Author: Attorney Desk Reference Manual
Last updated: June 2004

 

Federal Law and Regulations 
Applicability 
Coverage 
Right to Withhold Payment 
Retail Installment Sales Act (RISA) 
RISA Contract Terms 
Other Contract Requirements
Other Obligations of Seller or Holder 
Unenforceable Contract Provisions 
Remedies

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Federal Law and Regulations

 

• Consumer Credit Protection Act - Credit Billing, 15 U.S.C. §1666
• Regulation Z, 12 C.F.R. §226

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Applicability

• Applies to third-party credit card issuers (e.g., bank credit cards).
• Not applicable to "check guarantee" or "debit" cards.

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Coverage

When the consumer buys goods or services using a credit card, he or she can assert against the credit card issuer any defenses and non-tort claims he or she has against the merchant, if:

• he or she has made a good faith effort to resolve the problem with the merchant;
• the amount of the transaction exceeds $50; and
• the transaction took place:

• in the consumer’s state, or
• within 100 miles of the consumer’s home address.

 NOTE: Case law is conflicting as to where a telephone transaction is considered to have taken place – consumer’s home (more likely, if the consumer initiated the phone call), or state law regarding the rules of contract-formation.

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Right to Withhold Payment

The consumer can withhold payment up to the amount of the credit on the entire disputed transaction (not just the portion of the charge representing the defect).

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Retail Installment Sales Act (RISA) - Scope

All retail installment purchases of goods, used primarily for personal, family or household purposes, or the retail installment purchase of services, for use other than business are governed by the Retail Installment Sales Act (RISA) 815 ILCS 405/1 et seq. The Act applies whenever there is a deferred payment price payable in one or more installments. This Act does not cover motor vehicles, which are covered by the Motor Vehicle Retail Installment Sales Act (MVRISA) 815 ILCS 375/1 et seq.

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RISA - Contract Terms

Section 5 of the Act sets forth specific terms and conditions which must be disclosed in any retail installment contract. However, any retail installment contract which complies with the Truth in Lending Act (TILA) and Regulation Z is deemed to be in compliance with the provisions of this Section.

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Other Contract Requirements

In addition to the Section 5 disclosures, the contract must meet certain other requirements which cannot be satisfied by TILA compliance. They include:

• The contract must be in writing, dated, signed by both buyer and seller, and completed as to all essential provisions before buyer signs.
• The printed portion of the contract must be in at least 8-point type.
• It must contain the words RETAIL INSTALLMENT CONTRACT in at least 10 point bold type, both at the top of the contract and directly above space reserved for signature.
• It must contain a verbatim "Notice to the Buyer," as written in Section 3 of the Act, relating to certain buyer rights.
• It must contain the names of the seller and buyer, the place of business of the seller, the residence of the buyer, and a description or identification of the goods or services sold or rendered, and must clearly state and describe any security taken or retained by seller.
• It must specify for each kind of insurance sold in connection with the transaction the type of coverage, the term of coverage, and the separate charge made for each.
• It must provide for a schedule of installment payments in periodic, equal amounts (except for final installment, which may be less).

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Other Obligations of Seller or Holder

• The seller must deliver to the buyer a copy of the contract signed by the seller.
• The seller or holder must give the buyer a written receipt for any payment made in cash, and on buyer’s request, a written statement of payments made and amounts due.
• The seller must allow, notwithstanding contract provisions to the contrary, prepayment in full, and in that event, make a refund credit in certain amounts.
• A seller may not require any insurance other than insurance against loss or damage to the goods purchased; for any insurance purchased, the seller is limited in certain respects to the premiums he can charge and cannot deny the purchaser the right of selection of insurance companies; certain insurance issuances must comply with the Illinois Insurance Code and regulations; the seller must make a refund of unearned insurance premiums.
• A seller or holder may collect a late charge for installment payments at least 10 days late, but not exceeding 5% of the installment on installments in excess of $200 or $10 on installments of $200 or less. Only one delinquency charge may be collected on any installment.
• There once was a limit on setting maximum finance charge rates (usury law). However, as of September 25, 1981, there is no limit on finance charge rates.
• The seller must annually inform the buyer of his right to obtain information as to the total amount of finance charges charged to or paid by the buyer during the year, and must provide such information to the buyer on request (or must provide this information annually without request).

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Unenforceable Contract Provisions

• Acceleration in the absence of default, abandonment, or destruction of the property.
• Provisions relieving the seller from liability for any buyer remedies provided by law.
• Provisions purporting to waive any provisions of this Act.

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Remedies

No person who violates this Act, except as a result of an accident or bona fide error of computation, may recover any finance charge, any delinquency or collection charge or any refinance charge in connection with the related retail installment contract or charge agreement.

The Illinois Supreme Court has ruled that RISA and MVRISA only authorizes defenses to collection actions, not affirmative causes of action. The Court noted, however, that certain violations of RISA and MVRISA constitute violations of the Consumer Fraud and Deceptive Business practices Act (CFDBP) and the Sales Finance Agency Act (SFA), both of which can be brought as affirmative claims. Hoover v. May Department Stores, 32 Ill. Dec.311, 395 N.E.2d 541 (1979).

The Attorney General can seek injunctive relief.

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