214 F.3d 849 (7th Cir. 2000)
Gregory Balderos, on behalf of himself  and all others similarly situated,    Plaintiff-Appellant,    v.City Chevrolet, et al.,    Defendants-Appellees.
No. 98-1944
In the  United States Court of Appeals  For the Seventh Circuit
Argued November 8, 1999
Decided May 26, 2000

Appeal from the United States District Court  for the Northern District of Illinois, Eastern  Division.  No. 97 C 2084--George M. Marovich, Judge. [Copyrighted Material Omitted]
Before Posner, Chief Judge, and Ripple and  Diane P. Wood, Circuit Judges.
Posner, Chief Judge.


1
The complaint in  this class action suit against an  automobile dealer and a finance company  (and some associated individuals)  charges, in 136 paragraphs, violations of  the Truth in Lending Act, RICO, and state  consumer-protection laws. 15 U.S.C.  sec.sec. 1601 et seq.; 18 U.S.C. sec.sec.  1961 et seq.; 815 ILCS 505/2; 205 ILCS  660/8.5. Because the district judge  dismissed the suit for failure to state a  claim, we take the facts alleged in the  complaint to be true, though of course  without vouching for their truth.


2
Three practices are challenged. First,  when the dealer arranges financing with  the finance company, and the amount of  the loan exceeds the retail value of the  automobile by more than 20 percent, the  finance company levies an additional  charge on the dealer, who raises the  price of the car to cover the additional  charge. The addition is not listed as a  finance charge on the Truth in Lending  disclosure form that the dealer is  required to give the purchaser and so  does not increase the interest rate  disclosed on the form. Yet it is a  finance charge--labels don't control--and  so it must be disclosed. Walker v.  Wallace Auto Sales, Inc., 155 F.3d 927,  931-34 (7th Cir. 1998); Gibson v. Bob  Watson Chevrolet-Geo, Inc., 112 F.3d 283,  284-85 (7th Cir. 1997); see also Williams  v. Chartwell Financial Services, Ltd.,  204 F.3d 748, 753-54 (7th Cir. 2000);  Adams v. Plaza Finance Co., 168 F.3d 932,  934 (7th Cir. 1999); Cowen v. Bank United  of Texas, FSB, 70 F.3d 937, 942 (7th Cir.  1995). Against this conclusion the  defendants' only argument is that the  complaint, despite its verbosity, does  not actually allege that the dealer  increases the price only of the cars that  are financed, as opposed to those that  are sold for cash. We think it does,  because it alleges that the sale price of  the financed cars substantially exceeds  the price at which comparable vehicles  are sold for cash, as in Walker v.  Wallace Auto Sales, Inc., supra, 155 F.3d  at 931-32. Yet at argument the  plaintiff's lawyer, not content with  pointing this out, also argued that he  does not have to prove that the dealer  added the finance charge to the price of  only the financed cars, not of cars sold  for cash as well. We disagree. Suppose  the additional finance charge were on  average $50 and were imposed in 80  percent of the dealer's sales. And  suppose that instead of adding $50 to the  price of the financed cars the dealer  added $40 to the price of all cars. There  would be no violation of the Truth in  Lending Act, because the credit purchaser  would not be paying any more than the  cash purchaser. See id. at 931-32, 934;  Gibson v. Bob Watson Chevrolet-Geo, Inc.,  supra, 112 F.3d at 287.


3
A finance charge is a charge that is  avoidable by paying cash, 12 C.F.R. sec.  226.4(a), and in our example the charge  is not so avoidable and therefore is not  a finance charge, even though it  originates in a practice of selling on  credit. The Act's purpose is to enable  borrowers to determine the cost of credit  so that they can decide, in the case of  a purchase (as distinct from a free-  standing loan), whether to pay cash or to  borrow from or through the seller or from  another lender (and thus pay cash to the  seller), who may charge a lower interest  rate. 15 U.S.C. sec. 1601(a); Mourning v.  Family Publications Service, Inc., 411  U.S. 356, 364-68 (1973); Smith v. Cash  Store Management, Inc., 195 F.3d 325, 332  (7th Cir. 1999); Walker v. Wallace Auto  Sales, Inc., supra, 155 F.3d at 930, 932-  34. That purpose is not engaged when the  same charge is imposed on cash purchasers  and on credit purchasers. With the charge  the same, the purchaser's choice between  paying cash to the seller (and perhaps  borrowing from someone else) and buying  from the seller on credit is not  influenced.


4
If the plaintiff in this case, standing  by his guns, declared that he would not  try to prove that the dealer does not  fold the additional finance charge into  his cash price, then we would affirm the  dismissal of this part of the complaint.  But at argument the plaintiff's lawyer  made clear that he does intend to prove  this if we reject his broader theory (as  we have just done), and the narrower  theory is alleged and is in any event  consistent with the complaint, which is  all that matters. E.g., Highsmith v.  Chrysler Credit Corp., 18 F.3d 434, 439-  40 (7th Cir. 1994).


5
Second, the finance company charges the  dealer a $50 "acceptance fee" for every  retail sales contract that it agrees to  finance, but waives the fee if the dealer  sells membership in the "Continental Car  Club," which the finance company owns, to  the purchaser of the car. Membership,  which entitles the member to a bond card  so that he doesn't have to surrender his  driver's license should he be ticketed  for a traffic offense, is sold only to  credit customers of the dealer. The  plaintiff was charged $60 for membership  in the Continental Car Club and the  charge was not included in the finance  charge.


6
The plaintiff is prepared to prove that  the value of the bond card is  considerably less than $60, and indeed is  probably little more than $10, in which  event the membership fee is rather  transparently in lieu of a $50 finance  charge. The dealer changes a $50 finance  charge, which if listed as such would  cause the disclosed interest rate to  rise, into a $60 fee for a nonfinance  service, namely the bond card. Although  the service is worth only about $10, the  buyer doesn't care that he's paying $60  for it, because he is also getting a  discount of $50 and thus paying a net of  only $10. It seems, therefore, that $50  of the $60 membership fee is a disguised  finance charge, and the disguise violates  the Act. See 12 C.F.R. sec.sec. 226.4(a),  (b)(6); Walker v. Wallace Auto Sales,  Inc., supra, 155 F.3d at 931-34; Gibson  v. Bob Watson Chevrolet-Geo, Inc., supra,  112 F.3d at 284-85; see also Adams v.  Plaza Finance Co., supra, 168 F.3d at  935-37.


7
Against this the defendants again point  to the language of the complaint. The  complaint does not allege that the buyer  is forced to buy a Continental Car Club  membership (and it is conceded that he is  not), or that the $50 finance charge is  imposed if the buyer refuses to buy the  membership, or even that the finance  charge is ever imposed--maybe the dealer  swallows it; not all costs are passed on  by a middleman to his customers. If the  finance charge is either never imposed,  or not imposed on those car buyers who do  not buy the membership, then the  membership fee cannot be a charge in lieu  of a finance charge, because it is not  avoidable by paying cash. But again the  plaintiff has offered to prove that the  finance charge is imposed on buyers who  do not buy the membership and not on  those who do, and this possibility is not  excluded by any of the allegations of the  complaint, unlike the situation in Damato  v. Hermanson, 153 F.3d 464, 473 (7th Cir.  1998).


8
The fact that membership in the club is  not mandatory is not a defense. Consider  this variant of our earlier example: The  membership is worth $11, and as before  the fee is $60. Then the car buyer who  buys the membership, and so (we are  assuming) avoids the $50 finance charge,  is $1 to the good; for when the dust has  cleared he has paid an extra $10 (the $60  membership fee, which he has paid, minus  the $50 finance charge, which he has  saved) for a benefit worth $11. In  effect, he has paid a finance charge of  $49--but the lower charge has not been  disclosed, either. Cf. McGee v. Kerr-  Hickman Chrysler Plymouth, Inc., 93 F.3d  380, 384 (7th Cir. 1996).


9
Although both alleged violations of the  Truth in Lending Act were committed by  the dealer in the first instance, since  it is the dealer who through the ruses  alleged is concealing the true interest  rate from the buyer, the finance company,  as assignee of the retail sales contract  which it is financing, is liable for any  violation that is apparent on the face of  the contract. 15 U.S.C. sec. 1641(a). The  cases are very strict in their  interpretation of this provision. So  while it is true that by looking at the  contract the finance company here could  tell that the $60 membership fee, which  it knew to be far in excess of the value  of the membership (for remember that the  Continental Car Club is owned by the  finance company, and so the company knows  what membership in the club is worth),  was an undisclosed finance charge,  something that is "apparent" only by  virtue of special knowledge, whether  about the practices of other firms, as in  Taylor v. Quality Hyundai, Inc., 150 F.3d  689, 694 (7th Cir. 1998), and Green v.  Levis Motors, Inc., 179 F.3d 286, 295  (5th Cir. 1999), or its own practices, as  in Ellis v. General Motors Acceptance  Corp., 160 F.3d 703, 709-10 (11th Cir.  1998), is not apparent on the face of the  contract itself. Even more clearly, the  finance company could not tell by looking  at the retail sales contract that its 20  percent additional finance charge had  been passed on to the buyer. The  plaintiff's reliance on 16 C.F.R. sec.  433.2 and the saving provision in 15  U.S.C. sec. 1610(d) is unavailing for the  reasons explained in Green v. Levis  Motors, Inc., supra, 179 F.3d at 296.


10
The third violation alleged, not of the  Truth in Lending Act but under the  federal mail and wire fraud statutes, is  a breach of fiduciary duty by the dealer.  Those statutes are criminal and do not  create civil liability directly, but they  are among the statutes the violation of  which is a "predicate act" upon which a  civil RICO claim can be based. 18 U.S.C.  sec. 1961(1)(B); Midwest Grinding Co.,  Inc. v. Spitz, 976 F.2d 1016, 1019 (7th  Cir. 1992). The allegation here is that  while the finance company has agreed to  finance the dealer's retail sales  contracts at a particular interest rate,  when the dealer is able to negotiate a  higher interest rate with the buyer of  the car the dealer and the finance  company split the additional interest.  The plaintiff describes the dealer's cut  as a "kickback" from the finance company  and argues that undisclosed self-dealing  by an agent is a serious violation of  fiduciary duty--which it is. Doner v.  Phoenix Joint Stock Land Bank, 45 N.E.2d  20, 24 (Ill. 1942); Meinhard v. Salmon,  164 N.E. 545 (N.Y. 1928) (Cardozo, C.J.);  Gagnon v. Coombs, 654 N.E.2d 54, 62  (Mass. App. 1995); Restatement of Agency  (Second) sec.sec. 387, 388 (1958). But an  automobile dealer is not its customers'  agent, obviously not in selling cars but  only a little less obviously in arranging  financing. If the buyer pays cash and  arranges his own financing, the dealer is  not in the picture at all. If the buyer  wants to buy on credit, he recognizes  that his decision does not change the  arms' length nature of his relation to  the dealer. He knows, or at least has no  reason to doubt, that the dealer seeks a  profit on the financing as well as on the  underlying sale. Restatement, supra, sec.  1, illustration 2.


11
This is in general, not in every case;  it is a question of fact whether the  contract express or implied between a  particular dealer and a particular  customer constitutes the former an agent  for the latter in procuring financing.  Cf. American Ins. Corp. v. Sederes, 807  F.2d 1402, 1405-06 (7th Cir. 1986);  Restatement, supra, sec. 1(1). But there  is no suggestion that the dealer here  represented that he would act as the  buyer's agent in dealing with the finance  company, no indication therefore that an  agency relationship was created. If there  were such a relationship it would mean  that the buyer could tell the dealer to  shop the retail sales contract among  finance companies and to disclose the  various offers the dealer obtained to  him, and no one dealing with an  automobile dealer expects that kind of  service.


12
The conclusion that the plaintiff has  failed to allege a breach of fiduciary  obligation is not the end of the RICO  claim. For while acknowledging that  violations of the Truth in Lending Act  are not predicate acts, the plaintiff  argues that they become such when mail  and wire communications are used to  further them. It is a rare case of  extension of credit that does not involve  mail or wire communications, and so the  practical effect of the plaintiff's  argument would be to criminalize the  Truth in Lending Act--for remember that  it is through the mail and wire fraud  statutes, which are criminal, that the  plaintiffs seek to convert TILA into a  basis for RICO liability.


13
What is true is that conduct in  violation of TILA might constitute a  scheme to defraud within the meaning of  the mail and wire fraud statutes, but  this must be separately alleged.  Concealing from credit purchasers the  true cost of credit might be part of a  scheme to defraud--or, if it resulted  simply from a misunderstanding of a  complex statute, might not be. The  district court was right to think that if  the defendants had not violated the Truth  in Lending Act, a fortiori they had not  engaged in criminal fraud. Since there  was a violation, that ground is not  robust. But as we read the complaint and  the plaintiff's briefs in this court, his  only theory of a violation of RICO (apart  from breach of fiduciary obligation,  which we have rejected) is that a  violation of the Truth in Lending Act  that is accomplished through mail or wire  communications is a predicate act, and  this theory is clearly unsound.


14
So we affirm the dismissal of the RICO  claim, and of the Truth in Lending Act  claim against the finance company; but we  remand the other TILA claims to the  district court for further proceedings  consistent with this opinion. We also  direct that court to reinstate, at least  provisionally, the supplemental state law  claims that it relinquished jurisdiction  over when it decided that the plaintiff  had failed to state a federal claim.


15
Affirmed in Part,  Reversed in Part, and Remanded

