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Illinois Consumer Law

Daniel A. Edelman


October 15, 2002

Copyright Daniel A. Edelman 2002

Daniel A. Edelman is the founding partner of Edelman, Combs & Latturner, a 14-attorney firm that represents injured consumers and investors.  Edelman, Combs & Latturner brings both individual and class actions on behalf of people injured by home improvement frauds, the purchase of “lemon” automobiles, automobile lease overcharges, illegal repossession practices, mortgage overcharges (such as escrow, late payment and interest computations, illegal collection practices, excessive points on second mortgages), and similar violations.

Daniel A. Edelman is a 1976 graduate of the University of Chicago Law School.  From 1976 to 1981 he was an associate at the Chicago office of Kirkland & Ellis with heavy involvement in the defense of consumer class action litigation (such as the General Motors Engine Interchange cases).  In 1981 he became an associate at Reuben & Proctor, a medium-sized firm formed by some former Kirkland & Ellis lawyers, and was made a partner there in 1982.  From the end of 1985 he has been in private practice in downtown Chicago.  Virtually all of his practice involves litigation on behalf of consumers.  He is the author or coauthor of numerous publications on class actions and consumer protection law, including Predatory Lending Litigation in Illinois (2001); Consumer Class Action Manual (2d-5th editions), National Consumer Law Center 1990-2002; Payday Loans:  Big Interest Rates and Little Regulation, 11 Loy.Consumer L.Rptr. 14 (1999); Fair Debt Collection Practices Act Update —  1999, Chicago Bar Assn 1999; An Overview of The Fair Debt Collection Practices Act, in Financial Services Litigation, Practicing Law Institute (1999); Consumer Fraud and Insurance Claims, in Bad Faith and Extracontractual Damage Claims in Insurance Litigation, Chicago Bar Ass’n 1992; Chapter 8, “Fair Debt Collection Practices Act,” Ohio Consumer Law (1995 ed.); Fair Debt Collection:  The Need for Private Enforcement, 7 Loy.Consumer L.Rptr. 89 (1995); The Fair Debt Collection Practices Act:  Recent Developments, 8 Loy.Consumer L. Rptr. 303 (1996); Residential Mortgage Litigation, in Financial Services Litigation, Practicing Law Institute (1996); Automobile Leasing:  Problems and Solutions, 7 Loy.Consumer L.Rptr. 14 (1994); Current Trends in Residential Mortgage Litigation, 12 Rev. of Banking & Financial Services 71 (1996); Applicability of Illinois Consumer Fraud Act in Favor of Out-of-State Consumers, 8 Loy.Consumer L.Rptr. 27 (1996); Illinois Consumer Law (Chicago Bar Ass’n 1996).

Mr. Edelman argued Heintz v. Jenkins, 115 S.Ct. 1489, 131 L.Ed.2d 395 (1995), the case establishing that the litigation conduct of collection attorneys is subject to the Fair Debt Collection Practices Act, as well as some 50 other federal and state appeals.


A.        Section 2 of the Illinois Consumer Fraud Act, 815 ILCS 505/2, provides:

Unfair methods of competition and unfair or deceptive acts or practices, including but not limited to the use or employment of any deception, fraud, false pretense, false promise, misrepresentation or the concealment, suppression or omission of any material fact, with intent that others rely upon the concealment, suppression or omission of such material fact, or the use or employment of any practice described in Section 2 of the “Uniform Deceptive Trade Practices Act,” approved August 5, 1965, are hereby declared unlawful whether any person has in fact been misled, deceived or damaged thereby.  In construing  this section consideration shall be given to the interpretations of the Federal Trade Commission and the federal courts relating to Section 5(a) of the Federal Trade Commission Act.

B.         As indicated, ‘2 was patterned after ‘5(a) of the Federal Trade Commission Act, 15 U.S.C. ’45.  Section 5 of the FTC Act does not provide for any private right of action.

C.         Section 2 of the Uniform Deceptive Trade Practices Act, 815 ILCS 510/2, incorporated by reference in the Consumer Fraud Act, provides:

A person engages in a deceptive trade practice when, in the course of his business, vocation or occupation, he: 

(1) passes off goods or services as those of another; 

(2) causes likelihood of confusion or of misunderstanding as to the source, sponsorship, approval or certification of goods or services; 

(3) causes likelihood of confusion or of misunderstanding as to affiliation, connection or association with or certification by another; 

(4) uses deceptive representations or designations of geographic origin in connection with goods or services; 

(5) represents that goods or services have sponsorship, approval, characteristics, ingredients, uses, benefits or quantities that they do not have or that a person has a sponsorship, approval, status, affiliation or connection that he does not have; 

(6) represents that goods are original or new if they are deteriorated, altered, reconditioned, reclaimed, used or secondhand; 

(7) represents that goods or services are a particular standard, quality or grade or that goods are a particular style or model, if they are of another; 

(8) disparages the goods, services or business of another by false or misleading representation of fact; 

(9) advertises goods or services with intent not to sell them as advertised; 

(10) advertises goods or services with intent not to supply reasonably expectable public demand, unless the advertisement discloses a limitation of quantity; 

(11) make false or misleading statements of fact concerning the reasons for, existence of or amounts of price reductions;

(12) engages in any other conduct which similarly creates a likelihood of confusion or of misunderstanding. 

    In order to prevail in an action under this Act, a plaintiff need not prove competition between the parties or actual confusion or misunderstanding. 

    This Section does not affect unfair trade practices otherwise actionable at common law or under other statutes of this State. 

D.        There are some 40 specific prohibitions in the Consumer Fraud Act following ‘2.  Some of the more important are:

1.         Pyramid sales prohibited:  815 ILCS 505/2A

2.         Right of cancellation for home solicitation sales:  815 ILCS 505/2B.  Patterned after FTC regulation (see below), but not as broad.

3.         Return of down payment or trade in on rejection of credit application.  815 ILCS 505/2C.

4.         “Revolving repossession” or “churning” schemes:  disposing of collateral under retail installment contract in manner calculated to increase deficiency.  815 ILCS 505/2G

5.         Credit advertising (similar prohibition in Truth in Lending Act, but no private right of action).  815 ILCS 505/2J.

6.         Statutory used car warranties.  815 ILCS 505/2L.

7.         Until recently, if contract was negotiated in foreign language contract must be furnished in that language.  815 ILCS 505/2N.  This has now been substantially watered down.

8.         Failure of home improvement contractor to complete work or return money upon demand.  815 ILCS 505/2Q.

9.         A contract may not be enforced against a cosigner without giving 15 days’ advance notice to the cosigner.  815 ILCS 505/2S provides:

No person may report adverse information to a consumer reporting agency, provide information to a collection agency or take any collection action regarding a cosigner of an obligation unless prior thereto, such person has notified the cosigner by first class mail that the primary obligor has become delinquent or defaulted on the loan, that the cosigner is responsible for the payment of the obligation and that the cosigner must, within 15 days from the date such notice was sent, either pay the amount due under the obligation or make arrangements for payment of the obligation. In the event that the cosigner pays or makes arrangements to pay the obligation, no adverse information shall be reported regarding the cosigner. 

Any person violating this Section commits an unlawful practice within the meaning of this Act and, in addition, is liable in a civil action for actual damages of up to $250 plus reasonable attorney’s fees.  

10.        Prohibits advertising of “wholesale prices” unless the advertiser can “substantiate significant savings on his price as compared to identical merchandise offered for sale by retailers in the trade area.”  815 ILCS 505/2CC.

11.        Section 2D  subjects assignees to certain claims and defenses.  This has in part been rendered obsolete by the FTC regulation on the same subject, 16 C.F.R. part 433 (discussed below).

E.         Violations of other statutes are specifically defined as violations of the Consumer Fraud Act:

1.         815 ILCS 505/2E:  Commission of three or more violations in a calendar year of:

a.         Consumer Installment Loan Act, 205 ILCS 670/1 et seq.

b.         Retail Installment Sales Act, 815 ILCS 405/1 et seq.

c.         Motor Vehicle Retail Installment Sales Act, 815 ILCS 375/1 et seq.

d.         Interest Act, 815 ILCS 205/0.01 et seq.

e.         Wage Assignment Act, 740 ILCS 170/.01 et seq.

f.          Garnishment restrictions in Code of Civil Procedure

Most of these other statutes are discussed below.

There is a conflict between Appellate Court districts as to whether the adjudication of the multiple violations can be made in the present action or has to have occurred previously.  Fidelity Financial Services, Inc. v. Hicks, 214 Ill.App.3d 398, 574 N.E.2d 15 (1st Dist. 1991), leave to appeal denied, 141 Ill.2d 539, 580 N.E.2d 112 (1991); Smith v. Sears, Roebuck & Co., 95 Ill.App.3d 174, 419 N.E.2d 673 (4th Dist. 1981) (divided panel).

Furthermore, in Robinson v. Toyota Motor Credit Corp.,  No. 90242, 201 Ill.2d 403, 2002 WL 1038728  (May 23, 2002), the court held that the prohibition of unfair practices covers conduct which violates, or comes close to violating, other statutes, not specifically enumerated.

2.         Willful and material violation of any Illinois consumer credit statute:  815 ILCS 505/2F.  Picks up some federal violations as well because the regulations under the Sales Finance Agency Act require compliance with certain federal laws.  (See below)

3.         815 ILCS 505/2Z makes a “knowing” violation of the following statutes a violation of the Consumer Fraud Act:

a.         Dance Studio Act, 815 ILCS 610/1 et seq.

b.         Physical Fitness Services Act, 815 ILCS 645/1 et seq.

c.         Hearing Instrument Consumer Protection Act, 225 ILCS 50/1 et seq.

d.         Illinois Union Label Act, 815 ILCS 425/1 et seq.

e.         Job Referral and Job Listing Services Consumer Protection Act, 815 ILCS 630/1 et seq.

f.          Travel Promotion Consumer Protection Act, 815 ILCS 420/1 et seq.

g.         Credit Services Organizations Act, 815 ILCS 605/1 et seq. (discussed below).

h.         Home Repair and Remodeling Act,  815 ILCS 513/1 et seq.

i.          Safe and Hygienic Bed Act, 225 ILCS 50/1 et seq.

j.          Subsection (a) or (b) of Section 3-10 of the Cigarette Tax Act and subsection (a) or (b) of Section 3-10 of the Cigarette Use Tax Act,  815 ILCS 390/1 et seq. and 35 ILCS 130/3-10.

k.         Electronic Mail Act, 815 ILCS 511/1 et seq.

l.          Automatic Telephone Dialers Act, 815 ILCS 305/1 et seq.

m.        Pay‑Per‑Call Services Consumer Protection Act, 815 ILCS 520/1 et seq.

n.         Telephone Solicitations Act, 815 ILCS 413/1 et seq.

o.         Automotive Repair Act, 815 ILCS 306/1 et seq.

p.         Illinois Funeral or Burial Funds Act, 225 ILCS 45/1 et seq.

q.         Cemetery Care Act, 760 ILCS 100/1 et seq.

r.          Pre‑Need Cemetery Sales Act, 815 ILCS 413/1 et seq.

F.         Finally, the Illinois Supreme Court has adopted a definition of unfair practice that includes conduct that violates public policy, as defined by other statutes and regulations, injures consumers, and cannot reasonably be avoided by consumers.

G.        Illinois Attorney General Regulations

a.         Buyers clubs:  14 Ill. Adm. Code part 460

b.         Retail advertising:  14 Ill. Adm. Code part 470

c.         Automobile sales/ lease practices: 14 Ill. Adm. Code part 470.  Important provisions.

(1)        14 Ill. Adm. Code 475.210 requires disclosure of “all material terms and conditions relating to the offer clearly and conspicuously at the outset of the offer so as to leave no reasonable probability that the offering might be misunderstood. Material terms include, without limitation, those mandated by federal law including, but not limited to, those Acts listed in Section 475.250, or state law, or without which the advertisement would be false or misleading.”

(2)        14 Ill.Adm. Code 475.310  makes it unlawful “to advertise the total price of a motor vehicle without including in the advertised price all costs to the purchaser at the time of sale, or which are necessary or usual prior to delivery of such vehicle to the purchaser, including any costs of delivery, dealer preparation and any other charges of any nature; provided, however, taxes, license and title fees and a documentary service fee, as defined herein, may be excluded from the advertised price if clearly disclosed in the advertisement that these costs are excluded from the advertised price.”

(3)        14 Ill. Adm. Code 475.410  regulates use of “Dealer Cost” and “Invoice” in advertising.

(4)        14 Ill. Adm. Code 475.580 makes it unlawful “for a dealer to negotiate the terms of a sale and thereafter add the cost of items including, without limitation, extended warranties, credit life, dealer preparation, or undercoating, to the contract without previously disclosing same to the consumer and without the consumer’s consent.”


1.         Section 2 covers unfair methods of competition and unfair or deceptive acts or practices “in the conduct of any trade or commerce  . . . .”

2.         Section 1(f) defines “trade” and “commerce” to mean “the advertising, offering for sale, sale, or distribution of any services and any property, tangible or intangible, real, personal or mixed, and any other article, commodity, or thing of value wherever situated, and shall include any trade or commerce directly or indirectly affecting the people of this State.”

3.         This language should be construed to cover violations committed by an Illinois business, regardless of where the victim is located, and was so construed in Martin v. Heinold Commodities, 117 Ill.2d 772, 510 N.E.2d 840 (1987); and Gordon v. Boden, 224 Ill.App.3d 195, 586 N.E.2d 461 (1st Dist. 1991), leave to appeal denied.   However, in Oliveira v. Amoco Oil Co., 311 Ill.App.3d 886, 726 N.E.2d 51 (4th Dist. 2000), appeal pending, the court held that the CFA only protected Illinois consumers. People of the state@ means any conduct affecting the sovereign interests of the state of Illinois  — the sense it is used in an indictment  — and not particular individuals within the state of Illinois.

4.         Section 1(a) defines “advertisement” to “include[] the attempt by publication, dissemination, solicitation or circulation to induce directly or indirectly any person to enter into any obligation or acquire any title or interest in any merchandise and includes every work device to disguise any form of business solicitation by using such terms as ‘renewal’, ‘invoice’, ‘bill’, ‘statement’, or ‘reminder’, to create an impression of existing obligation when there is none, or other language to mislead any person in relation to any sought after commercial transaction”.

5.         “Merchandise” is defined in ‘1(b) to include “any objects, wares, goods, commodities, intangibles, real estate situated outside the State of Illinois, or services”.

6.         Leases are covered as well as sales.  Duncavage v. Allen, 147 Ill.App.3d 88, 497 N.E.2d 433 (1st Dist. 1986), leave to appeal denied,  505 N.E.2d 352 (Ill. 1987); Carter v. Mueller, 120 Ill.App.3d 314, 457 N.E.2d 1335 (1st Dist. 1983); People ex rel. Fahner v. Hedrich, 108 Ill.App.3d 83, 438 N.E.2d 924 (2d Dist. 1982); People ex rel. Fahner v. Testa, 112 Ill.App.3d 834, 445 N.E.2d 1249 (1st Dist. 1983); Johnson v. Steven Sims Subaru and Subaru Leasing, 92 C 6355, 1993 WL 761231, 1993 U.S.Dist. LEXIS 8078 (N.D.Ill. June 9, 1993); Kedziora v Citicorp Nat’l Servs., 780 F.Supp. 516 (N.D. Ill. 1991).

7.         There were a couple of cases stating that the Consumer Fraud Act did not apply to banking practices, In re Estate of Szorek, 194 Ill.App.3d 750, 551 N.E.2d 697 (1st Dist. 1990), but these have now been repudiated, Law Offices of Wm. J. Stogsdill v. Cragin Fed. Bank for Savings, 268 Ill App.3d 433, 645 N.E.2d 564 (2d Dist. 1995); Brown v. C.I.L., Inc., 1996 U.S.Dist. LEXIS 4917 (N.D.Ill. 1996), adopted, 94 C 1479, 1996 WL 164294, 1996 U.S.Dist. LEXIS 4053 (N.D.Ill. April 1, 1996).

8.         The statute does not apply to a claim by a client against an attorney for malpractice, Frahm v. Urkovich, 113 Ill.App.3d 580, 447 N.E.2d 1007 (1st Dist. 1983); Guess v. Brophy, 164 Ill.App.3d 75, 517 N.E.2d 693 (4th Dist. 1987), leave to appeal denied, 121 Ill.2d 569, 526 N.E.2d 830 (1988); Lurz v. Panek, 172 Ill.App.3d 915, 527 N.E.2d 663 (2d Dist. 1988), or to similar claims by patients against health care providers, Feldstein v. Guinan, 148 Ill.App.3d 610, 499 N.E.2d 535 (1st Dist. 1986), but has been held to apply to the commercial aspects of the provision of health care, such as secret payments for referrals.  Gadson v. Newman, 807 F.Supp. 1412 (C.D.Ill. 1992); Dimensions Medical Ctr. v. Principal Fin. Group, 93 C 6264, 1995 U.S. Dist. LEXIS 1420 (N.D.Ill. 1995), later opinion, 1996 WL 494229, 1996 U.S.Dist. LEXIS 12,051 (N.D.Ill. Aug. 21, 1996); Sullivan’s Whsle. Drug Co. v. Faryl’s Pharmacy, Inc., 214 Ill.App.3d 1073, 573 N.E.2d 1370 (5th Dist. 1991), leave to appeal denied, 141 Ill.2d 561, 580 N.E.2d 136 (1991).

9.         There is some ambiguity in the definitions as to whether the sale of Illinois real estate is covered, because ‘1(b) states that “The term ‘merchandise’ includes any objects, wares, goods, commodities, intangibles, real estate situated outside the State of Illinois, or services,” but the better view is that it is covered.  City of Aurora v. Green, 126 Ill.App.3d 684, 467 N.E.2d 610 (2d Dist. 1984); Randels v. Best Real Estate, Inc., 243 Ill.App.3d 801,  612 N.E.2d 984 (2d Dist. 1993). ContraMaguire v. Holcomb, 169 Ill.App.3d 238, 523 N.E.2d 688 (5th Dist. 1988).  Numerous cases, including Supreme Court decisions,  assume that it is covered.  Siegel v. Levy Organization Development Co., 153 Ill.2d 534, 607 N.E.2d 194 (1992); Breckenridge v. Cambridge Homes, Inc., 246 Ill.App.3d 810, 822‑23, 616 N.E.2d 615 (1993), leave to appeal denied, 152 Ill.2d 555, 622 N.E.2d 1201 (1993); Tan v. Boyke, 156 Ill.App.3d 49, 59‑60, 508 N.E.2d 390 (2d Dist. 1987), leave to appeal denied, 116 Ill. 2d 577, 515 N.E.2d 127 (1987).

10.        There are decisions holding that one must be a “consumer” to bring suit under the general provisions of ”2 and 10a of the Consumer Fraud Act. Norton v. City of Chicago, 267 Ill.App.3d 507, 642 N.E.2d 839 (1st Dist. 1994), leave to appeal denied, 161 Ill.2d 529, 649 N.E.2d 418 (1995) (private citizens who were dunned for excessive amounts for parking violations by debt collection firm held to lack standing because they were not consumers).  However, this conclusion is not justified by the text of the statute (certain provisions, such as ‘2B, are limited to consumer transactions, but neither ‘2 nor ’10a is so limited), and there are a larger number of cases from the same Appellate Court districts and divisions holding that non-consumers can sue.

11.        For example, it is clear that one business can bring suit against another under the Act for unfair competition.  Empire Home Servs., Inc. v. Carpet Am., Inc., 274 Ill.App.3d 666, 653 N.E.2d 852 (1st Dist. 1995), appeal denied, 163 Ill.2d 553, 657 N.E.2d 619 (1995); Downers Grove Volkswagen, Inc. v. Wigglesworth Imports, Inc., 190 Ill.App.3d 524, 546 N.E.2d 33 (2d Dist. 1989); Zinser v. Rose, 245 Ill.App.3d 881, 614 N.E.2d 1259 (3d Dist. 1993); Sullivan’s Whsle. Drug Co. v. Faryl’s Pharmacy, Inc., supra, 214 Ill.App.3d 1073, 573 N.E.2d 1370 (5th Dist. 1991), leave to appeal denied, 141 Ill.2d 561, 580 N.E.2d 136 (1991); P.I.A. Mich. City, Inc. v. National Porges Radiator Corp., 789 F. Supp. 1421 (N.D. Ill. 1992); Gadson v. Newman, 807 F.Supp. 1412 (C.D.Ill. 1992); Coca‑Cola Co. v. Alma‑Leo U.S.A., Inc., 719 F.Supp. 725 (N.D.Ill. 1989); Web Communications Group, Inc. v. Gateway 2000, Inc., 889 F.Supp. 316 (N.D.Ill. 1995); Adams v. Advanta Mortgage Corp. Midwest, 88 A 216 (Bkcy., N.D.Ill. 1989); Pain Prevention Lab, Inc. v. Electronic Waveform Labs, Inc., 657 F.Supp. 1486 (N.D.Ill. 1987); Uniroyal Goodrich Tire Co. v. Mutual Trading Corp., 749 F.Supp. 869 (N.D.Ill. 1990); Industrial Specialty Chemicals v. Cummins Engine Co., 902 F. Supp. 805 (N.D.Ill. 1995), later opinion, 918 F.Supp. 1173 (N.D.Ill. 1996).  The court in Sullivan’s held that “the protections of the statute are not limited to consumers. That this is so is made clear by the full title of the Act itself, which indicates that it is ‘An Act to protect consumers and borrowers and businessmen against fraud, unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce . . . .'” (214 Ill.App.3d at 1082, 573 N.E.2d at 1370)  Another court stated:  “Recently, courts have specifically held that standing to sue under the Fraud Act is not limited to consumers. . . . The conclusion reached by these courts is fully supported by the explicit language of the statute and is in accord with the Illinois Supreme Court’s interpretation thereof.”  Scotsman Group v. Mid‑America Distribs., 1994 U.S. Dist. LEXIS 4127 (N.D.Ill. 1994), *17.  Another court explained:  “As is apparent from its name, The Consumer Fraud Act is fundamentally concerned with protecting consumers. . . . In spite of this fact, a plaintiff need not be a consumer to proceed under the Act. See 815 ILCS 505/1(c). However, when both parties to the suit are commercial entities which are not consumers the test for standing is whether the alleged conduct invokes trade practices addressed to the market generally or otherwise implicates consumer protection concerns.” Stepan v. Winter Panel Corp., 948 F. Supp. 802, 805-06 (N.D. Ill. 1996).

12.        The decisions requiring that the plaintiff be a consumer may have originated prior to the express enactment of a private right of action in 1973.  During that period, courts implied a private right of action, Rice v. Snarlin, 131 Ill.App.2d 434, 440-2, 266 N.E.2d 183 (1st Dist. 1970), but inferred from the existence of the definition of “consumer” that one be a “consumer” to sue. Steinberg v. Chicago Medical School, 69 Ill.2d 320, 328, 371 N.E.2d 634 (1977); People ex rel. Scott v. Cardet Int’l, Inc., 24 Ill.App.3d 740, 321 N.E.2d 386 (1st Dist. 1974).  It appears that some courts continued to refer to these cases even though the cause of action enacted by the legislature in 1973 (’10a) runs in favor of any “person” affected by a violation.

13.        Privity between the plaintiff and defendant is not required.  Elder v. Coronet Ins. Co., 201 Ill.App.3d 733, 558 N.E.2d 1312 (1st Dist. 1990), appeal withdrawn, Elder v. Coronet Ins. Co., 139 Ill.2d 594, 575 N.E.2d 913 (1991) (in action complaining of use of polygraph tests to process insurance claims, suit could be brought by insured against claims processor as well as insurer, although insured had only contracted with insurer); Connick v. Suzuki Motor Co., 174 Ill. 2d 482, 675 N.E.2d 584 (1996) (consumer fraud claim stated against manufacturer of vehicle purchased through dealer for false statements in advertising); Ramson v. Layne, 668 F.Supp. 1162 (N.D.Ill. 1987) (liability of endorser).

14.        Debt collection is covered by the Act.  People ex rel. Daley v. Datacom Sys. Corp., 146 Ill.2d 1, 585 N.E.2d 51 (1991);  Brown v. C.I.L., Inc., 1996 U.S.Dist. LEXIS 4917 (N.D.Ill. 1996), adopted, 94 C 1479, 1996 WL 164294, 1996 U.S.Dist. LEXIS 4053 (N.D.Ill. April 1, 1996).

                      I.          STANDARD OF DECEPTION

1.         The basic elements of a deception claim are (1) a deceptive act or practice, (2) at least if an omission is concerned, defendant’s intent that the plaintiff rely on the deception, and (3) that the deception occurred in the course of conduct involving trade or commerce. Siegel v. Levy Org. Dev. Co., 153 Ill.2d 534, 607 N.E.2d 194, 198 (1992); Brandt v. Time Ins. Co., 302 Ill.App.3d 159, 704 N.E.2d 843, 946 (1st Dist. 1998);  Vance v. National Benefit Ass’n, 99 C 2627, 1999 WL 731764, 1999 U.S.Dist. LEXIS 13846 (N.D.Ill. Aug. 30,  1999), *13; Shields v. Lefta, Inc., 888 F. Supp. 891 (N.D. Ill. 1995); Bankier v. First Fed. Sav. & Loan Ass’n, 225 Ill.App.3d 864, 588 N.E.2d 391 (4th Dist.), leave to appeal denied, 146 Ill.2d 622, 602 N.E.2d 446 (1992).

2.         The test of “deception” is whether a representation “creates the likelihood of deception or has the capacity to deceive” the persons exposed to the practice in the particular case.   Elder v. Coronet Ins. Co., 201 Ill.App.3d 733, 558 N.E.2d 1312 (1st Dist. 1990), appeal withdrawn, Elder v. Coronet Ins. Co., 139 Ill.2d 594, 575 N.E.2d 913 (1991); Williams v. Bruno Appliance & Furniture Mart, Inc., 62 Ill.App.3d 219, 222, 379 N.E.2d 52, 54 (1st Dist. 1978); Beard v. Gress, 90 Ill.App.3d 622, 625, 413 N.E.2d 448 (4th Dist. 1980).

3.         The Consumer Fraud Act imposes an affirmative duty to disclose material facts pertaining to a transaction.  Connick v. Suzuki Motor Co., 174 Ill. 2d 482, 675 N.E.2d 584 (1996).  “Under the Act the omission of any material fact is deceptive conduct.”  Crowder v. Bob Oberling Enterprises, Inc., 148 Ill.App.3d 313, 317, 499 N.E.2d 115 (1st Dist. 1986); Simeon Mgmt. Corp. v. FTC, 579 F.2d 1137, 1145 (9th Cir. 1978) (“Failure to disclose material information may cause an advertisement to be false or deceptive within the meaning of the FTCA [Federal Trade Commission Act] even though the advertisement does not state false facts”); J. B. Williams Co. v. FTC, 381 F.2d 884, 888 (6th Cir. 1967) (court found a violation of FTCA ‘5 based on the manufacturer’s failure to disclose that “Geritol” was useful only to individuals who were deficient in one of the vitamins or minerals contained in the product and required affirmative disclosure of “the negative fact that a great majority of persons who experience these symptoms do not experience them because there is a vitamin or iron deficiency”).

4.         Thus, material omissions are actionable even if no duty to disclose the omitted information, other than that imposed by the Consumer Fraud Act itself, exists. Connick v. Suzuki Motor Co., supra, 174 Ill.2d 482, 675 N.E.2d 584 (1996); Celex Group v. Executive Gallery, 877 F.Supp. 1114 (N.D. Ill. 1995), citing Totz v. Continental Du Page Acura, 236 Ill.App.3d 891, 602 N.E.2d 1374 (2d Dist. 1992) (car dealer has duty to disclose that vehicle has been previously damaged in an accident).  The common-law restriction of liability to affirmative misrepresentation, as opposed to nondisclosure, has been abolished.  Indeed, one of the specific problems that CFA ‘2 and other state statutes patterned after FTCA ‘5 were intended to solve was the common‑law rule that a seller had no affirmative duty to disclose material information relating to the product or service sold.  Note, The Seller’s Duty to Disclose Under Consumer Protection Statutes:  Defining the Standard of Care, 17 Suff.U.L.R. 722 (1983).

5.         The Illinois courts have held that where there is a dispute concerning the construction of a statute, noncompliance does not constitute a CFA violation until the statute has been construed.  Lee v. Nationwide Cassell, LP, 174 Ill.2d 540, 675 N.E.2d 599 (1997); Stern v. Norwest Mortgage, Inc., 179 Ill.2d 160, 688 N.E.2d 99 (1997).

6.         A matter is “material” if it might cause a consumer to act differently.  Kleidon v. Rizza Chevrolet, Inc., 173 Ill.App.3d 116, 527 N.E.2d 374 (1st Dist. 1988), leave to appeal denied, 123 Ill.2d 559, 535 N.E.2d 402 (1988).  “Materiality” is objective, to be determined according to the standard of the population to which the defendant’s practices are directed.  Heastie v. Community Bank of Greater Peoria,  690 F.Supp. 716 (N.D.Ill. 1988), later opinion, 125 F.R.D. 669 (N.D.Ill. 1989), later opinion, 727 F. Supp. 1133 (N.D.Ill. 1989), later opinion, 727 F.Supp. 1140 (N.D.Ill. 1989); Mother Earth, Ltd. v. Strawberry Camel, Ltd., 72 Ill.App.3d 37, 52, 390 N.E.2d 393, 406 (1st Dist. 1979), appeal after remand 98 Ill.App.3d 518, 424 N.E.2d 758 (1st Dist 1981).  Note that this does not mean that the consumer would not have entered into the transaction at all, just that something different would have happened.  Thus, small overcharges obtained through deception or unfair practices are actionable.  People ex rel. Hartigan v. Stianos, 131 Ill.App.3d 575, 475 N.E.2d 1024 (2d Dist. 1985).

7.         Even the “unthinking, the ignorant and the credulous” are protected from deceptive conduct, Williams, supra, quoting from Rodale Press, Inc., 71 F.T.C. 1184, 1237-38 (1967).  Accordingly, lack of due diligence on the part of the injured party is no defense.  Zimmerman v. Northfield Real Estate, Inc., 156 Ill.App.3d 154, 168, 510 N.E.2d 409 (1st Dist. 1986), appeal denied, 116 Ill.2d 578, 515 N.E.2d 129 (1987); Beard v. Gress, supra, (“neither the mental state of the person making a misrepresentation nor the diligence of the party injured to check as to the accuracy of the misrepresentation [is] material to the existence of a cause of action for that misrepresentation”); Carter v. Mueller, 120 Ill.App.3d 314, 320, 457 N.E.2d 1335 (1st Dist. 1983).

8.         Deception is evaluated from the perspective of an unsophisticated consumer.  FTC v. Standard Education Society, 302 U.S. 112, 115 (1937) (“The fact that a false statement may be obviously false to those who are trained and experienced does not change its character, nor take away its power to deceive others less experienced.  . . . Laws are made to protect the trusting as well as the suspicious”); Clomon v. Jackson, 988 F.2d 1314, 1318-1319 (2d Cir. 1993) (the law protects “the vast multitude which includes the ignorant, the unthinking and the credulous,” and “in evaluating the tendency of language to deceive,” courts and agencies “look not to the most sophisticated readers but rather to the least”); Gammon v. GC Services, 27 F.3d 1254, 1257 (7th Cir. 1994) (following Clomon, standard is that of the “unsophisticated” consumer and protects the average consumer “who is uninformed, naive, or trusting”).  As the court in Williams, supra, noted:

It is well established that the test to be used in interpreting advertising is the net impression that it is likely to make on the general populace. [Citations.] It is immaterial that a given phrase considered technically may be construed so as not to constitute a misrepresentation or that a deception is accomplished by innuendo rather than by affirmative misstatement. [Citations.] . . . In sum, the [Federal Trade] Commission’s mandate from the courts is to protect the `ignorant, the unthinking, and the credulous.'”  62 Ill.App.3d at 222, 379 N.E.2d at 54, citing, Rodale Press, Inc., 71 F.T.C. 1184, 1237-38 (1967).

9.         The fact that an astute consumer could have detected the practice is irrelevant when the fact is that most consumers under the circumstances do not check.  For example, in People ex rel. Hartigan v. Stianos, 131 Ill.App.3d 575, 475 N.E.2d 1024 (2d Dist. 1985), the court held that a retailer’s practice of charging consumers sales tax in an amount slightly greater than that authorized by law  was both deceptive and unfair:

We conclude the practice described in this case is both deceptive and unfair as those terms are used in the Consumer Fraud Act.  The sales tax rates which may be charged to consumers have been fixed by statute; the legislature set the tax rate at 1.25%, but the evidence here is that defendants collected an average of 4.75%.  While the three sales upon which this case is premised reflect only a few cents in overcharges, it is apparent that similar overcharges, if permitted to continue, could aggregate very substantial losses and injury to the consuming public.  It is also unfair to permit the extraction from the consumer of excessive sums under the guise it is a lawful tax.  If, as defendants alleged in their answer, the excess sums collected were turned over to the State, defendants’ conduct remains unfair and deceptive to the consumers’ injury.  (475 N.E.2d at 1029.

Obviously, the amount of sales tax is set by law, and a consumer who looked up the statute and then did the computations upon being presented with a cash register tape at the supermarket could detect the overcharge.  Of course, consumers generally do not whip out the Revenue Act and a calculator when the clerk rings up their grocery purchase.  They simply accept the supermarket’s representation of the amount of the tax and pay.  Given the context in which the representation was made  —  i.e., the normal shopping habits of consumers  —  inflating the amount of the tax has the “tendency” and “capacity” to deceive.

Another instructive decision is Linden v. United States, 254 F.2d 560 (4th Cir. 1958), which held that the use of advertising material for phone directory other than Yellow Pages that simulated appearance of Yellow Pages renewals violated the federal mail fraud statute, 18 U.S.C. ‘1341.

10.        Under this standard, a representation is deceptive if it can be interpreted in either a misleading or a nonmisleading manner.  Russell v. Equifax A.R.S., 74 F.3d 30 (2d Cir. 1996).

11.        Although there is some occasional contrary language in cases, e.g., Duran v. Leslie Oldsmobile, Inc., 229 Ill.App.3d 1032, 594 N.E.2d 1355 (2d Dist. 1992), the common-law fraud requirement of a false statement of fact is eliminated.  The statute expressly covers “false pretenses”, “false promises”, and omissions.  For example, the Act prohibits false statements of opinion, Duhl v. Nash Realty, Inc., 102 Ill.App.3d 483, 495, 429 N.E.2d 1267 (1st Dist. 1981), misrepresentations as to future conduct, Buzzard v. Bolger, 117 Ill.App.3d 887, 453 N.E.2d 1129, 1131-2 (2d Dist. 1983), false innuendos, Simeon Mgmt. Corp. v. FTC, 579 F.2d 1137, 1145 (9th Cir. 1978), and other conduct that does not involve an outright false statement of fact.

12.        The Illinois legislature has given a “clear mandate . . . that the courts . . . are to utilize the Consumer Fraud Act to the utmost degree in eradicating all forms of deceptive and unfair business practices and to grant appropriate remedies to defrauded consumers.” Warren v. LeMay, 142 Ill.App.3d 550, 491 N.E.2d 464, 472 (5th Dist. 1986), later appeal, 144 Ill.App.3d 107, 494 N.E.2d 206 (5th Dist 1986); American Buyers Club of Mt. Vernon v. Honecker, 46 Ill.App.3d 252, 257, 361 N.E.2d 1370, 1374 (5th Dist. 1977); Downers Grove Volkswagen, Inc. v. Wigglesworth Imports, Inc., 190 Ill.App.3d 524, 546 N.E.2d 33 (2d Dist. 1989); Roberts v. Robert V. Rohrman, Inc., 909 F.Supp. 545, 549 (N.D.Ill. 1995).  “The best element of business has long since decided that honesty should govern competitive enterprises, and that the rule of caveat emptor should not be relied upon to reward fraud and deception.”  FTC v. Standard Education Society, 302 U.S. 112, 116 (1937).

13.        Whether the failure to disclose matters of law is deceptive has turned on whether the parties had equal access to the information.  Randels v. Best Real Estate, Inc., 243 Ill.App.3d 801, 612 N.E.2d 984 (2d Dist. 1993); City of Aurora v. Green, 126 Ill.App.3d 684, 467 N.E.2d 610 (2d Dist. 1984).    Where a statute or regulation requires that a seller inform a consumer of his or her rights, the parties do not have equal access to the information.  Lee v. Nationwide Cassell, L.P., 277 Ill.App.3d 511, 660 N.E.2d 94 (1st Dist. 1995), rev’d other grounds, 174 Ill. 2d 540, 675 N.E.2d 599 (1996).  Affirmative misrepresentation of a consumer’s legal rights constitutes an unfair and deceptive practice. Heastie v. Community Bank of Greater Peoria, 727 F.Supp. 1133 (N.D.Ill. 1989) and 727 F.Supp. 1140 (N.D.Ill. 1989); Leardi v.  Brown, 394 Mass. 151, 474 N.E.2d 1094 (1985)  (landlord’s inclusion in lease of provisions prohibited or rendered unenforceable by various consumer protection statutes or judicial decision is an unfair and deceptive practice violative of a statute virtually identical to the Illinois Consumer Fraud Act); People v. McKale, 25 Cal.3d 626, 602 P.2d 731, 159 Cal.Rptr. 811 (1979) (similar); Wiginton v.  Pacific Credit Corp., 2 Haw. 435, 634 P.2d 111 (App. 1981) (unlawful for creditor to assert that debtors are liable for attorney’s fees where such liability is clearly barred by state law).  In the context of debt collection, such misrepresentation is specifically prohibited by the Fair Debt Collection Practices Act.


1.         The Illinois Supreme Court has adopted the test of an unfair practice@ set forth in FTC v. Sperry & Hutchinson Co., 405 U.S. 233, 244-45 n. 5 (1972); and Cheshire Mortgage Service, Inc. v. Montes, 223 Conn. 80,  612 A.2d 1130 (1992).   Robinson v. Toyota Motor Credit Corp.,  No. 90242, 201 Ill.2d 403, 2002 WL 1038728  (May 23, 2002); Scott v. Association for Childbirth at Home, Int’l, 88 Ill.2d 279, 430 N.E.2d 1012 (1981).  The Robinson decision approved and adopted the discussion of unfair practice@ in Cheshire, which held that violations of the Truth in Lending Act and a Connecticut law regulating the number of points that can be charged in residential mortgage transactions established an unfairness violation.

2.         In determining whether a practice is “unfair,” these decisions consider:

(1) whether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise  —  whether, in other words, it is within at least the penumbra of some common-law, statutory or other established concept of unfairness;

(2) whether it is immoral, unethical, oppressive or unscrupulous;

(3) whether it causes substantial injury to consumers (or competitors or other businessmen).

FTC v. Sperry & Hutchinson Co., 405 U.S. 233, 244-45 n. 5 (1972).

3.         “All three criteria do not need to be satisfied to support a finding of unfairness.   A practice may be unfair because of the degree to which it meets one of the criteria or because to a lesser extent it  meets all three.@  Cheshire Mortgage Service, Inc. v. Montes, 223 Conn. 80,  612 A.2d 1130, 1143-44 (1992).

4.         ATo justify a finding of unfairness the injury must satisfy three tests.   It must be substantial;  it must not be outweighed by any countervailing benefits to consumers or competition that the practice produces;  and it must be an injury that consumers themselves could not reasonably have avoided.”  Cheshire, 612 A.2d at 1447.  An overcharge of about $400 was considered substantial injury.@

5.         In light of the Supreme Court=s adoption of Cheshire, the Connecticut decisions following it should be considered as precedent.  Some of the practices found to be unfair in Connecticut include:

a.         Conducting business without compliance with a licensing requirement intended to protect the public. DSM, Inc. v. Sentry Select Ins. Co., 2002 WL 652424 (Conn. Super. March 22, 2002).

b.         Forgery or enforcing forged documents.  HomeAmerican Credit, Inc. v. Weiss, 2000 WL 347785 (Conn. Super. March 16, 2000).


1.         A 1990 amendment to 815 ILCS 505/10a specified that no such requirement ordinarily exists.  The amendment did not effect a substantive change in the law, but merely clarified that there never was a public injury requirement under the statute. Ryan v. Wersi Elec. GmbH & Co., 3 F.3d 174  (7th Cir. 1993), later opinion, 59 F.3d 52  (7th Cir. 1995); Golembiewski v. Hallberg Ins. Agency, Inc., 262 Ill.App.3d 1082, 635 N.E.2d 452 (1st Dist.), leave to appeal denied, 157 Ill.2d 499, 642 N.E.2d 1278 (1994).

2.         A 1995 amendment to ’10a purported to reinstate a “public injury” requirement with respect to car dealers, only.  This was extended to holders of motor vehicle retail installment contracts in 1999. A 2002 Appellate Court decision holds that it violates the special legislation@ prohibition in the Illinois constitution.   Allen v. Woodfield Chevrolet, Inc., 332 Ill.App.3d 605, 773 N.E.2d 1145 (1st  Dist.2002).

3.         There are a number of cases which state that a simple breach of a consumer contract is not a Consumer Fraud Act violation.  Bankier v. First Fed. Sav. & Loan, 225 Ill.App.3d 864, 588 N.E.2d 391 (4th Dist. 1992), leave to appeal denied, 146 Ill.2d 622, 602 N.E.2d 446 (1992); Village of Pawnee v. Azzarelli Constr. Co., 183 Ill.App.3d 998, 539 N.E.2d 895 (4th Dist. 1989); Zankle v. Queen Anne Landscaping, 311 Ill.App.3d 308, 311-12, 724 N.E.2d 988, 992 (2d Dist. 2000).   These decisions should not be read as imposing a “pattern” requirement, but rather as defining what constitutes a “deceptive” or “unfair” act or practice.  A simple dispute over performance of a contract is neither.  Golembiewski v. Hallberg Ins. Agency, Inc., 262 Ill.App.3d 1082, 1093, 635 N.E.2d 452 (1st Dist. 1994), leave to appeal denied, 157 Ill.2d 499, 642 N.E.2d 1278 (1994) (“Every individual breach of contract between two parties . . . does not amount to a cause of action cognizable under the Act and the Act should not apply to simple breach of contract claims”).

4.         However, it is unfair and deceptive for a business to (1) systematically breach or fail to honor obligations under consumer contracts, Orkin Exterminating Co., 108 F.T.C. 263 (1986), aff’d, 849 F.2d 1354 (11th Cir. 1988) (Orkin entered into form contracts with thousands of consumers to conduct annual pest inspections for a fixed fee and later, without authority in the contracts, raised the fees an average of $40; both the FTC and the federal Court of Appeals had no difficulty holding that this action was an unfair practice); People ex rel Hartigan v. All American Aluminum & Construction Co., 171 Ill.App.3d 27, 524 N.E.2d 1067 (1st Dist. 1988) (repeated failure to perform home improvement contracts violated Consumer Fraud Act); or (2) misrepresent or conceal material information concerning its ability or intention to perform a consumer contract, Elder v. Coronet Ins. Co., supra, 201 Ill.App.3d 733, 558 N.E.2d 1312 (1st Dist. 1990) (deceptive for insurance company to enter into contracts of insurance without disclosing that it intended to process claims under the contracts by means of “lie detector” tests).  Some cases state that “the test for standing is whether the alleged conduct involves trade practices addressed to the market generally or otherwise implicates consumer protection concerns.”  Lefebvre Intergraphics, Inc. v. Sanden Mach. Ltd., 946 F.Supp. 1358, 1368 (N.D.Ill. 1996); Gadson v. Newman, 807 F. Supp. 1412, 1421 (C.D. Ill. 1992); Industrial Specialty Chemicals, Inc. v. Cummins Engine Co.,, 902 F. Supp. 805, 812 (N.D. Ill. 1995); Zinser v. Rose, 245 Ill.App.3d 881, 886, 614 N.E.2d 1259, 1263 (3d Dist. 1993).

5.         While it is not generally necessary for a plaintiff to prove that a defendant acted in violation of the Consumer Fraud Act on other occasions, it is proper for a plaintiff to do so.  Bond v. Noble, 163 Ill.App.3d 1067, 517 N.E.2d 319 (4th Dist. 1987).  A pattern of violations shows that defendant intended to deceive, which in turn gives rise to an inference that the means defendant selected to carry out his intent were suitable to effectuate his illicit purpose.  Gammon v. GC Services L.P., 27 F.3d 1254  (7th Cir. 1994).  E.g.Joseph Taylor Coal Co. v. Dawes, 122 Ill.App. 389 (1905), aff’d. 220 Ill. 147, 77 N.E. 131 (1906) (intent); Eaves v. Penn, 587 F.2d 453, 463-4 (10th Cir. 1978) (in civil action for breach of fiduciary duty, evidence of breaches of fiduciary other than one for which recovery was sought properly admitted to show intent); Edgar v. Fred Jones Lincoln-Mercury, 524 F.2d 162, 167 (10th Cir. 1975) (same, odometer fraud);  Welch v. Barnett, 34 Okla. 166, 125 P. 472 (1912) (that five Indians willed property to the same unrelated white men in different transactions is convincing proof that undue influence and fraud were practiced on all).  Further, “a pattern of deception justifies an award of punitive damages.”  Carter v. Mueller, 120 Ill.App. 3d 314, 457 N.E.2d 1335, 1337 (1st Dist. 1983); accord, Tetuan v. A.H. Robins, 738 P.2d. 1210 (Kan. 1987);  Eichenseer v. Reserve Life Ins. Co., 934 F.2d 1377 (5th Cir. 1991)


1.         There is no requirement of intent to defraud on the part of the defendant.  Miller v. William Chevrolet/ Geo, Inc., 326 Ill.App.3d 642, 762 N.E.2d 1, 11 (1st Dist. 2001);  Beard v. Gress, supra.  Even innocent misrepresentations are covered.  Ramson v. Layne, 668 F.Supp. 1162, 1169-70 (N.D.Ill. 1987).  “[A] plaintiff’s right to recovery under the Act may be based on an innocent or negligent misrepresentation as well as one that is intentional.”   Rubin v. Marshall Field & Co., 232 Ill.App.3d 522, 533, 597 N.E.2d 688, 695  (1st Dist. 1992).

2.         Scienter is required for real estate brokers and insurance agencies and producers

3.         The reference in CFA ‘2 to “intent that others rely . . .” does not reintroduce the common‑law requirement of intent to defraud.  Rather, it requires that the defendant intend to affect the conduct of the victim.  Warren v. LeMay, supra, 142 Ill.App.3d 550, 566, 573‑74, 491 N.E.2d 464 (5th Dist. 1986); Crowder v. Bob Oberling Enterprises, Inc., 148 Ill.App.3d 313, 316, 499 N.E.2d 115 (1st Dist. 1986); Elder v. Coronet Ins. Co., supra, 201 Ill.App.3d 733, 558 N.E.2d 1312 (1st Dist. 1990); Carl Sandburg Village Condominium Ass’n No. 1 v. First Condominium Development Co., 197 Ill.App.3d 948, 557 N.E.2d 246 (1st Dist. 1990) (“the ‘intent’ required by the statute is only the intent that plaintiffs . . . rely on the information that defendants gave them, as opposed to any intent on defendants’ part to deceive”); Cox v. Joe Rizza Ford, Inc., 94 C 5688, 1996 WL 65994, 1996 U.S. Dist. LEXIS 1581 (N.D.Ill. Feb. 9, 1996).  Satisfaction of this requirement is presumed when the challenged conduct takes place in connection with a transaction between the parties.  Warren v. LeMay, supra; Roberts v. Robert V. Rohrman, Inc., supra, 909 F.Supp. 545 (N.D.Ill. 1995).  The purpose of the requirement is to prevent unlimited liability to unknown persons for failure to disclose.


1.         Siegel v. Levy Organization Development Co., 153 Ill.2d 534, 607 N.E.2d 194 (1992); Martin v. Heinold Commodities, 163 Ill.2d 33, 643 N.E.2d 734, 754 (1994); Miller v. William Chevrolet/ Geo, Inc., 326 Ill.App.3d 642, 762 N.E.2d 1, 11 (1st Dist. 2001); Tylka v. Gerber Products Co., 178 F.R.D. 493 (N.D.Ill. 1998);  Swanagan v. Al Piemonte Ford Sales,94 C 4070, 1995 WL 493480, 1995 U.S. Dist. LEXIS 11863 (N.D.Ill., August 15, 1995).

2.         Damages are assessed on objective basis:  would reasonable consumer have considered matter significant.  Heastie v. Community Bank of Greater Peoria, supra, 690 F.Supp. 716 (N.D.Ill. 1988).

3.         However, it is necessary to prove that plaintiff’s damages were caused by the defendant’s conduct.  See below.


1.         Available in federal court, Inter-Asset Finanz AG v. Refco, Inc., 1993 U.S. Dist. LEXIS 11181, *8-9 (N.D.Ill. 1993), Cellular Dynamics, Inc. v. MCI Telecommunications Corp., 1997 U.S.Dist. LEXIS 7466 (N.D.Ill. 1997), but not in state court, Martin v. Heinold, supra.

2.         In most cases, whether a representation is material or deceptive presents a factual question.  Nichols Motorcycle Supply v. Dunlop Tire Corp., 913 F.Supp. 1088 (N.D.Ill. 1995); People ex rel. Daley v. Datacom Sys., 146 Ill. 2d 1, 585 N.E.2d 51, 66 (1991).


1.         In Zekman v. Direct American Marketers, Inc., 182 Ill.2d 359, 695 N.E.2d 853 (1998), the court rejected the theory that knowingly accepting the fruits of a deceptive practice results in CFA liability.  “We agree with AT&T that the plain language of section 2 of the Act does not include anything that makes it unlawful to knowingly receive the benefits of another’s fraud.”  Defendants tend to cite this decision in inappropriate contexts, such as where liability is sought to be imposed on the basis of respondeat superior.

2.         Respondeat superior liability is necessarily provided for by the CFA, as ’10a provides that “Any person who suffers actual damage as a result of a violation of this Act committed by any other person may bring an action against such person,” and ‘1(c) defines “person” to include any natural person or his legal representative, partnership, corporation (domestic and foreign), company, trust, business entity or association, and any agent, employee, salesman, partner, officer, director, member, stockholder, associate, trustee or cestui que trust thereof”.  Since a corporate “person” can only act through a human agent, respondeat superior liability is necessarily contemplated.   Warren v. LeMay, supra; Duhl v. Nash Realty, Inc., 102 Ill.App.3d 483, 429 N.E.2d 1267 (1st Dist. 1981); Vance v. National Benefit Ass’n, 99 C 2627, 1999 WL 731764, *4, 1999 U.S.Dist. LEXIS 13846 (N.D.Ill. Aug. 30, 1999).

3.         Similarly, the CFA expressly contemplates that agents, officers, directors, etc., may be held liable.  The cases hold that an officer or other person who controls a corporation is liable if he or she participates in violations.  Garcia v. Overland Bond & Inv. Co., 282 Ill.App.3d 486, 668 N.E.2d 199 (1st Dist. 1996); People ex rel. Hartigan v. All American Aluminum & Construction Co., 171 Ill.App.3d 27, 524 N.E 2d 1067 (1st Dist. 1988); People ex rel. Fahner v. American Buyer’s Club, Inc., 115 Ill.App.3d 759, 450 N.E.2d 904 (3d Dist. 1983); People ex rel. Hartigan v. Dynasty System Corp., 128 Ill.App.3d 874, 471 N.E 2d 236 (1st Dist. 1984).  This test appears somewhat more stringent than that applied under ‘5 of the FTC Act.  Zale Corp. v. FTC, 473 F.2d 1317, 1322 (5th Cir. 1973); In re Macmillan, Inc., 96 F.T.C. 208 (1980); FTC v. Amy Travel Service, 875 F.2d 564 (7th Cir. 1989); FTC v. International Diamond Corp., 1983‑2 Trade Cas. (CCH) &65,506, at p. 68,458 (N.D.Cal. 1983); FTC v. H. N. Singer, Inc., 1982‑83 Trade Cas. (CCH) &65,011 (N.D.Cal. 1982).

4.         Advertising agencies

In re Diamond Mortgage Co., 118 B.R. 575 (Bankr., N.D.Ill. 1989).

5.         Endorsers

Ramson v. Layne, 668 F.Supp. 1162 (N.D.Ill. 1987); In re Diamond Mtge. Corp., 118 B.R. 588 (Bankr. N.D.Ill. 1989); In re Diamond Mtge. Corp., 118 B.R. 575 (Bankr. N.D.Ill. 1989).

6.         Aiding, abetting, and assisting.

Waltham Watch Co. v. FTC, 318 F.2d 28, 32 (7th Cir. 1963); People by Lefkowitz v.  Therapeutic Hypnosis, Inc., 83 Misc.2d 1068, 374 N.Y.S.2d 576 (N.Y.Sup.Ct. 1975); Armstrong v. Edelson, 718 F.Supp. 1372 (N.D.Ill. 1989).  This ground of liability is open to question in light of Zekman.

P.         REMEDIES

                         1.         DAMAGES

a.         Causation. 

It is necessary to show a causal connection between the misrepresentation or omission and the claimed damages, but this can be done on an objective basis through proof of a material misrepresentation or omission.  Heastie v. Community Bank of Greater Peoria, supra, 690 F.Supp. 716 (N.D.Ill. 1988); Mother Earth, Ltd. v. Strawberry Camel, Ltd., supra, 72 Ill.App.3d 37, 52, 390 N.E.2d 393, 406 (1st Dist. 1979).   For example, in Martin v. Heinold Commodities, Inc., 163 Ill.2d 33, 643 N.E.2d 734 (1994), where a commodities broker misrepresented that part of its commission was a third-party “foreign service fee,” the court permitted a class of commodities purchasers to recover the entire amount of the fee, without any showing as to what happened in individual transactions.

In In re Synthroid Marketing Litigation, 1999 U.S.Dist. LEXIS 11195 at *13 (N.D.Ill. July 19, 1999), Judge Bucklo stated that “Proximate cause is established by demonstrating that purchases occurred after the allegedly fraudulent statements were made, and that the alleged fraud directly or indirectly injured Plaintiffs,” citing Garner v. Healy, 184 F.R.D. 598, 602 (N.D.Ill. 1999).

Defendants claim that a stricter standard is required under Oliveira v. Amoco Oil Co., No. 89511, 201 Ill.2d 134, 2002 WL 1340895 (June 20, 2002).

b.         Benefit of Bargain

Brooks v. Midas-Int’l Corp., 47 Ill.App.3d 266, 272-73, 361 N.E.2d 815 (1st Dist. 1977).

c.         Injury to Person:  recently abolished

d.         Punitive:  Guess v. Brophy, 164 Ill.App.3d 75, 517 N.E.2d 693 (4th Dist. 1987); Gent v. Collinsville Volkswagen, Inc., 116 Ill.App.3d 496, 451 N.E.2d 1385 (5th Dist. 1983); Malooley v. Alice, 251 Ill.App.3d 51, 621 N.E.2d 265 (3d Dist. 1993); Ekl v. Knecht, 223 Ill.App.3d 234, 585 N.E.2d 156 (2d Dist. 1993); Martin v. Heinold Commodities, 163 Ill.2d 33, 643 N.E.2d 734 (1994).


a.         The Consumer Fraud Act was amended effective January 1, 1991 to authorize “injunctive relief where appropriate” in suits by private parties.  ’10a(c).  This changed prior law to contrary.  Brooks v. Midas-International Corp., 47 Ill.App.3d 266, 361 N.E.2d 815 (1st Dist. 1977).

b.         Previously, courts had refused to grant injunctive relief in suits by private individuals on the grounds that (i) a person harmed by a deceptive practice does not need an injunction against future deception and (ii) the provisions in the Act authorizing the Attorney General to obtain injunctive relief were exclusive.  Brooks, supra.

c.         It appears that the Legislature meant to create a “statutory injunction,” whereby any individual who was damaged by a practice has standing to obtain an injunction protecting others from being harmed.  In applying a statute authorizing an injunction for law enforcement purposes, “the standards of the public interest, not the requirements of private litigation, measure the propriety and need for injunctive relief.”  Hecht Co. v. Bowles, 321 U.S. 321, 331 (1944).  The question is simply whether an injunction is necessary to secure future compliance with the law.  People ex rel. Edgar v. Miller, 110 Ill.App.3d 264, 441 N.E.2d 1328 (4th Dist. 1982).  However, some cases appear to continue to inquire whether the plaintiff needs an injunction, which will almost never be the case.  Disc Jockey Referral Network, Ltd. v. Ameritech Publishing, 230 Ill.App.3d 908, 596 N.E.2d 4 (1st Dist. 1992), leave to appeal denied, 146 Ill.2d 625, 602 N.E.2d 450 (1992).

3.         RESCISSION

Grimes v. Adlesperger, 67 Ill.App.3d 582, 384 N.E.2d 537, 539 (4th Dist. 1978); Warren v. Borger, 184 Ill.App.3d 38, 539 N.E.2d 1284 (5th Dist. 1989), appeal denied, 136 Ill. Dec. 610, 545 N.E.2d 134 (1989); Perkins v. Collette, 179 Ill.App.3d 852, 534 N.E.2d 1312 (2d Dist. 1989).


American Buyer’s Club v. Honecker, 46 Ill.App.3d 252, 361 N.E.2d 1370, 1375 (5th Dist. 1977); American Buyer’s Club v. Hayes, 46 Ill.App.3d 270, 361 N.E.2d 1383, 1384 (5th Dist. 1977).


In a case where rescission of contracts or declaratory relief is appropriate, it should be possible to sue under the Act for that relief alone.  Section 10a(a) of the Act provides that “Any person who suffers actual damage as a result of a violation of this Act committed by any other person may bring an action against such person. The court, in its discretion may award actual economic damages or any other relief which the court deems proper . . . .”   “Injury” or “damage” is defined as “any wrong or damage done to another, either in his person, rights, reputation or property.  The invasion of a legally protected interest of another.” Black’s Law Dictionary, 5th Ed., p. 706.  See White v. Touche Ross & Co., 163 Ill.App.3d 94, 516 N.E.2d 509 (1st Dist. 1987), appeal denied, 119 Ill.2d 576, 522 N.E.2d 1259 (1988).  For example, the fact that a purported indebtedness results from a violation of the CFA is in and of itself an invasion of protected rights. Golt v. Phillips, 308 Md. 1, 517 A.2d 328 (1986) (“legal liability is also an actual damage” under Maryland statute similar to the Illinois Consumer Fraud Act).

At least one court has found that the fact that a consumer was required to defend a lawsuit and prosecute a counterclaim to secure relief from an illegal obligation constituted “damages sustained” under a consumer protection statute.  St. Paul Fire & Marine Ins. Co. v. Updegrave, 33 Wash.App. 653, 656 P.2d 1130 (1983).  In St. Paul Fire, a consumer was sued for insurance premiums, and successfully counterclaimed alleging the premiums had been imposed in violation of the consumer protection statute.  The court awarded the consumer attorneys’ fees due to the fact that the consumer was forced to defend the lawsuit, and held that “damages sustained” does not require proof of specific monetary damages.  See also, Hinchliffe v. American Motors Corp., 184 Conn. 607, 440 A.2d 810, 813 (1981).

Massachusetts courts have also held that a consumer who signed a contract containing illegal terms constituted “injury” within the meaning of the Massachusetts consumer protection statute. Leardi v. Brown, 394 Mass. 151, 474 N.E.2d 1094, 1100-01 (1985). “The term `injury’ denotes `the invasion of any legally protected interest of another.'” Id. 474 N.E.2d at 1101.

6.         ATTORNEY’S FEES

Attorney’s fees are specifically authorized by ’10a(c).  Although there is some difference in the formulations used in the 1st and 2d Appellate Districts, a  prevailing defendant should be able to recover fees only if the action was frivolous.    Graunke v. Elmhurst Chrysler Plymouth Volvo, Inc., 247 Ill.App.3d 1015, 617 N.E.2d 858 (2d Dist. 1993).

Q.        DEFENSES

1.         LIMITATIONS

Section 10a provides a three year statute of limitations, which is tolled until the injury is discovered by the victim.  Hermitage Corp. v. Contractors Adjustment Co., 166 Ill.2d 72, 651 N.E.2d 1132 (1995); Highsmith v. Chrysler Credit Corp., 18 F.3d 434 (7th Cir. 1994).


The parol evidence rule does not bar evidence of deceptive representations.  Shanahan v. Schindler, 63 Ill.App.3d 82, 379 N.E.2d 1307 (1st Dist. 1978); Spindler v. Krieger, 16 Ill.App.2d 131, 147 N.E.2d 457 (1st Dist. 1958); Wagner v. Morris, 658 S.W.2d 230 (Tex.Civ.App. 1983); Tidelands Life Ins. Co. v. Harris, 675 S.W.2d 224 (Tex.Civ.App. 1984), writ ref’d n.r.e.


Under this doctrine, a plaintiff who voluntarily pays money in reply to an incorrect or illegal claim of right cannot recover that payment unless he show fraud, coercion, or mistake of fact.@  Randazzo v. Harris Bank Palatine, 262 F.3d 663, 666 (7th Cir. 2001).

The voluntary payment doctrine cannot be used to defeat public policy.  Pratt v. Smart Corp., 968 S.W.2d 868 (Tenn. App. 1997) (the voluntary payment rule does not come into play in situations involving a transaction that violates public policy@); Harper v. American Tel. & Tel. Co., 54 F.Supp.2d 1371, 1380-81 (S.D.Ga. 1999) (state law regarding voluntary payments cannot be used to prevent recovery of money obtained through mail fraud); LaParr v. City of Rockford, 100 F.2d 564, 568  (7th Cir. 1938);  Dunbar v. American Tel. & Tel. Co., 238 Ill. 456, 87 N.E. 521, 535-36 (1909); Evans v. Funk, 151 Ill. 650, 661-2, 38 N.E. 230, 234 (1894); Bizik v. Bizik, 124 Ind. App. 146, 158, 111 N.E.2d 823, 829 (1953).  Thus, where a party not in pari delicto seeks recovery of amounts paid pursuant to an illegal contract, he may do so.   Congress & Empire Spring Co. v. Knowlton, 103 U.S. 49, 58 (1880).

For example, the voluntary payment doctrine cannot be used to defeat the recovery of usurious interest, the law being intended for the protection of borrowers against lenders.   Watertown Fire Ins. Co. v. Rust, 40 Ill.App. 119 (3d Dist. 1890), affd on opinion below, 141 Ill. 85, 30 N.E. 772 (1892); Buck v. Dahlgren, 23 Cal. App.3d 779, 100 Cal.Rptr. 462, 468 (1972).  Similarly, where a statute limits the fees that may be charged in a transaction, and a person intended to be protected against excessive fees is charged more than permitted, the fact that the payment is voluntary does not prohibit recovery of the fee.  Newton v. Cox, 878 S.W.2d 105 (Tenn. 1994).

Illinois courts have held that where a person performs professional services for which a license is required to protect the public, without having the required license, and collects a fee, the person that paid the fee is entitled to bring an action for restitution of the payment.  Ransburg v. Haase, 224 Ill.App.3d 681, 684-88, 586 N.E.2d 1295, 1297-1300 (3d Dist. 1992) (unlicensed architect); Kaplan v. Tabb Assoc., 276 Ill.App.3d 320, 324-5, 657 N.E.2d 1065 (1st Dist. 1995) (same). The purchaser is not considered to be in pari delicto because the law in question was passed for the protection of the person who paid and it appears that the purposes of the law would be better effectuated by granting relief [to the client] than by denying it.@ Ransburg, 586 N.E.2d at 1298-99.  The Ransburg decision specifically allows recovery on public policy grounds even though the fee was voluntarily paid to the unlicensed person.

The voluntary payment doctrine has no application where money is entrusted to someone for a specific purpose, such as payment to a governmental official, and the money is not paid over to the third party.  Harrison Sheet Steel Co. v. Lyons, 15 Ill.2d 532, 155 N.E.2d 595, 597-8 (1959); Cohon v. Oscar L. Paris Co., 17 Ill.App.2d 21, 149 N.E.2d 472 (1st Dist. 1958); Lawyers Title Ins. Corp. v. Dearborn Title Corp., 118 F.3d 1157, 1164 (7th Cir. 1997).   There is no rule of equity or law which would permit the defendant to collect money for a special purpose for which it never can or will be used and to retain the money for its own enrichment over the rights of the plaintiff or plaintiffs who had paid it.@  Cohon, 149 N.E.2d at 478.  Duress, compulsion or fraud need not be shown in such cases.  Cohon, supra; Lawyers Title, supra.  Allowing the defendant to retain money under such circumstances is little short of theft.

Finally, the voluntary payment doctrine should have no applicability to residential mortgages.  The Illinois voluntary payment rule in effect imposes an obligation to raise any question regarding debits and credits on a transaction prior to payment.   The federal Cranston Gonzales amendment to the Real Estate Settlement Procedures Act, 12 U.S.C. ‘2605, says a mortgagor can go back and get an adjustment for any debits or credits up to one year after the servicer ceases servicing the loan.   See N. K. Fairbank Co. v. City of Chicago, 153 Ill.App. 140, 1910 WL 1720 (1st Dist. 1910) (where ordinance gives payor right to adjustment after payment, voluntary payment rule does not apply).  The federal statute prevails over the state common law rule, under the Supremacy Clause.


Invariably, and usually inappropriately, invoked by defendants.

The CFA does not apply to “actions taken or transactions specifically authorized by laws administered by any regulatory body or officer . . . .”  ’10b (815 ILCS 505/10b)

Preemption exists only if some other statute or regulation mandated some specific disclosure or act and an attempt is made to prohibit it under CFA.  Heastie v. Community Bank of Greater Peoria, supra, 690 F.Supp. 716 (N.D.Ill. 1988); Aurora Firefighter’s Credit Union v. Harvey, 163 Ill.App.3d 915, 516 N.E.2d 1028 (2d Dist. 1987), leave to appeal denied, 119 Ill.2d 553, 522 N.E.2d 1240 (1988).


In Lanier v. Associates Finance, Inc., 114 Ill.2d 1, 499 N.E.2d 440 (1986), the court held that where the Federal Reserve Board required use of particular terminology, without further explanation, a CFA ‘2 claim complaining that further explanation should have been provided could not be sustained.

In Hill v. St. Paul Federal Bank, 2002 WL 480924 (Ill.App. March 29, 2002), the court held that it was not necessary for a bank to disclose the fact that it posted checks in such order as to maximize the overdraft fees it charged.  A[I]t is the policy in Illinois not to extend disclosure requirements beyond what is mandated by federal law.

In Weatherman v Gary‑Wheaton Bank of Fox Valley, N.A., 186 Ill.2d 472, 713 N.E.2d 543 (1999), the court held that where a fee was disclosed in compliance with the Real Estate Settlement Procedures Act, the CFA could not be used to impose greater disclosure requirements.

In Aurora Firefighter’s Credit Union, the court held that where TILA specified the persons to whom a disclosure statement had to be furnished, CFA ‘2 could not be used to alter the list.


The mere fact that a transaction is subject to regulation under another statute does not mean that it is not also subject to the CFA.

In Chandler v. American General Finance, Inc., 329 Ill.App.3d 729, 768 N.E.2d 60 (1st Dist.  2002), the court held that the fact that the disclosures in a credit transaction complied with the Truth in Lending Act did not foreclose a CFA claim based on misleading advertising used to induce the credit transaction.

In Heastie v. Community Bank of Greater Peoria, supra, the court held that the fact that TILA confers a right to cancel certain mortgage transactions does not preclude a CFA ‘2 claim based on unfair or deceptive inducement of such mortgage transactions.

Similarly, in Aurora Firefighter’s Credit Union v. Harvey, supra, the fact that the Credit Union Act regulated the credit union’s practices did not create a CFA exemption; the court held that only if a specific act or representation were authorized or required by the Credit Union Act would there be an exemption.

Likewise, Kellerman v. MCI Telecommunications Corp., 112 Ill.2d 428, 493 N.E.2d 1045 (1986), held that the federal Communications Act, by regulating rates for long distance phone service, did not preclude application of CFA ‘2 to deceptive advertising of long distance telephone rates.  Accord, Speakers of Sport, Inc. v. U. S. Telephone, 149 Ill.App.3d 898, 501 N.E.2d 318 (1st Dist. 1986), appeal denied, 114 Ill.2d 558, 508 N.E.2d 736 (1987).

If the other regulatory statute is not complied with, and the conduct is also unfair or deceptive within meaning of CFA ‘2, there is no problem in applying CFA to impose liability.  April v. Union Mortgage Co., 709 F.Supp. 809 (N.D.Ill. 1989) (misstatement of material information required to be disclosed by TILA); Kleidon v. Rizza Chevrolet, Inc., 173 Ill.App.3d 116, 527 N.E.2d 374 (1st Dist. 1988), leave to appeal denied, 123 Ill.2d 559, 535 N.E.2d 402 (1988)(similar).

The fact that the federal law has a shorter limitations period, which has expired, does not mean that the transaction complies with federal law for purposes of ‘ 10b.  MorEquity, Inc. v. Naeem, 118 F.Supp.2d 885, 893 (N.D.Ill. 2000).

Under a parallel provision in the North Carolina UDAP statute, the fact that the state insurance commission authorized the terms of the policy did not exempt deception in marketing or selling it.  Davidson v. Knauff Ins. Agency, Inc., 93 N.C.App. 20, 376 S.E.2d 488 (1989), review denied, 324 N.C. 577, 381 S.E.2d 772 (1989)

Section 155 of the Insurance Code does not preempt the CFA.  Fox v. Industrial Cas. Ins. Co., 98 Ill.App.3d 543, 546, 424 N.E.2d 839  (1st Dist. 1981).


A.        16 CFR part 433

In 1976, the Federal Trade Commission promulgated a regulation, 16 C.F.R. part 433, intended to address the problem of consumer liability to financial institutions which finance the purchase of defective goods.  As explained in the FTC’s Staff Guidelines on Trade Regulation Rule Concerning Preservation of Consumers’ Claims and Defenses, the purpose of the regulation was to make it impossible “for a seller to arrange credit terms for buyers which separate the consumer’s legal duty to pay from the seller’s legal duty to keep his promises.”  Prior to the regulation, this could be accomplished in three ways:  (1)  “[T]he seller may execute a credit contract with a buyer which contains a promissory note,” which was then negotiated to a financing institution.  (2)  “[T]he seller may incorporate a written provision called a ‘waiver of defenses’ in the text of an installment sales agreement” and then assign the agreement to a financing institution.  (3)  “[A] seller may arrange a direct loan for his buyer” from the financing institution.  (Id.)

The FTC regulation “is directed at all three of the above situations.”  Seller‑arranged direct loans were expressly included because “[i]n jurisdictions where efforts have been made to curtail the use of promissory notes and waivers of defenses, the Commission documented a significant increase in the use of arranged loans to accomplish the same end.”  (Id.)

1.         Assigned obligations

The FTC regulation has two parts.  The first part, 16 C.F.R. ‘433.2(a), applies to situations (1) and (2)  ‑‑  where the seller and the consumer enter into an obligation which is then assigned or transferred to a financing institution.  In that situation, the FTC regulation eliminates holder in due course status for the financing institution by requiring that the contract contain the following statement:


2.         Direct loans

The second part of the regulation, 16 C.F.R. ‘433.2(b), applies to situation (3)  ‑‑  where the seller refers the consumer to a lender which proceeds to enter into a loan agreement with the consumer.  Section 433.2(b) is triggered when a “creditor” makes a cash advance to a consumer which the consumer applies, “in whole or substantial part, to a purchase of goods or services from a seller who (1) refers consumers to the creditor or (2) is affiliated with the creditor by common control, contract, or business arrangement.” (16 C.F.R. ‘433.1(d))  It requires that “any consumer credit contract made in connection with such purchase money loan”  ‑‑  i.e., the contract between the consumer and the lender  ‑‑  contain the following notice:


B.         Depends on existence of referral or assignment relationship

C.         Purpose:

1.         The FTC regulation was intended to abrogate the holder in due course rule in consumer transactions,  Hempstead Bank v. Babcock, 115 Misc.2d 97, 453 N.Y.S.2d 557, 559 (Sup.Ct. 1982), and place the creditor “in the shoes of the seller” with respect to the consumer.  Aillet v. Century Fin. Co., 391 So.2d 895, 897 (La.App. 1980).  “The creditor or assignee is in the same position the seller would have been in.”  Thomas v. Ford Motor Credit Co., 48 Md.App. 617, 429 A.2d 277, 282 (Md.App. 1981)

2.         The FTC intended to place the burden of losses caused by seller misconduct on the creditor/assignee, on the theory that it is in a better position to bear the losses and to avoid them by policing seller misconduct.  Provident Bank v. Barnhart, 3 Ohio App. 3d 316, 445 N.E.2d 746, 749-50 (1982)

D.        Restrictive reading by Illinois Supreme Court

1.         In Jackson v. South Holland Dodge,  197 Ill.2d 39, 755 N.E.2d 462 (2001), the Illinois Supreme Court held that the FTC notice only applied where the violation was such as to warrant rescission, revocation of acceptance, or the like.

E.         Displacement by specific assignee limitation provisions in TILA and other statutes.

1.         The Seventh and Eleventh Circuits and the Illinois Supreme Court have held that the FTC required notice does not overcome the limitation on assignee liability in the Truth in Lending Act, 15 U.S.C. ‘1641.  Walker v. Wallace Auto Sales, 155 F.3d 927 (7th Cir. 1998); Ellis v. GMAC, 160 F.3d 703 (11th Cir. 1998); Jackson v. South Holland Dodge, Inc., 197 Ill.2d 39, 755 N.E.2d 462 (2001).

2.         The Jackson court further held that under ’10b of the Consumer Fraud Act, the holder notice could not be used to impose liability for a CFA violation based entirely on noncompliance with TILA, on the theory that the assignee complied with TILA by accepting a transaction that did not on its face violate TILA.

3.         This limitation should not be applied to any federal statute that does not expressly address and limit the liability of assignees or transferees.

4.         Outside the context of the CFA, with its peculiar provision in ’10b, this limitation should not be applied to any state statute or common law theory of liability, regardless of whether it expressly addresses or limits the liability of assignees or transferees, as doing so would be inconsistent with the Supremacy Clause.  While Walker held that an FTC regulation cannot override a federal statute, a federal regulation can override state law.

F.         Extent of affirmative recovery:

1.         The consumer may recover from an assignee all payments made under an assigned contract, including any down payment made to the seller.  Cox v. First Nat’l Bank of Cincinnati, 633 F.Supp 236, 239 (S.D.Ohio 1986); FTC Staff Guidelines on the Holder Rule, 41 Fed.Reg. 20,023 (May 14, 1976).

2.         Tinker v. De Maria Porsche Audi, Inc., 459 So.2d 487, 492 (Fla.App. 1984):

“. . . it is clear that not only does the Notice clause entitle the buyer to withhold the balance of the purchase price owed to the creditor when the seller’s contractual duties are not fulfilled, but it gives the buyer a complete defense should the creditor sue for payment.”

3.         Provident Bank v. Barnhart, supra, 445 N.E.2d 746, 750 (Ohio App. 1982):

“The FTC Notice allows the obligor to sue the assignee for the seller-assignor’s faulty performance.”

4.         Thomas v. Ford Motor Credit Co., 429 A.2d 277, 282 (Md.App. 1981):

“The appellee urges that a debtor can only assert a defense in response to a suit by the creditor for collection of the debt.  We disagree.  The appellee, as the assignee of the contract can be sued directly by the appellants, recovery being limited to the amounts paid by the debtor under the contract.  To find otherwise would be to defeat the purpose of the notice and the clear import of the language.”

G.         Operation

1.         The rule requires insertion of language negating negotiability in the contract.

2.         This avoids the problem that there is no private right of action under ‘5 of the FTC Act.  The cause of action is contractual.

3.         Because it alters the contract, the required preservation-of-claims language may be enforced as a contract term even if it is inserted in error, e.g., in a business-purpose contract, or one in which there is no referral relationship.  Jefferson Bank & Trust Co. v. Stamatiou, 384 So.2d 388, 391 (La. 1980).

4.         The consumer may be able to recover attorney’s fees from a creditor who refuses to recognize its obligations under the required notice, on the theory that it is unfair or deceptive conduct.  Home Savings Ass’n v. Guerra, 733 S.W.2d 134 (Tex. 1987); Kish v. Van Note, 692 S.W.2d 463, 466, 468-69 (Tex. 1985).

5.         Consumers who exercise their rights under the notice may be the subject of derogatory reports to credit bureaus.  Such reports may be unfair or deceptive, insofar as they imply that the consumer is not paying for credit-related reasons.  See Metro Ford Truck Sales, Inc. v. Davis, 709 S.W.2d 785, 790-1 (Tex.Civ.App. 1986).

H.        Consequences of attempts to evade

1.         Consumer fraud

Heastie v. Community Bank of Greater Peoria, 727 F.Supp. 1133 (N.D.Ill. 1989), and 727 F.Supp. 1140 (N.D.Ill. 1989) (lender’s provision of contradictory loan documentation as consumer fraud violation).

Iron & Glass Bank v. Franz, 9 Pa.D.& C.3d 419, 428‑29 (1978) (court held that a lender’s “knowing participation in a transaction which violated the FTC ‘preservation of defenses’ trade regulation rule constitutes an unfair or deceptive act or practice” within the meaning of the Pennsylvania consumer protection statute”).

In re Beneficial Corp., 96 F.T.C. 120 (1980) (financial institution which attempted to limit claims and defenses assertable against it to those raised within specific time period committed violation of ‘5 of FTC Act) (consent order).

The FTC Staff Guidelines state that “[t]he requirement that a contract ‘contain’ the Notice is not satisfied if the text of the Notice is printed in the contract in conjunction with additional recitals which limit or restrict its application.”

2.         Mail and wire fraud

Brown v. LaSalle Northwest National Bank, 148 F.R.D. 584 (N.D.Ill. 1993), later opinion, 820 F.Supp. 1078 (N.D.Ill. 1993), later opinion, 1993 U.S.Dist. LEXIS 11419 (N.D.Ill. 1993) (lender’s provision of nonconforming loan documentation as scheme to defraud within mail and wire fraud statutes).

Stevens v. Associates Finance, 1996 U.S. Dist. LEXIS 1912 (N.D.Ill. 1996) (Magistrate Judge’s report, adopted by District Court).

III.       UNIFORM COMMERCIAL CODE, 810 ILCS 5/1-101 et seq.

A.        Article 2:  sales

1.         Express warranties:

a.         ‘2‑313(1)(b):  “any description of the goods which is made part of the basis of the bargain creates an express warranty that the goods shall conform to the description”.

b.         ‘2‑313(1)(a):  “any affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods shall conform to the affirmation or promise.”

c.         Brochures and advertisements may constitute express warranties.  Wheeler v. Sunbelt Tool Co., 181 Ill.App.3d 1088, 1100, 537 N.E.2d 1332, 1340 (4th Dist. 1989), appeal denied, 136 Ill.Dec. 610, 545 N.E.2d 134 (1989).  The description of the product normally creates an express warranty.  Custom Automated Machinery v. Penda Corp., 537 F.Supp. 77, 82 (N.D.Ill. 1982) (seller’s statement that machine would operate at 120 cycles per hour created an express warranty).

d.         In car cases, express warranties may be found on the basis of statements that a car is in good running condition or free from defects, Redmac, Inc. v. Computerland of Peoria, 140 Ill.App.3d 741, 489 N.E.2d 380 (3d Dist. 1986) (“free of defects” and would “work for a reasonable period of time”); that a car is new, Stamm v. Wilder Travel Trailers, 44 Ill.App.3d 530, 358 N.E.2d 382 (5th Dist. 1976); Buechin v. Ogden Chrysler‑Plymouth, Inc., 159 Ill.App.3d 237, 511 N.E.2d 1330 (2d Dist. 1987), in undamaged condition, Sass v. Spradlin, 66 Ill.App.3d 976, 384 N.E.2d 464 (2d Dist. 1978), in good order, condition and repair, Continental Sand & Gravel, Inc. v. K & K Sand & Gravel, Inc., 755 F.2d 87 (7th Cir. 1985); or a “good runner.” Crothers by Crothers v. Cohen, 384 N.W.2d 562, 563 (Minn. App. 1986).

e.         Disclaimers:  Disclaimers of express warranties are generally not effective to the extent that they negate promises or representations.  UCC ‘2-316; Blankenship v. Northtown Ford, Inc., 95 Ill.App.3d 303, 420 N.E.2d 167, 169-71 (4th Dist. 1981) (boilerplate disclaimer did not negate dealer’s obligation to supply “new” car); Husky Spray Serv. v. Patzer, 471 N.W.2d 146 (S.D. 1991).  UCC ‘2-316 states:

Exclusion or modification of warranties.

(1)  Words or conduct relevant to the creation of an express warranty and words or conduct tending to negate or limit warranty shall be construed wherever reasonable as consistent with each other; but subject to the provisions of this Article on parol or extrinsic evidence (Section 2-202) negation or limitation is inoperative to the extent that such construction is unreasonable.

Comment 4 to UCC ‘2-313 states:

In view of the principle that the whole purpose of the law of warranty is to determine what it is that the seller has in essence agreed to sell, the policy is adopted of those cases which refuse except in unusual circumstances to recognize a material deletion of the seller’s obligation.  Thus, a contract is normally a contract for sale of something describable and described.   A clause generally disclaiming “all warranties, express or implied” cannot reduce the seller’s obligation with respect to such description and therefore cannot be given literal effect under Section 2-316.

2.         Implied warranties:

a.         Merchantability

UCC ‘2-314 provides:

(1)  Unless excluded or modified (Section 2-316), a warranty that the goods shall be merchantable is implied in a contract for their sale if the seller is a merchantable is implied in a contract for their sale if the seller is a merchant with respect to goods of that kind. . . .

(2)  Goods to be merchantable must be at least such as

(a) pass without objection in the trade under the contract description; and . . .

(c)  are fit for the ordinary purposes for which such goods are used; . . . .

(f) conform to the promise or affirmations of fact made on the container or label if any.

b.         Fitness for particular purpose.  UCC ‘2-315.

c.         Used vehicles are covered: Lipinski v. Martin J. Kelly Oldsmobile, Inc., 325 Ill.App.3d 1139,  759 N.E.2d 66 (1st Dist. 2001);  Jackson v. H. Frank Olds, Inc., 65 Ill.App.3d 571, 382 N.E.2d 550, 555-6 (1st Dist. 1978); Overland Bond & Investment Corp. v. Howard, 9 Ill.App.3d 348, 292 N.E.2d 168 (1st Dist. 1972).  Any car can be expected to provide reliable and safe transportation.  Blankenship v. Northtown Ford, Inc., 95 Ill.App.3d 303, 420 N.E.2d 167, 169-71 (4th Dist. 1981).

d.         The statute of limitations on such a warranty begins running from the time the used vehicle is delivered to the plaintiff.  Lipinski, supra.

e.         Disclaimers must be:

(1)        Permitted under 15 U.S.C. ‘2308, which invalidates disclaimers if a written warranty or service contract is issued within 90 days after purchase (see below).

(2)        Conspicuous.  UCC ‘2-518.  Language of disclaimer under a caption such as “Warranty” is misleading and not conspicuous.  Blankenship v. Northtown Ford, Inc., 95 Ill.App.3d 303, 420 N.E.2d 167 (4th Dist. 1981).

(3)        Made prior to or at the time of consummation of the transaction, not later. Midland Supply Co. v. Ehret Plumbing & Heating Co., 108 Ill.App.3d 1120, 440 N.E.2d 153, 157 (5th Dist 1982); Independent Mach. v. Kuehne & Nagel, Inc., 867 F. Supp. 752 (N.D.Ill. 1994).

(4)        Must be in a document comprising part of the contract, rather than an invoice or shipping document.  See Independent Mach. v. Kuehne & Nagel, Inc., 867 F.Supp. 752 (N.D.Ill. 1994);  Schroeder v. Fageol Motors, Inc., 86 Wash. 2d 256, 544 P.2d 20 (1975) (en banc) (disclaimer of warranties included in “owner book” handed to vehicle owner upon delivery of vehicle)

(5)        In order to disclaim the implied warranty of merchantability, the disclaimer must either refer to “merchantability” or contain “as is” language.  Schultz v. Jackson, 67 Ill. App. 3d 889, 385 N.E.2d 162 165 (3d Dist. 1979);  Jackson v. H. Frank Olds, Inc., 65 Ill.App.3d 571, 382 N.E.2d 550, 555-6 (1st Dist. 1978); McCormick Mach. v. Julian E. Johnson & Sons, 523 So.2d 651 (Fla.App. 1988).

f.          Disclaimers may not be effective if the seller engages in fraud.  Shannon v. Boise Cascade, 328 Ill.App.3d 621, 630, 766 N.E.2d 1136, 1143-44 (4th Dist. 2002).   A[E]ven if a disclaimer on its face is not unconscionable, it is subject to challenge if a plaintiff, as in this case, properly raises allegations of deceit and violation of chapter 93A.@   V.S.H. Realty, Inc. v. Texaco, Inc., 757 F.2d 411, 418 (1st Cir. 1985).  The First Circuit Court also stated that Massachusetts case law unequivocally rejects assertion of an Aas is@ clause as an automatic defense against allegations of fraud:

The same public policy that in general sanctions the avoidance of a promise obtained by deceit strikes down all attempts to circumvent the policy by means of contractual devices.  In the realm of fact it is entirely possible for a party knowingly to agree that no representations have been made to him, while at the same time believing and relying upon representations which in fact have been made and in fact are false but for which he would not have made the agreements.=  Bates v. Southgate, 308 Mass. 10, 182, 31 N.E.2d 551 (1941).

See also Schell v. Ford Motor Company, 270 F. 2d 384, 386 (1st Cir. 1959) ( under the law of Massachusetts … in the absence of fraud a person may make a valid contract exempting himself from any liability to another which he may in the future incur as a result of his negligence@); Attaway v. Tom=s Auto Sales, Inc., 144 Ga.App. 813, 815, 242 S.E.2d 740, 742 (1978).   An effective disclaimer of warranties does not necessarily prevent recovery of damages caused by the seller=s fraudulent or other deceptive conduct.@  Bundren v. Car Connection, Inc., 963 P.2d 634, 637 (Okla.Civ.App. 1998)..

The use of an Aas is@ disclaimer did not disclaim all prior misrepresentations regarding the failure of a seller to disclose that a truck had been wrecked, because the state Consumer Protection Act creates a separate and distinct cause of action for unfair and deceptive acts or practices.@  Smith v. Scott Lewis Chevrolet, 843 S.W.2d 9, 11 (Tenn.1992).  The Tennessee Supreme Court stated that to allow an Aas is@ disclaimer to serve as a bar to claims of fraud, would be to contradict the intent of the Consumer Protection Act and give sellers free rein to engage in fraudulent acts.  Id., citing Morris v. Mack=s Used Cars & Parts, Inc., 1991 WL 3310 (Tenn.Ct.App.).  The Tennessee Supreme Court has held that the Uniform Commercial Code (UCC) imposes an obligation of good faith in the performance of every contract which may not be disclaimed, and that disclaimers permitted by Tenn.Code. Ann. ‘ 47-2-316 do not defeat separate causes of action under the Consumer Protection Act.@  Ganzevoort v. Russell, 949 S.W.2d 293, 297 (Tenn. 1997).

g.         A seller=s ability to disclaim is limited by the principles of unconscionability (UCC ‘ 2-302) and good faith (UCC ‘ 1-203).   Among the circumstances which can invalidate a disclaimer on these grounds are misrepresentation or nondisclosure of known nonconformities.  Bernstein v. Sherman, 130 Misc.2d 741, 497 N.Y.S.2d 298 (1986); Butcher v. Garrett-Enumclaw Co., 20 Wash.App. 361, 581 P.2d 1352 (1978).

h.         Disclaimers of liability for consequential and incidental damages flowing from warranty breaches may not be honored in consumer cases, on the theory that the warranty fails of its essential purpose if the defendant is unable or unwilling to repair a defective vehicle or similar product, but nevertheless seeks the benefit of its disclaimer. Frank’s Maintenance & Engineering, Inc. v. C.A. Roberts Co., 86 Ill.App.3d 980, 989-92, 408 N.E.2d 403 (1st Dist. 1980); Custom Automated Machinery v. Penda Corp., 537 F.Supp. 77 (N.D.Ill. 1982); KKO, Inc. v. Honeywell, Inc., 517 F.Supp. 892 (N.D.Ill. 1981); Jones & McKnight Corp. v. Birdsboro Corp., 320 F.Supp 39, 43-44 (N.D.Ill. 1970) (“This Court would be in an untenable position if it allowed the defendant to shelter itself behind one segment of the warranty when it has allegedly repudiated and ignored its very limited obligations under another segment of the same warranty, which alleged repudiation has caused the very need for relief which the defendant is attempting to avoid”); see Schroeder v. Fageol Motors, Inc., 86 Wash. 2d 256, 544 P.2d 20, 22-5 (1975) (en banc).  “Under Illinois law, a buyer may seek consequential damages arising from a seller’s breach of warranty, despite a disclaimer to the contrary if the buyer can demonstrate that the warranty fails of its essential purpose and the parties did not contractually allocate all attendant risks.”  Trans States Airlines v. Pratt & Whitney Canada, Inc., 1995 U.S.Dist. LEXIS 1641, * 6 (N.D.Ill. 1995).

3.         Proof of breach does not necessarily require expert testimony, although such testimony is certainly desirable.  Redmac, Inc. v. Computerland of Peoria, 140 Ill.App.3d 741, 489 N.E.2d 380 (3d Dist. 1986); Jackson v. H. Frank Olds, Inc., 65 Ill.App.3d 571, 382 N.E.2d 550, 555-6 (1st Dist. 1978); Burrus v. Itek Corp., 46 Ill.App.3d 350, 360 N.E.2d 1168, 1171-2 (3d Dist. 1977); Sauers v. Tibbs, 48 Ill.App.3d 805, 809-10, 363 N.E.2d 444 (4th Dist. 1977); Overland Bond & Investment Corp. v. Howard, 9 Ill.App.3d 348, 292 N.E.2d 168 (1st Dist. 1972); Universal Motors, Inc. v. Waldock, 719 P.2d 254, 257-9 (Alas. 1986) (extensive discussion).  “It is well settled that the defective condition of a product can be shown by circumstantial evidence.”  Ouwenga v. Nu‑Way Ag, Inc., 239 Ill.App.3d 518, 521, 604 N.E.2d 1085 (3d Dist. 1992).

4.         Remedies:

a.         The basic measure of damages is the difference in value between what was promised and what was received, plus consequential and incidental damages.  UCC ” 2-714, 2-715.  The cost of repair is an acceptable measure of the difference in value; it is not necessary that the repairs actually have been made.  Continental Sand & Gravel, Inc. v. K & K Sand & Gravel, Inc., 755 F.2d 87, 91-92 (7th Cir. 1985); Crest Container Corp. v. R.H. Bishop Co., 111 Ill.App.3d 1068, 1075, 445 N.E.2d 19 (5th Dist. 1982); Midland Supply Co. v. Ehret Plumbing & Heating Co., 108 Ill.App.3d 1120, 440 N.E.2d 153, 157 (5th Dist 1982); Stamm v. Wilder Travel Trailers, 44 Ill.App.3d 530, 358 N.E.2d 382, 385 (5th Dist. 1976); Overland Bond & Investment Corp. v. Howard, 9 Ill.App.3d 348, 292 N.E.2d 168 (1st Dist. 1972).  It is permissible to award damages on this basis exceeding the purchase price of the goods.  Continental Sand, supra, 755 F.2d at 91.

b.         Finance charges may be included in determining the value of the product as warranted. Burrus v. Itek Corp., 46 Ill.App.3d 350, 360 N.E.2d 1168, 1171-2 (3d Dist. 1977); Thompson Chrysler‑Plymouth, Inc. v. Myers, 48 Ala.App. 350, 264 So.2d 893, 896‑97 (1972).

c.         One court has held that diminished resale value due to the public perception that a given make and model is defective is not compensable.  Carlson v. GMC, 883 F.2d 287 (4th Cir. 1989).

d.         Revocation of acceptance

(1)        Requires substantial impairment.

(2)        This may not require that the car be dangerous or inoperable.  Black v. Don Schmid Motor, Inc., 232 Kan. 458, 657 P.2d 517, 523-24 (1983).

(3)        It is sufficient that the buyer’s faith in the product, or the seller’s ability to place it in good working order, has been substantially impaired, and that its operation is fraught with apprehension.  Lathrop v. Tyrrell, 128 Ill. App. 3d 1067, 1068, 471 N.E.2d 1049, 1051 (3d Dist. 1984); Cogan & O’Brien Co. v. Photo & Framing Place, Ltd., 1987 U.S. Dist. LEXIS 9019 (N.D.Ill., September 24, 1987); Jackson v. H. Frank Olds, Inc., 65 Ill.App.3d 571, 382 N.E.2d 550, 555-6 (1st Dist. 1978); Stamm v. Wilder Travel Trailers, 44 Ill.App.3d 530, 358 N.E.2d 382, 385-86 (5th Dist. 1976); Overland Bond & Investment Corp. v. Howard, 9 Ill.App.3d 348, 292 N.E.2d 168 (1st Dist. 1972); Hemmert Agric. Aviation, Inc. v. Mid‑Continent Aircraft Corp., 663 F.Supp. 1546, 1552 (D.Kan. 1987).

(4)        It may be possible to revoke acceptance even if all implied warranties have been disclaimed.  Lytle v. Roto Lincoln Mercury & Subaru, Inc., 167 Ill.App.3d 508, 521 N.E.2d 201, 207 (2d Dist. 1988); Blankenship v. Northtown Ford, Inc., 95 Ill.App.3d 303, 420 N.E.2d 167, 169-71 (4th Dist. 1981).

e.         Recovery of price:  The purchase price may be recovered in an action for rejection or revocation of acceptance.  In addition, the purchase price may also be recovered upon proof of breach of warranty, without rejection or revocation, if the goods have essentially no value.  Toyomenka (America), Inc. v Combined Metals Corp., 139 Ill.App.3d 654, 487 N.E.2d 1172 (1st Dist. 1985); AES Technology Systems, Inc. v. Coherent Radiation, 583 F.2d 933, 942 (7th Cir. 1978); Stamm v. Wilder Travel Trailers, 44 Ill.App.3d 530, 358 N.E.2d 382, 385 (5th Dist 1976).  This is the case where they cannot be repaired.   McGrady v. Chrysler Motors Corp., 46 Ill.App.3d 136, 360 N.E.2d 818 (1st Dist. 1977)

f.          Aggravation, inconvenience and loss of use may be recoverable damages.  McGrady v. Chrysler Motors Corp., 46 Ill.App.3d 136, 360 N.E.2d 818 (1st Dist. 1977) (inconvenience and aggravation can be recovered, but only if there is loss of use); Vieweg v. Friedman, 173 Ill.App.3d 471, 526 N.E.2d 364 (2d Dist. 1988) (similar).

g.         Notice:  UCC ‘2-607 requires notice of breach or warranty before damages may be recovered.

(1)        The complaint constitutes notice in a consumer case only where personal injuries are involved, Goldstein v. G. D. Searle & Co., 62 Ill.App.3d 344, 345, 378 N.E.2d 1083 (1st Dist. 1978).  The complaint cannot be relied on as notice in cases where economic damages are sought.  Perona v. Volkswagen of America, Inc., 276 Ill.App.3d 609, 658 N.E.2d 1349 (1st Dist. 1995), vacated, 223 Ill.Dec. 40, 678 N.E.2d 1048 (1997), on remand, 292 Ill.App.3d 59, 684 N.E.2d 859 (1st Dist. 1997).

(2)        Requirements for notice are less stringent for a consumer buyer than for a merchant buyer.  UCC ‘2-607, Comment 4.

(3)        The UCC does not require any particular type of notification in any particular words. Custom Automated Machinery v. Penda Corp., 537 F.Supp. 77, 84 (N.D.Ill. 1982). The seller’s observation of the product operating in a defective manner or its presentation for repairs by the buyer constitute sufficient notice.  Malawy v. Richards Mfg. Co., 150 Ill.App.3d 549, 501 N.E.2d 376, 384 (5th Dist. 1986), leave to appeal denied, 114 Ill.2d 547, 508 N.E.2d 729 (1987); Crest Container Corp. v. R.H. Bishop Co., 111 Ill.App.3d 1068, 1077, 445 N.E.2d 19 (5th Dist. 1982); Overland Bond & Investment Corp. v. Howard, supra, 9 Ill.App.3d 348, 357-8, 292 N.E.2d 168, 176 (1st Dist. 1972) (“Certainly by having the car towed to the dealer’s place of business, by informing its employees that the car was again in need of major repair, thus clearing implying that it could not be operated in a safe manner until such repairs were completed, was sufficient notice to the dealer that its implied warranties had been breached. . . . “).  See Arcor, Inc. v. Textron, Inc., 960 F.2d 710, 715 (7th Cir. 1992) (“Under Illinois law, the buyer is not required to notify the seller that the buyer considers the deficiencies of a product to constitute a breach in order to fulfill its obligation under section 2‑607(3)(a). Notification need merely be sufficient to let the seller know that the transaction is still troublesome. There is no need to state all objections the buyer has or for the buyer to say he is holding the seller liable and threaten litigation.  [citation]  Further, the buyer is deemed to have met the notice requirement when the seller has actual knowledge of the product’s failure based on the seller’s own observations”).

(4)        If the defendant had actual knowledge of a defect, the notice requirement is satisfied.  Connick v. Suzuki Motor Co., 174 Ill. 2d 482, 675 N.E.2d 584 (1996).  However, recall notices which merely evidenced knowledge of a potential problem in a large number of vehicles may not be sufficient. Perona v. Volkswagen of America, Inc., 276 Ill.App.3d 609, 658 N.E.2d 1349 (1st Dist. 1995), vacated, 223 Ill.Dec. 40, 678 N.E.2d 1048 (1997), on remand, 292 Ill.App.3d 49, 684 N.E.2d 859 (1st Dist. 1997).

h.         Give notice required under UCC ‘2‑717:

The buyer on notifying the seller of his intention to do so may deduct all or any part of the damages resulting from any breach of the contract from any part of the price still due under the same contract.

5.         Statute of limitations:  UCC ‘2-725

a.         Four years from delivery

b.         Where car is warranted to perform for specified length of time, breach may be found to occur upon noncompliance.  Stelzer v. Matthews Roofing Co., 117 Ill.2d 186, 511 N.E.2d 421, 421-23 (1987); R.W. Murray Co. v. Shatterproof Glass Corp., 697 F.2d 818, 823 (8th Cir. 1983) (“in order to constitute a warranty of future performance under [‘2‑725(2)], the terms of the warranty must unambiguously indicate that the manufacturer is warranting the future performance of the goods for a specified period of time”); Moore v. Puget Sound Plywood, Inc., 214 Neb. 14, 332 N.W.2d 212, 214-15 (1983); U.S. Industries, Inc. v. Mitchell, 148 Ga.App. 770, 252 S.E.2d 672, 673 (1979); Standard Alliance Indus. Inc. v. Black Clawson Co., 587 F.2d 813 (6th Cir. 1978).

B.         Article 9:  secured transactions

1.         Repossession / sale of collateral

a.         Illinois followed rule that failure to comply with notice requirements creates rebuttable presumption that the collateral is worth the debt.  First Galesburg Nat’l Bank v. Joannides, 103 Ill.2d 294, 469 N.E.2d 180 (1984).  Now codified in revised Article 9.

b.         Burden is on the secured party to prove a commercially reasonable sale and reasonable notice to the debtor of the sale.  Tauber v. Johnson, 8 Ill.App.3d 789, 291 N.E.2d 180 (1st Dist. 1972).

c.         Notice to obsolete address insufficient where debtor had given notice of address change.  Northern Trust Co. v. Kuykendall, 133 Ill.App.2d 458, 273 N.E.2d 526 (1st Dist. 1971).

2.         Waiver/ estoppel through acceptance of late payments.  Margolin v. Franklin, 132 Ill.App.2d 527, 270 N.E.2d 140 (1st Dist. 1971).

C.         Article 2A:  leases

D.        Articles 3 and 4:  negotiable instruments and payment systems


A.        Creates federal cause of action for noncompliance with written warranty, service contract or implied warranty and provides for recovery of attorney’s fees.  15 U.S.C. ‘2310.  “Written warranty” is defined in manner covering repair or replace warranties and warranties that product will perform for specified period.

B.         Prohibits disclaimer of implied warranties if a written warranty or service contract is issued within 90 days after purchase of product.  15 U.S.C. ‘2308.  However, a car dealer who sells a warranty issued by another can disclaim implied warranties.  Priebe v. Autobarn, Ltd., 240 F.3d 584 (7th Cir. 2001).

C.         Affects state law privity requirements.  Szajna v. General Motors Corp., 115 Ill.2d 294, 316, 503 N.E.2d 760, 770-71 (1986), holds that although the UCC requires privity, privity need not be shown for an implied warranty claim under Magnuson Moss.  However, there are several federal district court opinions that disagree. , and thus rejected the notion that the Warranty Act can create implied warranties that would not have existed under state privity law.  Diamond v. Porsche Cars North America, Inc., 02 C 414, 2002 WL 31155064 (N.D.Ill. Sep 26, 2002) (Hibbler, J.);  Kowalke v. Bernard Chevrolet, Inc., No. 99 C 7980, 2000 WL 656660, at *5 (N.D.Ill. March 23, 2000) (Kocoras, J.); Jones v. Fleetwood Motor Homes, No. 98 C 3061, 1999 WL 999784, at * 2 (N.D.Ill. Oct. 29, 1999) (Hart, J.); Larry J. Soldinger Associates, Ltd. v. Aston Martin Logonda of North America, Inc., 97 C 7792, 1999 WL 756174 (N.D.Ill., Sept. 13, 1999).

D.        Requires disclosures of warranties

E.         Although limited to consumer products, a business may be a plaintiff, as long as the product in question is one which is normally or usually purchased for personal, family or household purposes.  Stuart Becker & Co. v. Steven Kessler Motor Cars, Inc., 135 Misc.2d 1069, 517 N.Y.S.2d 692, 695-6 (Sup.Ct. 1987); Business Modeling Techniques, Inc. v. General Motors Corp., 123 Misc.2d 695, 474 N.Y.S.2d 258, 260-1 (Sup.Ct. 1984).  Thus, a passenger car owned by a corporation is covered.



1.         Covers many persons that offer to “arrange” financing.  “Credit Services Organization” is defined in 815 ILCS 605/3(d) to mean:

[A] person who, with respect to the extension of credit by others and in return for the payment of money or other valuable consideration, provides, or represents that the person can or will provide, any of the following services:

      (i) improving a buyer’s credit record, history, or rating; 

  (ii) obtaining an extension of credit for a buyer; or 

      (iii) providing advice or assistance to a buyer with regard to either subsection (i) or (ii).

However, it does not include (i) “a person authorized to make loans or extensions of credit under the laws of this State or the United States who is subject to regulation and supervision by this State or the United States,” (ii) “a lender approved by the United States Secretary of Housing and Urban Development for participation in a mortgage insurance program under the National Housing Act (12 U.S.C. Section 1701 et seq.)”, (iii) banks, savings and loan associations, or subsidiaries thereof, (iv) credit unions, (v) nonprofit consumer credit counseling organizations unless they charge or receive money, (vi) real estate brokers acting within the course and scope of their licenses, (vii) attorneys, (viii) securities and commodities brokers, (ix) consumer reporting agencies, and (x) residential mortgage loan brokers and bankers.  Under the Act, an “extension of credit” is the right “to defer payment of a debt or to incur a debt and defer its payment offered or granted primarily for personal, family, or household purposes.” 815 ILCS 605/3(c).

2.         This definition is broad enough to cover retailers (e.g., home improvement contractors) that arrange for credit to be extended to others and derive some pecuniary benefit from the transaction, even if the benefit is not a specific fee allocable to the arranging of credit.  In Midstate Siding & Window Co. v. Rogers, 309 Ill.App.3d 610, 722 N.E.2d 1156 (3d Dist. 1999), a divided court held:

[T]he case at bar presents a factual situation that compels application of the Act. Through their dealings with Midstate, the Rogers were placed in the precarious position of having signed a contract without knowing the interest rate that would eventually be charged. Midstate might have secured an outrageous rate to which the Rogers, for all intents and purposes, would have been bound. Such a situation is directly at odds with the Act and is likely to be one of the very evils that the legislature attempted to remedy through the Act.

The Supreme Court granted leave to appeal, but no decision has been issued.  Midstate Siding and Window Co.  v. Rogers, 189 Ill.2d 661, 731 N.E.2d 765 (2000).

3.         It probably does not cover a retailer that extends credit itself through a retail installment contract, as the “extension of credit by others” requirement is not satisfied in such a case.

4.         The statute prohibits (815 ILCS 605/5) a “credit services organization” from:

a.         Charging or receiving any money or other valuable consideration prior to full and complete performance of the services the credit services organization has agreed to perform for or on behalf of the buyer, unless the credit services organization has obtained a surety bond.

b.         Charging or receiving any money or other valuable consideration solely for the referral of a buyer to a retail seller who will or may extend credit to the buyer if such extension of credit is in substantially the same terms as those available to the general public.

c.         Making, or advising any buyer to make, any statement that is untrue or misleading, or that should be known by the exercise of reasonable care to be untrue or misleading, with respect to a buyer’s credit reporting agency or to any person who has extended credit to a buyer or to whom a buyer has made application for an extension of credit.

d.         Making or using any untrue or misleading representations in the offer or sale of the services of a credit services organization or engaging, directly or indirectly, in any act, practice or course of business intended to defraud or deceive a buyer in connection with the office or sale of such services; including but not limited to: the amount or type of credit a consumer can expect to receive as a result of the performance of the services offered; the qualifications, training or experience of its personnel; or the amount of credit improvement the consumer can expect to receive as a result of the services.

5.         In addition, the statute requires disclosures (815 ILCS 605/6) and affords a right to cancel (815 ILCS 605/7) within three business days.

6.         All credit services organizations must file registration statements with the Secretary of State (815 ILCS 605/9).

7.         815 ILCS 605/11 creates a private right of action:

Any person injured by a violation of this Act or by the credit services organization’s breach of a contract entered into pursuant to Section 7 of this Act [815 ILCS 605/7], may bring any action for recovery of actual damages. Such person may also be awarded punitive damages, reasonable attorney’s fees and court costs. 

8.         Violations are also a violation of the Consumer Fraud Act (815 ILCS 605/15).

B.        RETAIL INSTALLMENT SALES ACT, 815 ILCS 405/1 et seq.

1.         Prescribes contents of retail installment contracts

2.         Requires consumer credit disclosures, satisfied by compliance with TILA.

3.         Requires credit for unearned finance charge on prepayment

4.         Regulates insurance

5.         Liability of cosigners

6.         Right to reinstate after payment of 30% of total sale price and prohibition of deficiency upon repossession after payment of 60%.

7.         No maximum rates.

8.         Does not create private right of action, Hoover v. May Dept. Stores Co., 77 Ill. 2d 93, 395 N.E.2d 541 (1979), but violations are cognizable under Consumer Fraud Act ”2, 2E and 2F and Sales Finance Agency Act.


1.         Contents generally similar to RISA.

2.         Repossession protections now moved into Vehicle Code, 625 ILCS 5/3‑114.  Does not specifically provide for cause of action for noncompliance.

D.        INTEREST ACT, 815 ILCS 205/0.01 et seq.

1.         As practical matter, no longer is limitation on rates that professional lenders may charge.

2.         Are limitations on points and prepayment penalties in ”4 and 4.1a, but there is extensive federal preemption.


1.         Licensing:  anyone can get one

2.         No longer any maximum interest rates

3.         Rebate of unearned interest on prepayment

4.         Regulation of credit life, disability and property insurance

5.         Prohibition of charges not authorized by CILA

6.         Disclosure requirements (satisfied by compliance with TILA)

7.         Prohibition of small mortgage loans (under $3,000)

8.         Redemption of motor vehicle security

F.         WAGE ASSIGNMENT ACT, 740 ILCS 170/1

1.         Form requirements for wage assignments

2.         Conditions before demand for wages can be made

3.         Limit on percent of wages that may be taken


1.         Licensing

2.         Violations:

Sec. 8.3.  Aiding or conspiring to aid any person in the violation of the Retail Installment Sales Act [815 ILCS 405/1 et seq.] or of the Motor Vehicle Retail Installment Sales Act [815 ILCS 375/1 et seq.].

Sec. 8.4.  Purchase of any retail contract, retail charge agreement, or evidence of indebtedness thereunder, that on its face violates the SFAA, the Retail Installment Sales Act [815 ILCS 405/1 et seq.] or the Motor Vehicle Retail Installment Sales Act [815 ILCS 375/1 et seq.].

Sec. 8.5.  Purchase of any retail contract, retail charge agreement, or evidence of indebtedness thereunder after actual knowledge that the contract, agreement or evidence of indebtedness violates the SFAA, the Retail Installment Sales Act [815 ILCS 405/1 et seq.] or the Motor Vehicle Retail Installment Sales Act [815 ILCS 375/1

Sec. 8.6.  Use of collection process which violates any of the laws of this State with respect to garnishment, wage deduction orders or wage assignments.

Sec. 8.8.  Fraud.

Sec. 8.9.  Fraud, misrepresentation, or concealment by the licensee of material facts required to be disclosed to a retail buyer under the Retail Installment Sales Act [815 ILCS 405/1 et seq.] or the Motor Vehicle Retail Installment Sales Act [815 ILCS 375/1 et seq.].

3.         Remedy:  Sec. 16.  Statutory damages have been abolished.


1.         Provides for licensing and regulation of mortgage lenders and brokers

2.         Regulations require written agreement between broker and client, and provide that attorney’s fees are awardable in action for breach

3.         Mortgage brokers must provide disclosure of their status as such








1.         Requires delivery of report attesting to seller=s knowledge of list of conditions, and creates private cause of action (765 ILCS 77/55) against anyone who knowingly violates or fails to perform any duty or knowingly makes false disclosure





1.         49 U.S.C. ”32701-11, formerly 15 U.S.C. ‘1981-91, and implementing regulations 49 C.F.R. part 580

2.         625 ILCS 5/3-112.1

3.         720 ILCS 5/17-11

4.         Requires intent to defraud, However, “actual knowledge is not a requirement under the Federal Odometer Fraud Act; constructive knowledge or reckless disregard is sufficient.”   Smith v. Walt Bennett Ford, Inc., 314 Ark. 591, 864 S.W.2d 817, 830 (1993); accord, Nieto v. Pence, 578 F.2d 640 (5th Cir. 1978).  While ordinary negligence is not enough, “gross negligence” by a professional dealer in cars is sufficient basis for a finding of intent.  Tusa v. Omaha Auto Auction Inc., 712 F.2d 1248, 1253 (8th Cir. 1983); Jones v. Hanley Dawson Cadillac, 848 F.2d 803, 808-9 (7th Cir. 1988); Resendiz v. Eatinger, 1990 U.S.Dist. LEXIS 7112, *4 (N.D.Ill. 1990).  “Once a dealer has notice of grounds for suspecting an odometer’s inaccuracy, the law imposes upon him a duty of further inquiry.  The dealer must then investigate the facts in order to ascertain whether the odometer’s mileage reading is reliable, before certifying that it as such; or, if he chooses not to do this, then he is legally bound to inform the customer that he suspects the odometer is inaccurate and that it should not be relied upon.”  Oettinger v. Lakeview Motors, Inc., 675 F.Supp. 1488, 1493 (E.D.Va. 1988);  Hall v. Riverside Lincoln Mercury Sales, Inc., 148 Ill.App.3d 715, 499 N.E.2d 156, 160 (2d Dist. 1986).

5.         Grounds for suspecting an odometer’s inaccuracy include:

a.         Mileage which appears unusually low given the age of the car.  Examples of mileage readings which have been held to place a dealer on notice that further inquiry is necessary include 14,736 on a ten-year-old truck, Nieto v. Pence, 578 F.2d 640 (5th Cir. 1978), 33,000 on a six-year-old car, Adams v. Neil Huffman Nissan, Inc., 1989 Ky.App. LEXIS 51 (1989), and 27,000 miles on a six-year-old car, Ragland v. Dumm, 1994 Ohio App. LEXIS 6030 (1994).

b.         The condition of the car  —  whether it shows signs of wear or replacement of parts that normally occur at a higher mileage than shown on the odometer.  Ragland v. Dumm, supraLevine v. Parks Chevrolet, Inc., 76 N.C.App. 44, 331 S.E.2d 747, 751 (1985) (finding that evidence was sufficient to show that defendant should have known that mileage was other than that recorded by odometer because several pieces of equipment, most noticeably the tires, were not of the original brand).

c.         The extent to which the defendant makes affirmative claims about the car’s mileage and ownership.  “[T]o make affirmative claims about mileage without knowledge is either intentionally deceitful or reckless . . . .”  Oettinger, supra, 675 F.Supp. at 1495.

6.         The “duty of further inquiry” placed upon the car dealer who has notice of a possible odometer discrepancy includes an obligation to obtain prior title or odometer disclosure documents.  Tusa v. Omaha Auto Auction, supra, 712 F.2d at 1254; Oettinger v. Lakeview Motors, 675 F.Supp. at 1494; Ragland v. Dumm, supra.  It may include an obligation to contact prior owners.  Resendiz v. Eatinger, supra.

7.         Intent may be established by inference:  “[t]hat an odometer was tampered with or that a transferor knew or should have known the mileage was false can be inferred from the facts.”  Smith, 864 S.W.2d at 830; Bryant v. Thomas, 461 F.Supp. 613 (D.Neb. 1978).

8.         Proof of an undisclosed false odometer statement or reading is prima facie evidence of fraudulent intent.  Smith, 864 S.W.2d at 831.

9.         The statute provides for treble damages with $1,500 minimum, plus attorney’s fees

10.        Mileage representations may also constitute express warranty under state law or representation actionable under Consumer Fraud Act.  See Roberts v. Robert V. Rohrman, Inc., 909 F.Supp. 545 (N.D.Ill. 1995):

This court notes that one possible outcome of this case would result in the imposition of strict liability on vendors like Rohrman, who have a statutory obligation to disclose the material fact of mileage on a vehicle at the time of sale. This may be a desirable result, but it may not be either Congress’ intent when it drafted the Federal Odometer Act, nor the intent of the Illinois legislature when it drafted the ICFA. The motion for summary judgment will be denied without prejudice.

F.         LEMON LAW, 815 ILCS 380/1 et seq.

1.         Of little value because of bar to UCC remedies, informal dispute settlement requirement, 18 month statute of limitation, requirement that same defect recur four times, absence of attorney’s fees, offset for consumer’s use of vehicle.

G.        ILLINOIS COLLECTION AGENCY ACT, 225 ILCS 425/1 et seq.

1.         There is implied private right of action, Sherman v. Field Clinic, 74 Ill. App. 3d 21, 392 N.E.2d 154 (1st Dist. 1979).

2.         Substantive prohibitions similar to those of federal act, except that it does not apply to attorneys

3.         Injunctive relief against unlicensed collectors

4.         No statutory damages, but can recover punitive damages


1.         Dance Studio Act, 815 ILCS 610/1 et seq.

2.         Physical Fitness Services Act, 815 ILCS 645/1 et seq.

3.         Hearing Instrument Consumer Protection Act, 225 ILCS 50/1 et seq.

4.         Job Referral and Job Listing Services Consumer Protection Act, 815 ILCS 630/1 et seq.

5.         Travel Promotion Consumer Protection Act, 815 ILCS 420

6.         Automatic Telephone Dialers Act, 815 ILCS 305/1 et seq.

7.         Pay‑Per‑Call Services Consumer Protection Act, 815 ILCS 520/1 et seq.

8.         Telephone Solicitations Act, 815 ILCS 413/1 et seq.



1.         Brown v. C.I.L., Inc., 1996 U.S. Dist. LEXIS 4053 (N.D.Ill., March 29, 1996), adopting, 1996 U.S.Dist. LEXIS 4917 (N.D.Ill., Jan. 28, 1996)(motion to dismiss).

2.         Cobb v. Monarch Fin. Corp., 913 F. Supp. 1164 (N.D.Ill. 1995), later opinion, 1996 U.S. Dist. LEXIS 2814 (N.D.Ill. 1996), later opinion, 1996 U.S. Dist. LEXIS 7776 (N.D.Ill. 1996), later opinion 1997 U.S. Dist. LEXIS 754 (N.D.Ill. 1997).

3.         Carboni v. Arrospide, 2 Cal.App.4th 76, 2 Cal.Rptr. 2d 845 (1991), rehearing denied, Jan. 21, 1992 (200%)


A.        Section 155, 215 ILCS 5/155:

(1) In any action by or against a company wherein there is in issue the liability of a company on a policy or policies of insurance or the amount of the loss payable thereunder, or for an unreasonable delay in settling a claim, and it appears to the court that such action or delay is vexatious and unreasonable, the court may allow as part of the taxable costs in the action reasonable attorney fees, other costs, plus an amount not to exceed any one of the following amounts:

(a) 25% of the amount which the court or jury finds such party is entitled to recover against the company, exclusive of all costs;

(b) $25,000;

(c) the excess of the amount which the court or jury finds such party is entitled to recover, exclusive of costs, over the amount, if any, which the company offered to pay in settlement of the claim prior to the action.

(2) Where there are several policies insuring the same insured against the same loss whether issued by the same or by different companies, the court may fix the amount of the allowance so that the total attorney fees on account of one loss shall not be increased by reason of the fact that the insured brings separate suits on such policies.


A.        TRUTH IN LENDING ACT, 15 U.S.C. ‘1601 et seq./ FEDERAL RESERVE REGULATION Z, 12 C.F.R. part 226

1.         TILA was enacted for the purpose of requiring every creditor extending credit to consumers in the United States to compute and state the cost of that credit in a precise, uniform manner, thereby enabling consumers to compare the cost of credit from various lenders by simply comparing a few numbers.  Congress “decided to effectively adopt a new national loan vocabulary that means the same in every contract in every state.”  Mason v. General Finance Corp., 542 F.2d 1226, 1233 (4th Cir. 1976).   “The legislative history [of TILA] makes crystal clear that lack of uniformity in the disclosure of the cost of credit was one of the major evils to be remedied by the Act.”  (Id., 542 F.2d at 1231)

2.         TILA and Regulation Z accordingly require disclosure of several key credit terms, computed in the precise manner prescribed by the Regulation and using precise terminology.

a.         The “amount financed” is “the amount of credit provided to you [the consumer] or on your behalf.”  12 C.F.R. ‘226.18(b)

b.         The “finance charge” is “the dollar amount the credit will cost you [the consumer].”  12 C.F.R. ‘226.18(d).  Includes “any charge payable directly or indirectly by the consumer and imposed directly or indirectly by the creditor as an incident to or a condition of the extension of credit.”  12 C.F.R. ‘226.4(a).

c.         “Strict compliance with the required disclosures and terminology is required.”  Smith v. No. 2 Galesburg Crown Finance Corp., 615 F.2d 407, 416-17 (7th Cir. 1980).  Liability will flow from even minute deviations from the requirements of TILA and Regulation Z.  Semar v. Platte Valley Fed. S. & L. Ass’n, 791 F.2d 699, 703‑04 (9th Cir. 1986).  “Moreover, any violation of TILA, regardless of the technical nature of the violation, must result in a finding of liability against the lender.   [citation]  Such a strict assessment of damages by courts was intended by Congress to create a ‘private attorney general’ scheme of enforcement which would obviate the need for a large federal bureaucracy to perform such a task.”  In re Steinbrecher, 110 B.R. 155, 161 (Bankr. E.D.Pa. 1990).  The “scheme of [TILA] is to create a system of private attorneys general to aid its enforcement, and its language should be construed liberally in light of its remedial purpose.”  McGowan v. King, Inc., 569 F.2d 845, 848 (5th Cir. 1978).

d.         Statutory damages are provided for.  Harm need not be shown for recovery under TILA:  “An objective standard is used to determine violations of the TILA, based on the representations contained in the relevant disclosure documents; it is unnecessary to inquire as to the subjective deception or misunderstanding of particular consumers.”  Zamarippa v. Cy’s Car Sales Inc., 674 F.2d 877, 879 (11th Cir. 1982).  Accord, Brown v. Marquette S. & L. Ass’n, 686 F.2d 608, 614 (7th Cir. 1982); Wright v. Tower Loan, 679 F.2d 436, 445 (5th Cir. 1982); In re Steinbrecher, supra at 161; Shepeard v. Quality Siding & Window Factory, Inc., 730 F.Supp. 1295, 1299 (D.Del. 1990); In re Russell, 72 B.R. 855 (Bankr. E.D.Pa. 1987)

3.         REMEDIES

a.         Statutory damages

(1)        There is a one-year statute of limitations, but a creditor who files suit waives its protection.  National Boulevard Bank v. Thompson, 85 Ill.App.3d 1145, 407 N.E.2d 739 (1st Dist. 1980).

b.         Actual damages:  “The lender who has failed to make proper disclosure is estopped to deny the borrower the benefit of a charge no higher than the amount actually disclosed or an amount calculated in accordance with the percentage rate actually disclosed,” whichever is more favorable to the borrower.  Villanueva v. Motor Town, Inc., 619 F.2d 632, 635 (7th Cir. 1980).

c.         Rescission of non-purchase money mortgages

d.         Effect under state law: violation of MVRISA/ RISA/ SFAA

e.         Does not void obligation, but there may be additional consequences under state law; e.g., failure to disclose material information may be fraud.

Peoples Trust & Sav. Bank v. Humphrey, 451 N.E.2d 1104 (Ind.App. 1983) (misstatement in TILA disclosures as fraud).



1.         FAIR CREDIT BILLING ACT, 15 U.S.C. ‘1666 et seq.

a.         Within 60 days after you receive a statement of account first showing a charge, you have the right to send a written notice to the creditor at address given on statement for disputes/ inquiries (not payment) contesting the charge

b.         Cannot be on payment stub

c.         Must give account name and number, state that there has been an error in the bill and the amount of the error, and provide an explanation.

d.         Billing errors include:

(1)        Item is not yours.

(2)        Amount is wrong

(3)        Don’t recognize the merchant name and want evidence that its yours.

(4)        Goods or services were not accepted or not delivered in accordance with the agreement.

(5)        This would include goods which are rejected, as to which acceptance is revoked, but probably not simple breach of warranty

(6)        Failure to reflect payment/ credit

(7)        Computational or accounting errors.

e.         Creditor must:

(1)        Acknowledge within 30 days

(2)        Within two billing cycles or 90 days, either:

(a)        Correct the account

(b)        Conduct an investigation and send the customer a statement in writing why the entry is correct and, upon request, send documentary evidence of obligation

f.          Creditor may not take any action to collect before conducting the investigation.  If account is reported to a credit reporting agency, disputed amounts must be shown as disputed.


a.         Use by a person other than the cardholder who does not have actual, implied or apparent authority and from which the cardholder receives no benefit.

b.         A person who is given a credit card by the account holder is an authorized user, even if he or she uses it in a manner that exceeds authority given.  For example, if the card is given for purpose of making one charge purchase, in the amount of $100, and the recipient runs up $1,000 in charges, the charges are authorized, because the merchant has no way of knowing of the restriction on authority.  Only way to effectively revoke the authority is to have the account canceled.

c.         Once charges appear on the monthly statement, if no objection is made further charges of like nature will be “authorized.”  Problem with estranged spouses, etc.

d.         Conversely, if the card issuer changes the address to which billing statements are sent without your permission, you may not have liability.  Common fraud.

e.         A merchant who processes a charge for an excessive amount is not making unauthorized use of the card, if the cardholder derives some benefit.  Car repair shop that exceeds estimate, for example.  May be billing error, though.

f.          If use was unauthorized, maximum liability is $50.  Can be imposed only if (i) the card was accepted, (ii) there is a means for identifying the cardholder or authorized user (signature, photograph, or PIN), (iii) the cardholder provides notice of potential liability and how to notify the issuer of theft, loss, etc., (iv) use took place before cardholder notifies issuer of loss, theft, or unauthorized use.

g.         Card issuer must prove use was authorized if authority is disputed.


a.         If credit card is used as a means of payment for goods or services (cash advances are not covered), you make good faith attempt to resolve the dispute with the merchant, the amount involved exceeds $50, and the transaction occurred within the same state as the cardholder’s mailing address or within 100 miles from that address, the credit card issuer is subject to claims and defenses arising from the purchase.

b.         Location is normally place of delivery for mail or phone orders.

c.         The location and amount restrictions don’t apply if the issuer and the merchant are the same or related entities (department store credit cards), or have a franchise relationship (gasoline company credit cards), or the merchant got the order through mail solicitation involving the card issuer (junk mail enclosed with bill).


1.         ECOA, Fair Housing Act, and 42 U.S.C. ‘1981 prohibit discrimination on account of race.

2.         Many practices that are consumer protection violations impact most heavily on minorities

3.         “Reverse redlining”:  While most people think of discrimination in terms of denial of credit, it also encompasses the conduct of businesses that take advantage of the limited access, or perception of limited access, to credit and other services to secure exorbitant rates and impose other disadvantageous terms.  For example, a lender which decides that it will take advantage of the fact that other lenders discriminate by making loans to minorities at higher rates is also engaging in intentional discrimination.  In Clark v. Universal Builders, 501 F.2d 324, 330-31 (7th Cir. 1974), the court held that one who exploits and preys on the discriminatory hardship of minorities does not occupy a more protected status that the one who created the hardship in the first instance.  Defendant cannot escape liability under the Civil Rights Act by asserting it merely “exploited a situation crated by socioeconomic forces tainted by racial discrimination.”  DuFlambeau v. Stop Treaty Abuse-Wisconsin, Inc., 41 F.3d 1190, 1194  (7th Cir. 1994); Mescall v. Burrus, 603 F.2d 1266 (7th Cir. 1979);  Ortega v. Merit Insurance Co., 433 F.Supp. 135 (N.D.Ill. 1977) (plaintiff’s allegations that a defacto system of discriminatory credit insurance pricing exists, and that defendant is exploiting this system is sufficient to withstand the defendant’s motion to dismiss);  Stackhouse v. De Sitter, 566 F.Supp. 856, 859 (N.D.Ill. 1983) (“Charging a black buyer an unreasonably high price for a home where a dual housing market exists due to racial segregation also violates this section . . .”); Buycks-Robertson v. Citibank, 162 F.R.D. 322 (N.D.Ill. 1995).

4.         This kind of discrimination claim overlaps with the concept of unconscionability and “unfair” practices, and in fact may be a violation of the Consumer Fraud Act.  Ortega v. Merit Insurance, supra.


F.         FAIR CREDIT REPORTING ACT, 15 U.S.C. ‘1681 et seq.

1.         Regulates what credit information credit bureau may maintain.  Prohibits reporting of obsolete information, including a bankruptcy proceeding more than 14 years old, tax liens after seven years, criminal records more than seven years from the date of disposition, release or parole, other adverse items more than seven years old.  15 U.S.C. ‘1681c.

2.         Entitles consumer to obtain their own credit reports.  15 U.S.C. ‘1681h.

3.         Allows consumers to dispute information on their credit reports.  The credit bureau must verify the information.  If the consumer disagrees with the verified item, he/ she is entitled to include a statement in the report.  15 U.S.C. ‘1681i.

4.         Regulates reasons credit report may be obtained.

5.         Generally, there is no legal way in which a consumer is entitled to the deletion of accurate information within the time periods permitted in the FCRA.

6.         1996 amendments create cause of action against creditor or debt collector that furnishes inaccurate credit information, but only if consumer complains to credit bureau and credit bureau seeks verification of the information from the creditor or debt collector.  15 U.S.C. ‘1681s-2.  Dornhecker v. Ameritech Corp., 99 F.Supp.2d 918 (N.D.Ill. 2000); Hawthorne v. Citicorp Data Systems, Inc., 216 F.Supp.2d 45 (E.D.N.Y. 2002); McMillan v. Experian Information Services, 119 F.Supp.2d 84 (D.Conn. 2000); DiMezza v. First USA Bank, Inc., 103 F.Supp.2d 1296 (D.N.M. 2000); Campbell v. Baldwin, 90 F.Supp.2d 754 (E.D.Tex. 2000).

7.         Preemption of uncertain scope of common-law claims for defamation, etc.  12 U.S.C. ‘1681h.  All such actions are limited to cases where conscious wrongdoing can be shown.  Courts divide on whether furnisher of false information to credit bureau can be held liable even if conscious wrongdoing shown, or whether preemption only applies to response that furnisher makes to specific inquiry from credit bureau requesting validation of item.

G.        CREDIT REPAIR ORGANIZATIONS ACT, 15 U.S.C. ‘1679 et seq.

1.         Basically invalidates contracts for credit repair services

2.         Coverage of nontraditional credit repair organizations: promises by collection agencies, bad debt buyers to restore credit.  Bigalke v. Creditrust Corp., 162 F.Supp.2d 996 (N.D.Ill. 2001), earlier opinion, 99 C 2303,        2001 WL 1098047 (N.D.Ill. Sep 14, 2001).; and  Parker v. 1-800 Bar None, a Financial Corp., Inc., 01 C 4488, 2002 WL 215530 (N.D.Ill. Feb 12, 2002).


1.         Covers ATM transactions, direct deposits and withdrawals, and non-conversational telephone transactions in which consumer account is debited or credited.

2.         Disclosure and documentation requirements

3.         Conditions under which consumer can revoke authorization for preauthorized electronic funds transfers

4.         Error resolution procedures

5.         Limitation of liability for unauthorized transfers

6.         Prohibition against distribution of unsolicited access devices

I.          TRUTH IN SAVINGS ACT, 12 U.S.C. ‘4301

1.         Requires disclosures for consumer accounts

2.         “Annual percentage yield”


A.        RICO

1.         MAIL AND WIRE FRAUD, 18 U.S.C. ”1341 and 1343

a.         Loan flipping:  Emery v. American Gen. Fin., Inc., 71 F.3d 1343  (7th Cir. 1995), complaint dismd, on remand 938 F. Supp. 495, 1996 U.S. Dist. LEXIS 12,695 (N.D. Ill. 1996), dismd, 952 F. Supp. 602, 1997 U.S. Dist. LEXIS 1982 (N.D. Ill. 1997), aff’d, 134 F.3d 1321 (7th Cir. 1998) (repetitive refinancing of loans without disclosing economic disadvantage); Chandler v. American General Finance, Inc., 329 Ill.App.3d 729, 768 N.E.2d 60 (1st Dist.  2002)(same).

b.         Billing for unauthorized charges:  Ventura v. Home Servicing of America, 1996 U.S. Dist. LEXIS 4583 (N.D.Ill., April 9, 1996).  Also see overescrowing cases:  Greenberg v. Republic Federal, 1995 U.S. Dist. LEXIS 5866 (N.D.Ill., April 28, 1995); Poindexter v. National Mtge. Co., 1995 U.S. Dist. LEXIS 5396 (N.D.Ill., April 18, 1995); Aitken v. Fleet Mtge. Corp., 1991 U.S.Dist. LEXIS 10420 (N.D.Ill. 1991), and 1992 U.S.Dist. LEXIS 1687 (N.D.Ill., Feb. 12, 1992); Robinson v. Empire of America Realty Credit Corp., 1991 U.S.Dist. LEXIS 2084 (N.D.Ill., Feb. 20, 1991); Leff v. Olympic Fed. S. & L. Ass’n, 1986 WL 10636 (N.D.Ill. 1986).


3.         TRAVEL ACT, 18 U.S.C. ‘1952


1.         Maximum deduction in Illinois is the lower of (a) 15% of gross wages or (b) [(net wages) – (45 x hourly minimum wages)] or (c) 25% of net wages.


1.         Now applies to second mortgages and home improvement financing secured by real estate if jurisdictional tests are met

2.         Requires furnishing of settlement statement

3.         Section 8, 12 U.S.C. ‘2607, and implementing HUD Regulation X, 24 C.F.R. ‘3500.14, prohibit payment and receipt of charges in connection with settlement other than for services rendered.

Prohibition against kickbacks and unearned fees.  

(a) Section 8 violation. Any violation of this section is a violation of section 8 of RESPA (12 U.S.C. ‘2607) and is subject to enforcement as such under ‘3500.19(b). . .

(b)  No referral fees.  No person shall give and no person shall accept any fee, kickback, or other thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or a part of a settlement service involving a federal-related mortgage loan shall be referred to any person.

(c) No split of charges except for actual services performed. No person shall give and no person shall accept any portion, split, or percentage of any charge made or received for the rendering of a settlement service in connection with a transaction involving a federally‑related mortgage loan other than for services actually performed. A charge by a person for which no or nominal services are performed or for which duplicative fees are charged is an unearned fee and violates this section. The source of the payment does not determine whether or not a service is compensable. Nor may the prohibitions of this Part be avoided by creating an arrangement wherein the purchaser of services splits the fee.  (Emphasis added)

Treble damages are provided for violations.

4.         Section 10 regulates escrow deposits.  Most courts hold that there is no private right of action.


1.         Usury provision

2.         Exportation

3.         Preemption


1.         HOME SOLICITATION SALES, 16 C.F.R. part 429.

a.         Provides a three-day right to cancel a door‑to‑door sale of consumer goods or services, with a purchase price of $ 25 or more

b.         Requires seller to furnish the buyer with oral and written disclosures of the right to cancel

c.         Generally applies to any sale made at a place other than the place of business of the seller.

2.         USED CARS, 16 C.F.R. part 455.

a.         Window sticker stating warranty rights must be displayed

3.         CREDIT PRACTICES, 16 C.F.R. part 444

a.         Prohibits confession of judgment provisions in consumer transactions

b.         Requires that all wage assignments be revocable at will by the consumer

c.         Prohibits certain non-purchase-money security interests in household goods

d.         Requires notices to cosigners

e.         Prohibits misrepresentation of liability of cosigners

f.          Prohibits pyramiding of late charges




1.         Affirmative cause of action for written warranties, service contracts, and implied warranties

2.         Negation of warranty disclaimers if written warranty or service contract is issued within 90 days.  15 U.S.C. ‘2308.

a.         Illegal disclaimers are common



a.         Cases:  Crowder v. Bob Oberling Enters., Inc., 148 Ill. App. 3d 313, 499 N.E.2d 115 (4th Dist. 1986); Totz v. Continental Du Page Acura, 236 Ill.App.3d 891, 602 N.E.2d 1374 (2d Dist. 1992) (car dealer has duty to disclose that vehicle has been previously damaged in an accident); Wilson v. Huntsville Chrysler Plymouth Dodge, Inc., 1996 Tex. App. LEXIS 3834 (1996); Huff v. Autos Unlimited, Inc., 124 N.C.App. 410, 477 S.E.2d 86 (1996); Black v. Iovino, 219 Ill.App.3d 378, 580 N.E.2d 139 (1st Dist. 1991), leave to appeal denied, 143 Ill.2d 636, 587 N.E.2d 1011 (1992); Curtis v. Bill Byrd Automotive, Inc., 579 So.2d 590 (Ala. 1990) (even if sold “as is”); Siegrist v. Kowalczyk, 1996 Conn.Super. LEXIS 69 (1996).

b.         FTC has repeatedly taken position that failing to disclose known serious defects is an unfair and deceptive trade practice. Ford Motor Co., 96 F.T.C. 362 (1980) (consent order); General Motors Corp., 102 F.T.C. 1741 (1983) (consent order) (failure to disclose defects in transmissions, camshafts and fuel injection systems); American Motors Corp., 100 F.T.C. 229 (1982) (consent order) (failure to disclose propensity of vehicles to roll over); Saab‑Scandia of America, Inc., 107 F.T.C. 410 (1986) (consent order) (failure to disclose defective operating systems); American Honda Motor Co., 99 F.T.C. 305 (1982) (consent order) (failure to disclose premature rusting).

c.         The Appellate Court has held that prior rental use of a car is a material fact that must be disclosed.  Miller v. William Chevrolet/ Geo, Inc., 326 Ill.App.3d 642, 762 N.E.2d 1, 11 (1st Dist. 2001).

d.         Get title history and contact prior owners


1.         Apply to used cars as well as new.  Overland Bond & Inv. Corp. v. Howard, 9 Ill.App.3d 348, 292 N.E.2d 168 (1st Dist. 1972)

2.         Permit recovery for inconvenience and aggravation and loss of use.  McGrady v. Chrysler Motors Corp., 46 Ill.App.3d 136, 360 N.E.2d 818 (1st Dist. 1977).


1.         Price gouging

2.         Unreasonable conditions on warranties:  MMA cause of action applies only to full warranties, but unreasonable conditions should be actionable on other theories with respect to any warranty:  for example, demanding $500 before inspecting a car.

3.         Lack of coverage/ misrepresentation of benefits


G.        LEMON LAW




Get consumer to sign binding contract, sign over trade-in, and take possession of new car before financing terms are known.  Also done with home improvements.

Consumer fraud violation in any case:  Gonzalez v. Schmerler Ford, 397 F.Supp. 323 (N.D.Ill. 1975):

[T]here are not actually two separate transactions in this case, one for a sale of goods and one for credit.  The purpose of the purchase order procedure is only to allow a salesman to get a floor commitment from the buyer that can be used to counteract the buyer’s remorse while he awaits clearance in the credit office.  Since most of the seller’s sales are on credit, the salesman knows when he gets the buyer’s signature on the purchase order that the likelihood of a credit transaction is great.  Disclosure is of little help to a buyer who is told in the credit office that he has a choice of either signing the creditor’s conditional sales contract form or of having collection procedures instituted against him because he is unable to come up with the cash.  (397 F.Supp. at 327)

Under “Simplification” (1980 amendment to TILA), TILA violation only if the initial contract states credit terms of some sort, which they often do:  Diaz v. Westgate Lincoln Mercury, Inc., 1994 U.S.Dist. LEXIS 16300 (N.D.Ill., Nov. 14, 1994) (Magistrate Judge’s report, adopted by District Court).


Slawson v. Currie Motors Lincoln Mercury, Inc., 1995 U.S.Dist. LEXIS 451 (N.D.Ill., Jan. 5, 1995); Cirone-Shadow v. Union Nissan, Inc., 1995 U.S.Dist. LEXIS 1379 (N.D.Ill., Feb. 3, 1995).


1.         However, if the dealer undertakes to arrange financing, there is no contract until financing terms satisfactory to the buyer (subjectively) are arranged and disclosed in compliance with TILA.

2.         Prior to that time any down payment or trade-in must be returned if the consumer cancels or does not like the financing terms obtained. Consumer Fraud Act, ‘2C.  The dealer may not impose any charge except for damage to the vehicle.



1.         Debtor must be sent notice of intent to apply for transfer of title and blank affidavit of defense.  Debtor has 21 days to object to transfer of title by submitting affidavit to creditor (creditor must receive affidavit within 21 days), in which event the creditor must obtain a court order directing transfer of title.

2.         Required as a result of a consent decree in Gibson v. Dixon, 75 C 4147 (N.D.Ill.).

3.         Occasionally used car lots do not issue the title to the consumer until a number of payments have been made, and then fail to comply with the transfer of title procedure.  This is illegal.



Bermudez v. First of America Bank Champion, N.A., 860 F.Supp. 580 (N.D.Ill. 1994), withdrawn per settlement, 886 F.Supp. 643 (N.D.Ill. 1995); Travis v. Boulevard Bank, 1994 U.S.Dist. LEXIS 14615 (N.D.Ill., Oct. 13, 1994), modified, 880 F. Supp. 1226 (N.D.Ill. 1995).


C.        30/ 60 PERCENT RULE OF MVRISA ’20

1.         If you pay 30% of “total of payments” (including down payment), have right to reinstate once

2.         If you pay 60% of “total of payments” (including down payment), and are willing to return the car upon request without intentional damage, the creditor must elect between taking the car and collecting the balance of the debt; cannot do both




A.        MVRISA ’18

XV.      AUTO LEASES (30% of all sales)



1.         If dealer undertakes to find financing, amounts to fraud.  Adkinson v. Harpeth Ford-Mercury, Inc., 1991 Tenn.App. LEXIS 114 (1991); Baggett v. Crown Automotive Group, 1992 Tenn.App. LEXIS 464 (1992); First Chicago Bank of Ravenswood v. Mangiardi, No. 92 M1 122340 (Circuit Court of Cook County, Aug. 25, 1993); Smith v. First Family Fin. Serv., Inc., 626 So.2d 1266 (Ala. 1993); McNulty v. First Nat’l Bank, 93 CH 11379 (Circuit Court of Cook County, August 17, 1994).  See also, In re Milbourne, 108 B.R. 522, 538 (Bankr. E.D.Pa. 1989), endorsing the same principle.  See also Sullivan’s Wholesale Drug Co. v. Faryl’s Pharmacy, Inc., 214 Ill.App.3d 1073, 573 N.E.2d 1370 (5th Dist. 1991), appeal denied, 141 Ill. 2d 561, 580 N.E.2d 136 (1991) (kickbacks by pharmacy to nursing home to get patient referrals); Gadson v. Newman, 807 F.Supp. 1412 (C.D.Ill. 1992) (court upheld an ICFA claim based on “undisclosed referrals and other financial incentives” in connection with the referral of patients); Dimensions Medical Center, Ltd. v. Principal Finan. Group, Ltd., 1995 U.S.Dist. LEXIS 1420 (N.D.Ill., Feb. 6, 1995) (similar).

Contra:  Perino v. Mercury Fin. Co., 1995 U.S. Dist. LEXIS 15654 (N.D.Ill., October 12, 1995), earlier opinion, 912 F. Supp. 313 (N.D.Ill. 1995).


One who undertakes to find and arrange financing or similar products for another becomes the latter’s agent for that purpose, and owes statutory, contractual and fiduciary duties to act in the interest of the principal and make full disclosure of all material facts.  “A person who undertakes to manage some affair for another, on the authority and for the account of the latter, is an agent.”  In re Estate of Morys, 17 Ill.App.3d 6, 9, 307 N.E.2d 669 (1st Dist. 1973).

A mortgage loan broker is an agent procured by the borrower to obtain a loan.  Wyatt v  Union Mtge. Co., 24 Cal.3d 773, 782, 157 Cal.Rptr. 392, 397, 598 P.2d 45 (1979) (a mortgage broker owes a fiduciary duty of the “highest good faith toward his principal,” the  prospective borrower, and “is ‘charged with the duty of fullest disclosure of all material facts concerning the transaction that might affect the principal’s decision'”).  AccordAllabastro v. Cummins, 90 Ill.App.3d 394, 413 N.E.2d 86, 82 (1st Dist. 1980); In re Dukes, 24 B.R. 404, 411‑12 (Bankr. E.D.Mich. 1982) (“the fiduciary, Salem Mortgage Company, failed to provide the borrower‑principal with any sort of estimate as to the ultimate charges until a matter of minutes before the borrower was to enter into the loan agreement”); Community Fed. Savings v. Reynolds, 1989 U.S. Dist. LEXIS 10115 (N.D.Ill. August 18, 1989); First City Mtge. Co. v. Gillis, 694 S.W.2d 144, 147 (Tex.Civ.App. 1985) (requirement of fiduciary duty forbids conduct on the part of the broker which is fraudulent or adverse to his principal’s interest and also imposes duty of full disclosure of facts material to his principal); In re Russell, 72 B.R. 855 (Bankr. E.D.Pa 1987); Langer v. Haber Mortgages, Ltd., New York Law Journal, August 2, 1995, p. 21 (N.Y. Sup.Ct.).


Tashof v. FTC, 437 F.2d 707, 711-12 (D.C.Cir. 1972) (false representations of “easy credit” and the like); Kleidon v. Rizza Chevrolet, Inc., 173 Ill.App.3d 116, 527 N.E.2d 374 (1st Dist. 1988), appeal denied, 123 Ill.2d 559, 535 N.E.2d 402 (1988) (deception regarding proposed financing terms actionable)


Allabastro v. Cummins, 90 Ill.App.3d 394, 413 N.E.2d 86 (1st Dist. 1980)  (one who undertakes to procure loan is an agent and fiduciary)

Fitzgerald v. Chicago Title & Trust Co., 72 Ill.2d 179, 380 N.E.2d 790 (1978) (title company’s payment of secret rebates to persons standing in fiduciary relationship to plaintiffs actionable under the Consumer Fraud Act)

Browder v. Hanley Dawson Cadillac Co., 62 Ill.App.3d 623, 379 N.E.2d 1206 (1st Dist. 1978) (seller of goods or services who undertakes to procure credit insurance has duties of insurance broker, and if he procures unnecessarily expensive insurance coverage because he has a pecuniary interest in doing so, and who fails to disclose to the insured the fact that comparable coverage is available elsewhere for less, commits Consumer Fraud Act violation)

Fox v. Industrial Cas. Ins. Co., 98 Ill.App.3d 543, 424 N.E.2d 839  (1st Dist. 1981) (similar to Browder).

Insurance Code has been amended for purpose of abolishing Fox and Browder.


1.         GAP PROTECTION:   $500 for privilege of not having a deficiency judgment against you if car is stolen or destroyed.


a.         Life

b.         Disability

c.         Involuntary unemployment

d.         Commissions are normally 40-60% and loss ratio (percentage of premiums collected paid out as losses) under 50%.  Normal loss ratios are 60-70% for automobile casualty companies and higher for good life and disability companies.

e.         Amount of insurance is often grossly excessive:  you never need coverage in excess of the payoff amount.  Lenders will sell coverage based on principal plus unearned interest, even though unearned interest is not paid.

f.          Failure to rebate unearned premiums if transaction is paid off early or accelerated.  Particularly if loan is assigned (second mortgages).






A.        Target population:  People who purchased homes some years ago, which have often appreciated dramatically, even     in poor neighborhoods

B.         Practices

1.         Getting consumers to sign binding agreements prior to disclosure of all financial terms.  In some cases, the initial agreements (a) represent that the financing terms will be other than the final terms, (b) provide for stiff penalties for cancellation

a.         As deceptive practice

Ky. AG opinion (1992 CCH Trade Cas. &69,916).

Fidelity Financial Services, Inc. v. Hicks, 214 Ill.App.3d 398, 574 N.E.2d 15 (1st Dist. 1991).

Williams v. Bruno Appliance & Furniture Mart, Inc., 62 Ill.App.3d 219, 222, 379 N.E.2d 52, 54 (1st Dist. 1978) (bait and switch)

Santiago v. Turner Acceptance Corp., 76 C 1247 (N.D.Ill., April 21, 1980).

In re American Aluminum Corp., 84 F.T.C. 21 (1974), aff’d per curiam, 522 F.2d 1278 (5th Cir. 1975) (litigated decision).

In re Capital Builders, Inc., 92 F.T.C. 274 (1978) (consent order).

In re United Builders, Inc., 92 F.T.C. 291 (1978) (consent order)

In re Tri-West Construction Co., 86 F.T.C. 1051 (1975) (consent order).

b.         Negates right to rescind under TILA:  Doggett v.  County Savings & Loan Co., 373 F.Supp. 774, 777 (E.D.Tenn. 1974).

c.         As TILA violation (if first contract contains a reference to financing terms):  Graves v. Tru-Link Fence Co., 905 F. Supp. 515 (N.D.Ill. 1995).


a.         Truth in Lending, 15 U.S.C. ‘1635

b.         CFA ‘2B

c.         FTC home solicitation sales regulation (16 C.F.R. part 429)


4.         Making loans without expectation of repayment for the purpose of acquiring the borrower’s equity. In many cases, such loans involve exorbitant “points” and other devices, so that the financing entity is getting a mortgage substantially in excess of the amount of cash actually disbursed to unrelated third parties.

a.         New TILA section, 15 U.S.C. ‘1639

5.         Steep discounts


1.         CFA now allows consumer to make demand for performance and rescind contract if not performed. Section 2Q(c) provides:

A person engaged in the business of home repair, as defined in Section 2(a)(1) of the Home Repair Fraud Act [815 ILCS 515/2] who fails or refuses to commence or complete work under a contract or an agreement for home repair, shall return the down payment and any additional payments made by the consumer within 10 days after a written demand sent to him by certified mail by the consumer or the consumer’s legal representative or by a law enforcement or consumer agency acting on behalf of the consumer.

2.         It is unlawful for a contractor to threaten to remove the improvements if payment is not forthcoming.  Ekl v. Knecht, 223 Ill. App. 3d 234, 585 N.E.2d 156 (2 Dist. 1991).



1.         FTC Credit Practices Rule




1.         It is well established that the sale of insurance constitutes “trade or commerce” subject to the Consumer Fraud Act.  Browder v. Hanley Dawson Cadillac Co., 62 Ill.App.3d 623, 379 N.E.2d 1206 (1st Dist. 1978); Fox v. Industrial Cas. Ins. Co., 98 Ill.App.3d 543, 424 N.E.2d 839  (1st Dist. 1981); P.I.A. Mich. City, Inc. v. National Porges Radiator Corp., 789 F.Supp. 1421 (N.D.Ill. 1992); Glazewski v. Coronet Ins.  Co., 108 Ill.2d 243, 466 N.E.2d 1151 (1985), aff’g, Glazewski v. Allstate Ins. Co., 126 Ill.App.3d 401, 466 N.E.2d 1151 (1st Dist. 1984); Petersen v. Allstate Ins. Co., 171 Ill.App.3d 909, 525 N.E.2d 1094 (1st Dist. 1988); Logsdon v. Shelter Mut. Ins. Co., 143 Ill.App.3d 957, 493 N.E.2d 748 (3d Dist. 1986); Ortega v. Merit Ins. Co., 433 F.Supp. 135 (N.D.Ill. 1977); Elrad v. United Life & Acc. Ins. Co., 624 F.Supp. 742 (N.D.Ill. 1985); Barr Co. v. Safeco Ins. Co., 583 F.Supp. 248 (N.D.Ill. 1984), later opinion, 706 F.Supp. 616 (N.D.Ill. 1989); Aabye v. Security‑Connecticut Life Ins. Co., 586 F.Supp. 5 (N.D.Ill. 1984).


1.         Claims practices

a.         Elder v. Coronet Ins. Co., 201 Ill.App.3d 733, 558 N.E.2d 1312 (1st Dist. 1990).  Class action  was brought by insured under auto policy against insurer and its claims processor, Elston.  Complaint alleged that Coronet and Elston denied plaintiff’s insurance claim on the basis of “lie detector” tests, that it is the policy of defendants to grant or deny claims based on the results of such tests, and that “lie detector” tests are grossly unreliable.  Elder alleged that defendants denied claim on ground that “the loss did not occur as you reported,” based on a finding of “deception” on the polygraph test, but made no investigation to ascertain the true facts, even after he produced a witness to theft of car and vehicle was recovered in stripped condition.  The complaint alleged that defendants’ policy of relying on lie detector tests to process claims was an unfair trade practice and that the sale of insurance policies without disclosure of the fact that the insurer had a policy of using grossly unreliable means of “determining” claims constituted a deceptive trade practice.

Both claims were held to state a cause of action by Appellate Court.  Case ultimately settled on class wide basis.

b.         Barr v. Safeco Ins. Co., 583 F.Supp. 248 (N.D.Ill. 1984).  Plaintiffs asserted a Consumer Fraud Act claim alleging that an insurance company had misrepresented that it would promptly and fairly investigate claims and indemnify its insureds; engaged in a practice of failing to pay or delaying the payment of its insureds’  claims as a means of coercing them into accepting inadequate settlements; and concealed and failed to disclose this practice.  The court held that these allegations stated a claim for engaging in a deceptive practice under the Consumer Fraud Act.

c.         Aabye v. Security‑Connecticut Life Ins. Co., 586 F.Supp. 5 (N.D.Ill. 1984) (similar).

d.         W. E. O’Neil Construc. Co. v. National Union Fire Ins. Co., 721 F.Supp. 984 (N.D.Ill. 1989) (similar allegations held to state CFA claim)

2.         Third party claims

a.         Held not to be covered in McCarter v. State Farm Mut. Aut. Ins. Co., 130 Ill.App.3d 97, 473 N.E.2d 1015 (3d Dist. 1985).  McCarter involved a claim against the insured by a third party injured by the insured.  The court held that the improper processing of such a claim was not a CFA ‘2 violation because the injured third party had not purchased insurance and was not a “consumer.”

3.         Improper Conduct In Obtaining or Placing Insurance.

a.         Browder v. Hanley Dawson Cadillac Co., 62 Ill.App.3d 623, 379 N.E.2d 1206 (1st Dist. 1978); and Fox v. Industrial Cas. Ins. Co., 98 Ill.App.3d 543, 424 N.E.2d 839 (1st Dist. 1981), hold that an insurance broker who procures unnecessarily expensive insurance coverage because he has a pecuniary interest in doing so, and who fails to disclose to the insured the fact that comparable coverage is available elsewhere for less, violates CFA ‘2.  Noteworthy that neither case involved a conventional “broker”  —  both cases involved sellers of goods who procured credit insurance at unnecessarily high price, allegedly because the commissions on the more expensive insurance were better.

b.         Lang v. Consumers Ins. Service, Inc., 222 Ill.App.3d 226, 583 N.E.2d 1147 (2d Dist. 1991).  CFA claim stated against insurance agent who told prospective insured that he had coverage of newly-purchased vehicle under existing policy, when insurance company later denied coverage.

c.         Ortega v. Merit Ins. Co., 433 F.Supp. 135 (N.D.Ill. 1977) (racial discrimination in pricing of insurance held actionable under CFA).

d.         Failure to inform purchaser of credit insurance of pre‑existing condition restriction was not a deceptive act where defendant was not aware of pre-existing condition.  Mackinac v. Arcadia Nat’l Life Ins. Co., 271 Ill.App.3d 138, 648 N.E.2d 237 (1st Dist. 1995), leave to appeal denied, 164 Ill.2d 561, 657 N.E.2d 624 (1995).

4.         Failure to Offer Underinsured Motorist Coverage When Required By Insurance Code

a.         Logsdon v. Shelter Mut. Ins. Co., 143 Ill.App.3d 957, 493 N.E.2d 748 (3d Dist. 1986); Peterson v. Allstate Ins. Co., 171 Ill.App.3d 909, 525 N.E.2d 1094 (1st Dist. 1988).

5.         Credit insurance practices

a.         Elliott v. ITT Corp., 764 F.Supp. 102 (N.D.Ill. 1991).

6.         Medical insurance issues

a.         Provider attempts to collect from patient amount in excess of what the insurance company has determined to be reasonable, where patient’s only liability is to pay reasonable charge.

b.         Insurer gets discount on bill but doesn’t take it into account when computing copayment

7.         “Vanishing premium” cases



1.         Clients often have no idea whether something actionable took place.  Furthermore, even where they have a specific complaint, the transaction may be subject to challenge, or only subject to challenge, on altogether different grounds.  For example, a client may come to you with a claim that a used car was defective, which is not worth bringing because there was a prominent “as is” disclaimer and no proof that the dealer actually knew of any defect, but the Truth in Lending disclosures are deficient.  You need to look at a case in a manner that will uncover all claims, not just the ones that the client thinks he or she has.

2.         Claims based on documents are generally better than claims based on oral testimony.  Assume that a car dealer or home improvement contractor will contradict everything that the client says and that is not reflected in a document emanating from the dealer or home improvement contractor.  However, if the APR is not properly calculated, there is probably nothing that the dealer or contractor can say that will get him out of liability.

3.         First examine all documents that the client has; then have the client tell his/her story chronologically.  Make certain that the client has given you all documents and not just those he or she has concluded are relevant.

4.         Pay particular attention to any additional charges or fees that have been placed on the client’s account.  These often furnish the best claims.  We have seen many cases where the defendant’s basic conduct was outrageous but not clearly actionable, but a valid claim exists because the defendant got greedy and could not resist tacking on an additional $10 or $20 in charges.  For example, it is not clearly illegal to charge 40% interest in Illinois (it may or may not be unconscionable), but if the defendant added $10 or $20 in extra charges which were not authorized by CILA or MVRISA, the entire interest is uncollectible.

5.         Do not assume that numbers generated by a computer or calculator are correct, or that the fact that a client was billed for something means that he or she owes it.  APR calculations should be checked with an appropriate program.

6.         Do not assume that the client did not receive or sign a document from the fact that he/she does not recall receiving or signing it, or does not have it.

7.         Never take a case involving automobile or home improvement problems without having the vehicle examined by your mechanic/ expert, who should be willing to testify to what he/ she finds.

8.         Expect that 90% of cases you review either do not involve a violation or are not viable.


1.         Do you have a solvent defendant?  Individual claims for home improvement defects against fly-by-night contractors are inherently uncollectible.

2.         To what extent does proof of violation depend on oral testimony, as opposed to violations apparent on face of documents?  Are you going to have to try the case?  Are you prepared to do so?  Can you win it if you do try it?

3.         If contractor arranged financing, financial institution has liability/ is subject to defense against payment under clause required by FTC regulation.


1.         Your pleadings should tell a compelling story.

2.         Fraudulent representations must be pled with specificity.  Connick v. Suzuki Motor Co., 174 Ill. 2d 482, 675 N.E.2d 584 (1996); Spengler v. V & R Marathon, Inc., 162 Ill.App.3d 715, 516 N.E.2d 787 (2d Dist. 1987), leave to appeal denied, 119 Ill.2d 575, 522 N.E.2d 1257 (1988) (state requirement); Ramson v. Layne, 668 F.Supp. 1162, 1170 (N.D.Ill. 1987) (federal). This means that the complaint must state “the identity of the person making the misrepresentation, the time, place, and content of the misrepresentation, and the method by which the misrepresentation was communicated . . . .”  Schiffels v. Kemper Financial Servs., 978 F.2d 344, 352 (7th Cir. 1992); Connick v. Suzuki, supra; Vance v. National Benefit Ass’n, 99 C 2627, 1999 WL 731764, 1999 U.S.Dist. LEXIS 13846 (N.D.Ill. Aug. 30, 1999), *13-14.


1.         Many cases are dismissed at the trial court level.  To maintain credibility you must be prepared to appeal valid cases, and to do so in a manner that will not result in making “bad law.”  There are many decisions of the Appellate Court which are simply irreconcilable with other decisions, and may have resulted from inadequate presentation.

2.         Proof is peculiarly within hands of defendants.  Aggressive pursuit of discovery is essential.


1.         Jury trial available under Consumer Fraud Act and other statutory violations under Seventh Amendment, but not under Illinois Constitution.


1.         Make sure your petition is appropriately documented, both as to time entries and justification for rates claimed.

2.         It is not uncommon in consumer protection litigation for the attorney’s fees to exceed the amounts paid to the aggrieved consumer.  Tolentino v. Friedman, 46 F.3d 645 (7th Cir. 1995); Fleet Inv. Co., Inc. v. Rogers,  620 F.2d 792, 793 (10th Cir. 1980); Johnson v. Eaton, 958 F. Supp. 261, 264 (M.D. La 1997)(over $13,000 in fees and costs awarded for $500 award in Fair Debt Collection Practices Act case); Perez v. Perkiss, 742 F. Supp. 883, 892 (D. Del. 1990)($10,110 fees, $1,200 damages); Beaulieu v. Dorsey, 562 A.2d 678, 679 (Me. 1989)($18,000 fees, $600 damages); Williams v. Finance Plaza, Inc.,  2002 WL 753516 (W.D. Mo. 2002)($47,500 fees and $4,000 damages in odometer fraud claim);  Bittner v. Tri-County Toyota, Inc., 569 N.E.2d 464, 465-66 (Ohio 1991);   Poussard v. Commercial Credit Plan, Inc., 479 A.2d 881 (Me. 1984) ($20,000 fees even though only $10,000 benefit); Welmaker v. W. T. Grant Co., 365 F.Supp. 531 (N.D.Ga. 1972) ($380.28 recovery and $17,500 attorney’s fees); In re Martinez, 2001 Bankr. LEXIS 1051 (Bankr. S.D.Fla., Aug. 22, 2001) (attorney==s fees of $29,037.50 awarded although plaintiff recovered FDCPA statutory damages of $1,000.00).  The theory on which such fees are allowed is that in view of the statutory caps on damages, any requirement of proportionality between the recovery and the fees “would be inconsistent with the policy of encouraging private enforcement of the Act.”  Hayer v. National Bank of Alaska, 663 P.2d 547, 550 n. 7 (1983).  See Tolentino, supra.