In the

United States Court of Appeals

For the Seventh Circuit

No. 98-1944

Gregory Balderos, on behalf of himself

and all others similarly situated,

Plaintiff-Appellant,

v.

City Chevrolet, et al.,

Defendants-Appellees.

Appeal from the United States District Court

for the Northern District of Illinois, Eastern

Division.

No. 97 C 2084--George M. Marovich, Judge.

Argued November 8, 1999--Decided May 26, 2000

 Before Posner, Chief Judge, and Ripple and

Diane P. Wood, Circuit Judges.

 Posner, Chief Judge. 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.

 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.

 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 freestanding 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.

 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).

 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.

 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.

 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).

 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. KerrHickman Chrysler Plymouth, Inc., 93 F.3d

380, 384 (7th Cir. 1996).

 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.

 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.

 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.

 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.

 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.

 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.

Affirmed in Part,

Reversed in Part, and Remanded.