It is a violation of the Act for dealerships to fail or refuse to return a customer’s down payment when financing was not able to be secured for the purchase of the vehicle. seller of part or all of the down payment, whether such down payment is in the form of money, goods, chattels or otherwise, under those circumstances as a fee for investigating the credit of the consumer or as liquidated damages to cover depreciation of the merchandise which was the subject of the purchase order or contract or for any other purpose is an unlawful practice within the meaning of this Act, whether that fee or those charges are claimed from the down payment, whether such down payment is in the form of money, goods, chattels or otherwise, or made as a separate charge to the consumer.” (815 ILCS 505/2C) The term “down payment” under the Act is broad and includes all forms of down payment, whether money, goods chattels or any other form. Dealerships are prohibited from retaining any part or portion of the down payment regardless of the reason. This means the dealership cannot keep all or part of the down payment (regardless of form) as a fee for investigating the credit of the consumer, as liquidated damages to cover damage or depreciation of the purchased vehicle, or for any other purpose whatsoever. To do so otherwise is an unlawful practice under the Act, whether a fee or charges are claimed from the down payment, whether the down payment is in the form of money, goods, chattels or otherwise, or whether made as a separate charge to the customer. It is a violation of the Act for dealerships to fail or refuse to return a customer’s down payment when financing was not able to be secured for the purchase of the vehicle. Dealerships in Illinois have been subject to enforcement action by the Illinois Attorney General’s Office for violations of Section 2C of the Act. Additionally, private actions have been successfully waged by consumers Julie A. Cardosi is an attorney and president of the private firm, Law Office of Julie A. Cardosi, P.C., of Springfield, Illinois. She has practiced law for 35 years and represents the business interests of franchised new vehicle dealers. Formerly in-house legal counsel for IADA, she concentrates her practice in the areas of mergers and acquisitions and other transfers of dealer ownership, franchise law, commercial law, state and federal regulatory compliance matters, including employment, and other areas impacting day-to-day dealership business operations. She has also served as an Illinois Assistant Attorney General and Deputy Chief of the Consumer Fraud Bureau of the Attorney General’s Office. The material discussed in this article is for general information only and is not intended as legal advice and should not be acted upon as such. Dealers should consult their own private legal counsel for application to their specific circumstances. For more information, Julie can be reached at jcardosi@autocounsel.com, or at 217.787.9782, ext. 1. against dealerships. (See Bates v William Chevrolet/ Geo, Inc., 785 N.E. 2d 53, 1st Dist. Ill. App. Ct. 2003.) In that case, the court rejected the dealership’s arguments stating that the failure to return the customer’s down payment after rejecting her credit application violated Section 2C of the Act. The customer was also awarded damages and attorney fees. Dealerships also continue to be challenged under Section 2C of the Act over the use of clauses or riders to the buyer’s order or retail installment contract which state if the dealer is not able to assign the contract to a finance company, the customer must return the purchased vehicle and forfeit to the dealership a portion of the customer’s down payment for dealership’s costs of repair or damage. Such clauses may be scrutinized as attempts to avoid Section 2C. Check your dealership’s transactional documents and consult with your attorney to ensure Section 2C compliance. 9
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