## Facts

- Three consumers filed nearly identical putative class actions against Chicago-area automobile dealers under the Truth in Lending Act (TILA).
- In a representative transaction, a buyer purchased a used car on credit and received an “Itemization of Amount Financed.”
- The itemization listed under “Amounts Paid to Others on Your Behalf”: “To North American for Extended Warranty $800.00.”
- The dealer admitted it retained a substantial but then-unknown portion of the $800 rather than remitting the entire amount to the warranty provider.
- Plaintiffs alleged (1) the retained portion was an undisclosed finance charge because warranty markups were allegedly higher in credit sales than in cash sales, and (2) the itemization was false because it stated the full $800 was paid to the warranty company.
- The district courts dismissed the complaints for failure to state a claim; the appeals were consolidated.

## Issues

1. Whether a dealer’s retention/markup on an extended warranty—allegedly larger in credit sales than cash sales—constitutes a “finance charge” requiring disclosure under TILA.
2. Whether listing the full warranty price as an amount paid to a named third party violates TILA’s itemization-of-amount-financed requirement when the dealer retains part of the charge.

## Decision

- The court of appeals affirmed the dismissals for failure to state a claim.
- The alleged additional retention on the extended-warranty charge in credit transactions was not a TILA finance charge.
- The itemization entry identifying the warranty provider and stating the $800 amount did not violate TILA’s itemization requirements even if the dealer kept part of that amount.

## Legal Principles

- A TILA “finance charge” covers charges imposed as an incident to, or condition of, the extension of credit; ordinary pricing decisions for goods or ancillary products are not finance charges merely because prices may differ between cash and credit transactions.
- TILA’s itemization-of-amount-financed disclosure is not a general requirement to disclose a seller’s internal allocation of proceeds, commissions, or profit on an ancillary product.
- Itemization requirements focus on disclosure of credit terms and the amounts financed, not on revealing wholesale versus retail components of a product’s price absent a statutory duty to do so.

## Conclusion

The court held that a dealer’s partial retention of an extended-warranty charge, even if allegedly greater in credit sales, neither creates an undisclosed TILA finance charge nor makes the itemization-of-amount-financed disclosure actionable, so the class-action complaints were properly dismissed.


Gibson v. Bob Watson Chevrolet-Geo, Inc., 112 F.3d 283 (7th Cir. 1997)