Prayitno v. Nextep Funding LLC

CHAN-LI PRAYITNO, Plaintiff, v. NEXTEP FUNDING LLC, Defendant.

No. 17 C 4310

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

June 22, 2020

Judge Jorge L. Alonso

MEMORANDUM OPINION AND ORDER

Plaintiff Chan-Li Prayitno claims that, in offering plaintiff financing for a new auto transmission, defendant Nextep Funding LLC ("Nextep") obscured the true cost of the financing, violating the Truth in Lending Act ("TILA"), 15 U.S.C. § 1601 et seq, the Illinois Consumer Fraud and Deceptive Business Practices Act ("ICFA"), 815 ILCS 505/1 et seq., the Illinois Consumer Installment Loan Act ("CILA"), 205 ILCS 670/20(d), and the Illinois Interest Act, 815 ILCS 205/4 ("Interest Act"). Defendant moves for summary judgment. For the following reasons, the motion is granted in part and denied in part.

BACKGROUND

In February 2017, plaintiff's auto transmission failed. During that time, plaintiff lived with his parents in Romeoville, Illinois, while pursuing a degree in computer networking at Joliet Junior College, where he attended classes at either of two campuses four to five days per week. Plaintiff also worked approximately twenty to thirty hours per week at a nearby Chinese restaurant, China House II. At the restaurant, plaintiff's duties included customer service, answering phones, taking orders, and delivering food. He owned a 2002 Acura TL 3.2, which he used both for personal purposes and to make food deliveries for China House II during working hours. It is unclear, and the parties dispute, how much time plaintiff spent in his car delivering food; it was at least fifty percent of his working hours, but not one hundred percent, as plaintiff sometimes worked one or more days per week inside the store. (See Def.'s LR 56.1 Resp. ¶ 9, ECF No. 166; Def.'s LR 56.1 Stmt. Ex. A, Pl.'s Dep. at 54:14-23, ECF No. 154-1.)

Upon discovering the transmission problem, plaintiff had his vehicle towed to Atomic Transmission ("Atomic"), where he learned that his transmission would need to be rebuilt or replaced. Plaintiff asked for the lowest-cost solution. The parties dispute what price he was quoted and whether it represented a quote for the total cost including both parts and labor, but the figure was at least $1,200, and it is undisputed that whatever the precise quote was, plaintiff responded that he could not pay that amount at that time. Plaintiff was then informed that he could apply for financing via defendant.

On February 21, 2017, plaintiff entered into a contract with defendant. Plaintiff signed a written contract form, captioned as a "Merchandise/Service/Repair Contract" ("MSR Contract") under the Nextep logo. On page 2, the document stated that "[b]y signing . . . you are entering into a Closed End Consumer Product Lease" of "property" with a "total value" of "$2010.58," and it described the payment structure as follows: "To satisfy your lease obligation and purchase and own your property you must make one in-store payment of 340.00 and 17 lease payments of 245.58, plus a final residual payment of 201.06." (Pl.'s Stmt. of Add'l Facts Ex. 2, Cook Dep. Ex. 2 App. B, MSR Contract, ECF No. 158 at 87.) On page 3, the MSR Contract stated, "This document governs your Lease. . . . The "Property" is the product(s) described below that you are leasing from us . . . . You are leasing the Property and have no ownership rights in it unless you exercise your purchase option. . . . IF YOU DO NOT MEET YOUR OBLIGATIONS UNDER THIS LEASE, WE MAY RETAKE YOUR PROPERTY." (Id. at 3, ECF No. 158 at 88.) TheMSR Contract then described the leased "property" as a "Transmission Repair" in the "Agreed Upon Value" of "$2,105.00." (Id., ECF No. 158 at 88; see also Compl. App. A, ECF No. 1-1 at 3.) It set forth the same schedule of payments described above and explained, "You have an option to purchase the Property at the end of the Lease term for $201.06." (MSR Contract at 3.) Thus, the MSR Contract required plaintiff to pay a total of $4,715.92, significantly more than double either the amount of the "Agreed Upon Value" of the "Transmission Repair" or the resulting "total value of the property."

Defendant's Retailer/Service Agreement, an agreement it makes with all of its retail dealers, including Atomic, provides that "'Nextep will pay Retailer . . . the purchase price of the subject merchandise, minus . . . the amount of the first lease payment retained by Retailer, and . . . [a] Merchant Discount Rate [of] 5%." (Pl.'s Stmt. of Add'l Facts Ex. 2, Cook Dep. Ex. 3, Retailer/Service Agreement, ECF No. 158 at 101; see Def.'s LR 56.1 Resp. ¶ 27, ECF No. 166.) On February 23, 2017, two days after plaintiff entered into the MSR Contract, defendant paid Atomic the balance due for plaintiff's rebuilt transmission under this agreement, S1,664.47.

Although the MSR Contract disclosed the sequence of installment payments, it did not disclose the annual percentage rate ("APR"), which was over 140%. Plaintiff alleges that the MSR Contract documents were therefore misleading as presented to him, and he entered into the contract without understanding how much he would pay in finance charges.

Plaintiff did not shop around for other credit before entering into the MSR contract. His credit cards were near their limits at the time, and, according to Eric Forster, defendant's expert, plaintiff's credit rating, limited income, and lack of valuable collateral, would have left him with no viable options for securing other credit. Plaintiff disputes this, stating that he would not have knowingly paid over 140%; he would have gone "anywhere else that would give [him], like, alower interest rate." (Prayitno Dep. at 111:22-23.) Even if he couldn't find cheaper credit elsewhere, plaintiff states that he would not have entered into the MSR Contract if he had known its true cost. Instead, he would have either delayed the transmission work until he could save up the necessary cash, doing on-site work at the restaurant or borrowing his mother's car to make deliveries in the interim, or else he would have borrowed cash from a family member or friend.

Plaintiff believed that he could enter into the MSR Contract to get the transmission repair completed and then pay off the balance early. When he contacted defendant to inquire about the payoff amount, a Nextep representative pressured him to make the monthly payments rather than pay off the balance in advance, telling him that it would improve his credit. Plaintiff was alarmed when he was quoted a payoff figure of over $2,000; he believed that the correct payoff amount should have been much less than that, particularly given that he had already paid $340 in the store.

Plaintiff made one payment to defendant of $245 in the spring of 2017. Facing financial problems and considering bankruptcy, plaintiff then consulted counsel. He filed this putative class action lawsuit in June 2017.

In the operative Third Amended Complaint, plaintiff claims that (1) the MSR Contract that defendant offered to him and others similarly situated was a loan that defendant disguised as a "lease" in an attempt to circumvent and violate TILA's disclosure requirements, including its requirement that lenders must disclose the APR, see 15 U.S.C. § 1638; (2) defendant charged exorbitant, usurious interest in excess of the rates allowable under the Interest Act and CILA; and (3) defendant's conduct was deceptive and unfair under the ICFA because it disguised the true terms of credit and charged exorbitant interest.

ANALYSIS

"The Court shall grant summary judgment if the movant shows that there is no genuinedispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a); Wackett v. City of Beaver Dam, 642 F.3d 578, 581 (7th Cir. 2011). A genuine dispute of material fact exists if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The Court may not weigh conflicting evidence or make credibility determinations, but the party opposing summary judgment must point to competent evidence that would be admissible at trial to demonstrate a genuine dispute of material fact. Omnicare, Inc. v. UnitedHealth Grp., Inc., 629 F.3d 697, 705 (7th Cir. 2011); Gunville v. Walker, 583 F.3d 979, 985 (7th Cir. 2009). The court will enter summary judgment against a party who does not "come forward with evidence that would reasonably permit the finder of fact to find in [its] favor on a material question." Modrowski v. Pigatto, 712 F.3d 1166, 1167 (7th Cir. 2013). The Court construes all facts and draws all reasonable inferences in favor of the nonmoving party. Chaib v. Geo Grp., Inc., 819 F.3d 337, 341 (7th Cir. 2016).

Defendant moves for summary judgment on all three counts of plaintiff's Third Amended Complaint. First, defendant argues that it is entitled to summary judgment on the TILA claim (Count I) because plaintiff lacks standing—and even if plaintiff has standing, defendant argues, he lacks evidence that the February 2017 transaction was primarily for personal, family, or household purposes. Second, defendant argues that it is entitled to summary judgment on the Interest Act/CILA claim (Count II) because the MSR Contract was for a lease, not a loan of money. Third, defendant argues that it is entitled to summary judgment on the ICFA claim (Count III) because plaintiff lacks evidence of actual damages.

I. TRUTH IN LENDING ACT

Defendant argues that plaintiff lacks standing to assert his TILA claim because, even ifdefendant may have committed some error or omission that technically violated TILA, plaintiff has not shown how it harmed him or risked harming him by affecting his consumer behavior. Additionally, defendant argues that the transaction was not for personal, family, or household purposes because plaintiff needed his car for work.

A. Standing

The Court previously set forth the legal principles...