that the dealers kept their part of the difference. Id. at PP 25, 57. Plaintiff alleges that this discounted transaction represents some type of "kickback" to the dealer for misrepresenting MFC Illinois' rate to the consumer.
Defendant's conduct is neither fraudulent nor is it an illegal "kickback". The plaintiff's "kickback" allegations focus on nondisclosure of the transaction or discount between MFC Illinois and Mancari Chrysler which resembles a typical commission. The Truth-in-Lending Act does not require disclosures of this kind. The Act requires only that a consumer be informed of the name of the creditor, the amount financed, and the APR. See 12 C.F.R. § 226.17 et seq. MFC Illinois made all required disclosures to plaintiff. Repeated allegations of "secret agreements" and "kickbacks" do not transform this perfectly legal conduct into actionable fraud under RICO.
Judge Leinenweber addressed a similar issue in Balentine v. Union Mortgage Company, 1994 U.S. Dist. LEXIS 1113, No. 91 C 8213, 1994 WL 34256 (N.D.Ill. Feb. 2, 1994). In Balentine, the plaintiff brought an action for fraud under the Illinois Consumer Fraud and Deceptive Business Practices Act alleging that the defendant unlawfully engaged in the purchase of retail installment contracts from a home improvement dealer at 15 to 40 percent less than face value. 1994 U.S. Dist. LEXIS 1113, No. 91 C 8213, 1994 WL 34256, at *1 (N.D.Ill. Feb. 2, 1994). Similar to the instant case, the discounted price was not disclosed to the consumer. Id. Judge Leinenweber held that the alleged failure to disclose this discount to the consumer is specifically authorized by, and in compliance with, the federal Truth-in-Lending Act ("TILA"), 15 U.S.C. § 1601 et seq. (1993). Id. at *2. Specifically, section 1605(a) of TILA only requires disclosure of finance charges. Id. The Court explained that the discount in this case was not a finance charge but a "cost of doing business." Id. "Charges absorbed by the creditor as a cost of doing business are not finance charges, even though the creditor may take such charges into consideration in determining the interest rate to be charged or the cash price of the property or services sold." Id. (quoting 12 C.F.R. § 226.4(a)(2)). Likewise, in April v. Union Mortgage Co., Inc., the Court held that the difference between the cash price of the work and the price at which the contract is sold is not required to be disclosed. 709 F. Supp. 809, 813-14 (N.D.Ill. 1989).
Accordingly, plaintiff has alleged only legal acts by MFC Illinois. Therefore, the defendant's motion to dismiss for failure to state a claim for RICO violations or mail fraud is granted. Because Count I is dismissed, the Court does not reach the issue of class certification pursuant to Fed.R.Civ.P. 23(a) and (b)(3).
II. State Law Claims
Since Count I is dismissed, the Court has no independent jurisdiction over the pendent state law claims for violations of the Illinois Consumer Fraud Act and the Uniform Commercial Code. Accordingly, Counts II, III, and IV are also dismissed. Again, because Counts II, III, and IV are dismissed, the Court does not reach the issue of class certification pursuant to Fed.R.Civ.P. 23(a) and (b)(3).
For all of the foregoing reasons, defendant's motion to dismiss the complaint is granted.
IT IS SO ORDERED.
Wayne R. Andersen
United States District Judge
Dated: September 21, 1995
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