The opinion of the court was delivered by: Justice Wolfson
Appeal from the Circuit Court of Cook County. Honorable Lester M. Foreman, Judge Presiding
Consumers, when buying a car on credit, often are encouraged by dealerships to agree to an extended service protection contract or "extended warranty." Persuaded by the added protection these plans promise, consumers purchase the contracts and the cost is typically added to the amount being financed.
Some dealerships list the cost of the extended warranty/service contract on the financing statement of the installment contract as a fee paid to the warranty provider, usually the auto manufacturer. But that entire amount does not always go to the warranty provider. A large part of the extended service fee often is retained by the dealer. The consumer is not told that. The consumer accepts the dealership's inflated charge without question or negotiation.
The question before this court is whether an assignee of the motor vehicle retail sales installment contract can be held liable for the dealership's misrepresentations in the financing statements if the defect (overcharge for the service contract) is not apparent on the face of the document.
In this case, the trial court granted the assignee's motion to dismiss the consumer's complaint. We affirm the trial court.
We look to the plaintiff's amended complaint and exhibits attached to it for the facts of this case:
On May 17, 1995, Vanessa Jackson (Jackson) purchased a Dodge Stratus from the South Holland Dodge (SHD) dealership. She also agreed to purchase a service contract/extended warranty. Jackson entered into a motor vehicle retail sales installment contract with SHD. One of the forms completed by SHD was entitled "Itemization of Amount Financed," and listed in section (4): "Other Charges Including Amounts Paid to Others on Your Behalf." One of the blank spaces beneath this heading was filled in:
The $1099 listed in the financing statement does not represent the actual amount SHD paid to Chrysler for the service contract. In fact, SHD paid only a portion of the $1099 to Chrysler and retained the remainder for itself. SHD subsequently assigned the retail installment contract to Chrysler Finance Corporation (CFC).
On February 27, 1998, Jackson brought a class action against SHD and CFC for damages suffered by her and others similarly situated as a result of these alleged misrepresentations made by SHD on the financing statement. Jackson further alleged the manner in which these charges are listed on the form, i.e., in a section where non-negotiable items such as filing fees and licensing fees are listed, leads consumers to believe the cost of the service contract/extended warranty is a non-negotiable fee, which it is not. This, said Jackson, is a deceptive practice. Jackson claimed these deceptive practices and misrepresentations constituted violations of the Illinois Consumer Fraud Act (ICFA) and the Illinois Sales Finance Agency Act (ISFAA), for which both SHD and CFC were liable.
Jackson contended CFC could be held liable because the retail installment contract contained a statement of the FTC's Holder Rule ("Holder Notice") which provides:
"Any holder of this consumer credit contract is subject to all claims and defenses which the debtor could assert against the seller of goods or services obtained pursuant thereto or with the proceeds hereof."
Alternatively, Jackson alleged CFC had actual knowledge the amounts listed in the retail installment contracts were a misrepresentation because of its "extensive experience" in the industry and because its predecessor (Chrysler Credit) had cooperated in a New York State Attorney General study on the practice of dealer overcharging.
In an amended complaint filed September 28, 1998, Jackson added no new counts, but added to the allegations against CFC. Jackson contended:
"On information and belief, for years prior to May 17, 1998, (sic) and continuously since that date, Chrysler [Financial Corp.] participated in a scheme and therefore acted in concert, uniformly, consistently, and regularly to exact monies from customers in amounts in excess of what the actual cost for extended warranties or service contracts were by misrepresenting that an amount was paid to the extended warranty or service contract provider that was in excess of the amount actually paid to the said provider."
Jackson did not allege CFC actively and directly participated in making the misrepresentations to the consumer. Rather, Jackson alleged CFC reviewed the retail installment contracts, forms provided to the dealers, before accepting the assignment and was "aware that contracts *** often contain[ed] misleading disclosures regarding the amounts paid to third parties for a service contract." Jackson further alleged CFC "had, from its expansive experience in financing used car transactions, actual knowledge *** and knew full well that the amount represented on the retail installment contract *** as having been disbursed to the issuer of [the] extended warranty or service contract *** was not in fact disbursed to those issuers."
Finally, Jackson alleged CFC, "as a major purchase (sic) of automobile retail installment contracts, was clearly aware of dealer retention of significant portions of the amount charged for an extended warranty" because these practices were well known in the industry and because, in 1990, "the Attorney General of New York issued a report indicating the widespread overcharging by automobile dealers for extended warranties and service contracts." Jackson contended CFC "acquiesced in and approved of the representations" used by SHD and other car dealerships because it benefitted from them -- the inflated price of the service contract meant an increased amount was financed by the consumer.
CFC filed a sec. 2-615 motion to dismiss (735 ILCS 5/2-615 (West 1996)). Citing Lanier v. Associates Finance, Inc., 114 Ill. 2d 1, 499 N.E.2d 440 (1986), CFC said it could not be held liable for a violation of the ICFA based on SHD's misrepresentations because, as an assignee, it could not be held liable under the federal Truth In Lending Act (TILA). 15 U.S.C. §1601 et seq. Under TILA, an assignee can be held liable only if the misrepresentation is "apparent on the face" of the document. See 15 U.S.C. §1641. The Holder Notice didn't change this, said CFC.
Furthermore, CFC said, because it never made any representations directly to Jackson, Jackson would not be able to prove CFC violated the Motor Vehicle Retail Installment Sales Act (MVRISA) and, therefore, there was no liability under the ICFA or the ISFAA.
The trial court granted CFC's motion, dismissing Jackson's complaint against CFC with prejudice on April 29, 1999. Language was added pursuant to Supreme Court Rule 304(a), making the order final and appealable.
Now on appeal, Jackson contends the trial court should not have dismissed the ICFA claim or the ISFAA claim against CFC.