of a putative class action that had alleged TILA violations in "cash vs.
credit" prices charged in connection with the financing of automobiles
purchases. A copy of the court's opinion is attached.
The named plaintiffs sought to represent a class of customers with poor
credit who purchased used automobiles from defendant Balise Auto Sales,
Inc. ("Balise") under retail installment contracts. The complaint asserted
that Balise buried hidden finance charges in the prices that the
plaintiffs were charged for Balise's automobiles.
Specifically, the complaint alleged that Balise advertised newer, more
valuable used cars in its inventory at market prices, as measured by a
particular used car buying guide, but sold the older, less valuable used
cars to subprime credit customers for prices substantially higher than the
market prices listed in the same guide.
The plaintiffs alleged that, for each of these cars, the portion of the
purchase price in excess of the used car value guide was not actually part
of the cost of the car itself, but rather a hidden finance charge intended
to compensate for the increased risk of lending to customers with poor
However, the complaint did not allege that Balise priced its older cars
differently for customers with good credit, or for customers paying in
cash. In fact, the complaint was silent as to whether such customers
purchased cars from Balise's older inventory at all.
The Court determined that the named plaintiffs merely alleged they had
received a bad bargain, and ruled that TILA is a disclosure statute, not a
fair pricing law.
Thus, the Second Circuit concluded the complaint did not contain any
allegation from which it could plausibly be inferred that the defendant
auto dealer failed to disclose a finance charge to the named plaintiffs,
or that the plaintiff's "bad bargain" stemmed from an undisclosed finance
The Court therefore affirmed the judgment of the district court dismissing
the class action for its failure to state a claim under TILA.
Ralph T. Wutscher
McGinnis Tessitore Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
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