Opinion ID: 348748
Heading Depth: 1
Heading Rank: 1

Heading: The Service Policy

Text: 9 Worthmore contends that the $50.00 freezer service charge was not an incident to the extension of credit and, in any event, was not a finance charge within the intent of the Act. In this regard 15 U.S.C. § 1605 provides: 10 (a) Except as otherwise provided in this section, the amount of the finance charge in connection with any consumer credit transaction shall be determined as the sum of all charges, payable directly or indirectly by the person to whom the credit is extended, and imposed directly or indirectly by the creditor as an incident to the extension of credit . . . . (Accent added.) 11 Subsection 226.4 of Regulation Z, 12 C.F.R. 226.4, defines the finance charge in language virtually identical to that in the Act. 12 We are unable to agree with either component of Worthmore's argument. Its claim that the service policy is not an incident to the credit transaction might have more appeal if it were able to offer documented evidence of a substantial cash business in which identical charges for service policies were levied in each sales transaction. See Manzina v. Publishers Guild, Inc., 386 F.Supp. 241 (S.D.N.Y.1974). However, where as here the alleged cash sales are insignificant exceptions to what is apparently a credit sales business, the naked claim that the service policy charge is imposed on cash customers is insufficient to acquit it as not incident to the extension of credit. See Kriger v. European Health Spas, Inc., 363 F.Supp. 334 (E.D.Wis.1973); Strompolos v. Premium Readers Service, 326 F.Supp. 1100 (N.D.Ill.1971). 13 Finding that the instant service policy's imposition was inextricably intertwined with Worthmore's interest as a creditor, we decide that the cost of the freezer service policy was a finance charge of the type defined at 15 U.S.C. § 1605(a)(5), supra. Worthmore's failure to include this cost in the finance charge disclosure, 15 U.S.C. § 1638(a)(6), and the associated annual percentage rate, 15 U.S.C. § 1638(a)(7), was a violation of the Act rendering Worthmore liable for damages in Federal court, 15 U.S.C. § 1640(a), (e).