Mr. Justice Peckham,

after making the foregoing statement of the facts, delivered the opinion of the court.

The indictment, it will be seen, charges that the plaintiff in error violated the one hundred and tenth section of article 8, chapter 415, of the Laws of 1897, known as the labor law of the State of New York, in that he wrongfully and unlawfully required and permitted an employé working for him to work more than sixty hours in one week. There is nothing in any of the opinions delivered in this case, either in the Supreme Court or the Court of Appeals of the State, which construes the section, in using the word “required,” as referring to any physical force being used to obtain the labor of an employé. It is assumed that the word means nothing more , than the requirement arising from voluntary contract for such labor in excess of the number of hours specified in the statute. There is no pretense in any of the opinions that the statute was intended to meet, a case of involuntary labor in any form. All the opinions assume that there is no real distinction, so far as this question is concerned, between the words “ required ” and “permitted.” The mandate of the statute that “no employé shall be required or permitted to work,” is the substantial equivalent of an enactment that “no employé shall cdntract or agree to. work,” more than ten hours per day, and as there is no provision for special emergencies the statute is mandatory in all cases.' It is not an act merely fixing the number of hours which shall constitute a legal day’s work, but an absolute prohibition upon the employer, permitting, under any circumstances, more than ten hours work to be done in his establishment. The employé may desire to earn the extra money, which would arise from his working more than the prescribed *53time, but this statute forbids the employer from permitting the employé to earn it.

The statute necessarily interferes with the right of contract between the employer and employes, concerning the number of hours in which the latter may labor in the bakery of the employer. The general right to make a contract in relation to his business is part of the liberty of the individual protected by the Fourteenth Amendment of the Federal Constitution. Allgeyer v. Louisiana, 165 U. S. 578. Under that provision no State can deprive any person of life, liberty or property without due process of law. The right to purchase or to sell labor is part of the liberty protected by this amendment, unless there are circumstances which exclude the right. There are, however, certain powers, existing in the. sovereignty of each State in the Union, somewhat vaguely termed police powers, the exact description and limitation of which have not been attempted by the courts. Those powers, broadly stated and without, at present, any attempt at a more specific limitation, relate to the safety, health, morals and general welfare of the public. Both property and liberty are held on such reasonable conditions as may be imposed by the governing power of the State in the exercise of those powers, and with such conditions the Fourteenth Amendment was not designed to interfere. Mugler v. Kansas, 123 U. S. 623; In re Kemmler, 136 U. S. 436; Crowley v. Christensen, 137 U. S. 86; In re Converse, 137 U. S. 624.

The State, therefore, has power to prevent the individual from making certain kinds of contracts, and in regard to them the Federal Constitution offers no protection. If the contract be one which the State, in the legitimate exercise of its police power, has the right to prohibit, it is not prevented from prohibiting it by the Fourteenth Amendment. Contracts in violation of a statute, either of the Federal or state government, or a contract to ‘let one’s property for immoral purposes, or to do any other unlawful act, could obtain no protection from the Federal Constitution, as coming under the liberty of *54person or of free contract. Therefore, when the State, by its legislature, in the assumed exercise of its police powers, has passed an act which seriously limits the right to labor or the right of contract in regard to their means of livelihood between persons who are sui juris (both employer and employé), it becomes of great importance to determine which shall prevail — the right of the individual to labor for such time as he may choose, or the right of the State to prevent the individual from laboring- or from entering into any contract to labor, beyond a certain time prescribed by the State.

This court has recognized the existence and upheld the exercise of the police powers of the States in many cases which might.fairly be considered as border ones, and it has, in the course of its determination of questions regarding the asserted invalidity of such statutes, on the ground of their violation of the rights secured by the Federal Constitution, been guided by rules óf a very liberal nature, the application of Which has resulted, in numerous instances, in upholding the validity of state statutes thus assailed. Among the later cases where the-state law has been upheld by this court is that of Holden v. Hardy, 169 U. S. 366. A provision in the act of the legislature of Utah was there under consideration, the act limiting the employment-of workmen in all underground mines or workings, to eight hours per day, “except in cases of emergency, where life or property is in imminent danger.” It also limited the hours of labor in smelting and other institutions for the reduction or refining of ores or metals to eight hours per day, except in like cases of emergency. The act was held to be a valid exercise of the police powers of the State. A review of many of the cases on the subject, decided by this and other courts, is given, in the opinion. It was held that the kind, of employment, mining, smelting, etc., and the character of the employés in such kinds of labor, were such as to make it reasonable and proper for the State to interfere to prevent the employés from being constrained' by the. rules laid down by the proprietors in regard to labor. The following citation *55from the observations of the Supreme Court of Utah in that case was made by the judge writing the opinion of this court, and approved: “The law in question is confined to the protection of that class of people engaged in labor in underground mines, and in smelters and other works wherein ores are reduced and refined. This law applies only to the classes subjected by their employment to the peculiar conditions and effects attending underground mining and work in smelters, and other works for the reduction and refining of ores. Therefore it is not necessary to discuss or decide whether the legislature can fix the hours of labor in other employments.”

It will be observed that, even with regard to that class of labor, the Utah statute provided for cases of emergency wherein the provisions of .the statute would not apply. The statute now before this court has no emergency clause in it, and, if the statute is valid, there are no circumstances and no emergencies under which the slightest violation of the provisions of the act would be innocent. There is nothing in Holden v. Hardy which covers the case now before us. Nor does Atkin v. Kansas, 191 U. S. 207, touch the case at bar. The Atkin case was decided upon the right of the State to control its municipal corporations and to prescribe the conditions upon which it will permit work of a public character to be done for a municipality. Knoxville Iron Co. v. Harbison, 183 U. S. 13, is equally far from an authority for this legislation. The employes in that case were held to be at a disadvantage with the employer in matters of wages, they being miners and coal workers, and the act simply provided for the cashing of coal orders when presented by the miner to the employer.

The latest case decided by this court, involving the police power, is that of Jacobson v. Massachusetts, decided at this term and reported in 197 U. S. 11. It related to compulsory vaccination, and the law was held valid as a proper exercise^ of the police powers with reference to the public health. It was stated in the opinion .that it was a case “of an adult who, for aught, that appears, was himself in perfect health and a fit *56subject for vaccination, and yet, while remaining in the community, refused to obey the statute and the regulation adopted in execution of its provisions for the protection of the public health and the public safety, confessedly endangered by the presence of a dangerous disease.” That case is also far from covering the one now before the court.

Petit v. Minnesota, 177 U. S. 164, was upheld as a proper exercise of the police power relating to the observance of Sunday, and the case held that the legislature had the right to declare that, as matter of law, keeping barber shops open on Sunday was not a work of necessity or charity.

It must, of course, be conceded that there is a limit to the valid exercise of the police power by the State. There is no dispute concerning this general proposition. Otherwise the Fourteenth Amendment would have no efficacy and the legislatures of the States would have unbounded power, and it would be enough to say that any piece of legislation was enacted to conserve the morals, the health or the safety of the people; such legislation would be valid, no matter how absolutely without foundation the claim might be. The claim of the police power would be a mere pretext — become another and delusive name for the supreme sovereignty of the State to be' exercised free from constitutional restraint. This is not contended for. In every case that comes before this court, therefore, where legislation of this character is concerned and where the protection of the Federal Constitution is sought, the question necessarily arises: Is this a fair, reasonable and appropriate exercise of the police power of the State, or is it an unreasonable, unnecessary and arbitrary interference with the right of the individual to his personal liberty - or to enter into those contracts in relation to labor which may seem to him appropriate or necessary for the support .of himself and his family? Of course the liberty of contract relating to labor includes both parties to it. The one has as much right to purchase as the other to sell labor.

This‘is not a question of substituting the judgment of the *57court for that of the legislature. If the act.be within the power of the State it is valid, although the judgment of the court might be totally opposed to the enactment of such a law. But the question would still remain: Is it within the police power of the State? and that question must be answered by the court.

The question whether this act is valid as a labor law, pure and simple, may be dismissed in a few words. There is no reasonable ground for interfering, with the liberty of person or the right of free contract, by determining the hours of labor, in the occupation of a baker. There is no contention that bakers as a class are not equal in intelligence and capacity to men in other trades or manual occupations, or that they are not able to assert their rights and care for themselves without the protecting arm of the State, interfering with their independence of judgment and of action. They are in no sense wards of the State. Viewed in the light of a purely labor law, with no‘reference whatever, to the question of health, we think that a law like the one before üs involves neither the .safety, the morals nor the welfare of the public, and that the interest of. the public is not in the slightest degree affected by such an act. The law must be upheld, if at all, as a law pertaining to the health of the individual engaged in the occupation of a baker. It does not affect any other portion of the public than those who are engaged in that occupation. Clean and wholesome bread does not depend upon whether the baker works but ten hours per day or only sixty hours a week. The limitation of the hours of labor does not come within the police nower on that ground.

It is a question of which of two powers or rights shall prevail —the power of the State to legislate or the right of the individual to liberty of person and freedom of contract. The mere assertion that the subject relates though but in a remote degree to the public health does not necessarily render the enactment valid. The act must have a more direct relation, as a means to an end, and the end itself must be appropriate and legitimate, before an act. can be held to be valid which interferes *58with the general right of an individual to be free in his person and in his power to contract in relation to his own labor.

This case has caused much diversity'of opinion in the state courts. In the Supreme Court two of the five judges composing the Appellate Division dissented from the judgment affirming the validity of the act. In the Court of Appeals three of the seven judges also dissented from, the judgment upholding the statute. Although found in what is called a labor law of the State, the Court of Appeals has upheld the act-as one relating to the public health — in other words, as a health law. One of the judges of the Court of Appeals, in upholding the law, stated that, in his opinion, the regulation in question could not be sustained unless, they were able to say,.from common knowledge, that working in a bakery and candy factory was an unhealthy employment. The judge held that, while the evidence was not uniform, it still led him'to the conclusion that the occupation of a baker or confectioner was unhealthy and tended to result in diseases of the respiratory organs. Three of the judges dissented from that view, and they thought the occupation of a baker was not to such an extent unhealthy as to warrant the interference of the legislature with the liberty of the individual.

We think the limit of the police power has been reached and passed in this case. There is, in our judgment, no reasonable foundation for holding this to be necessary or appropriate as a health law to safeguard the public health or the health of the individuals who are following the trade of a baker. If this statute be valid, and if, therefore, a proper case is made out in which to deny the right of an individual, sui juris, as employer or employe, to make contracts for tlie labor of the latter under the protection of the provisions of the Federal Constitution, there would seem to be no length to which legislation of this nature might not go. The case differs widely, as we have already stated, from the expressions of this court in regard to laws of this nature, as stated in Holden v. Hardy and Jacobson v. Massachusetts, supra.

*59' We think that there can be no fair doubt that the trade of a baker, in and of itself, is not an unhealthy one to that degree which-would authorize the legislature to interfere with the right to labor,- and with the right of free contract on the part of the individual, either as employer or employé. In looking through statistics regarding all trades and occupations, it may be true that the trade of a baker does not appear to be as healthy as some other trades, and is also vastly more healthy than still others.- To the common understanding the trade of a baker has newer been regarded as an unhealthy one. Very likely physicians would not recommend the exercise of that or of any other trade as a remedy for ill health. Some occupations are more healthy than others, but we think there are none which might not come under the power of the legislature to supervisé and control the hours of working therein, if the mere fact that the occupation is not absolutely and perfectly healthy is to confer that right upon the legislative department of the Government. It might be safely affirmed that almost all occupations more or less affect the health. There must be more than the mere fact of the possible existence-'of. some small amount of unhealthiness to warrant legislative interference with liberty. It is unfortunately true that labor, even in any department, may possibly carry with it the seeds of unhealthiness. But are we all, on that account, at the mercy of legislative majorities? A printer, a tinsmith, a locksmith, a carpenter, a cabinetmaker, a dry goods clerk, a bank’s, a lawyer’s or a physician’s glerk, or a clerk in almost any kind of business, would all come under the power of the legislature, on this .assumption. No trade, no occupation, no -mode of earning one’s living, could escape this all-pervading power, and the acts of the legislature in limiting the hours of labor in all employments would be valid, although such limitation might seriously cripple the ability of the laborer to support himself and his family. In our large cities there are many buildings into which the sun penetrates for but a short time in each day, and these buildings are occupied by people carrying on the *60business of bankers, brokers, lawyers, real estate, and many other kinds of business, aided by many clerks, messengers, and other employés. Upon the assumption of the validity of this act under review, it is not possible to say that an act, prohibiting lawyers’ or bank clerks, or others, from contracting,to labor for their employers more than eight hours a day, would be invalid, It might be said that it is unhealthy to work more than that number of hours in an apartment lighted by artificial light during the working hours of the day; that the occupation of the bank clerk, the lawyer’s clerk, the real éstate clerk, or the broker’s clerk in such offices is therefore unhealthy, and the legislature in its paternal wisdom must, therefore, have the right to legislate on the subject of and to limit the hours for such labor, and if it exercises that power and its validity be questioned, it .is sufficient to say, it has reference to the public health; it has reference to the health pf the employés condemned to labor day after day in buildings where the sun never shines; it is a health law, and therefore.it is valid, and cannot be questioned.by the courts.

It is also urged, pursuing the same, line of argument, that it is to the interest of the State that its population should be strong and robust, and therefore any legislation which may be said to tend to make people healthy must be valid as health laws, enacted under the police power. If this be a. valid argument and'a justification for this kind of legislation, it follows that the protection of the Federal Constitution from undue interference with liberty of person and freedom of contract is visionary, wherever the law is sought to be justified as a valid exercise of the police power. Scarcely any law but might find shelter under such assumptions, and conduct; properly so called, as well as contract, would come under the restrictive sway of the legislature. Not only the hours of employés,' but the hours of employers, could be regulated, and doctors, lawyers, scientists, all professional men, as well as athletes and artisans, could be forbidden to fatigue their brains' and bodies by prolonged hours of exercise, lest the fighting strength *61of the State be impaired. We mention these extreme cases because, the. contention is extreme. We do not believe in the soundness of the views' which uphold this law. On the contrary, we think- that such a law as this, although passed in the assumed exercise of the police power, and as relating to the public health, or the health of the employés named, is not within that powpr, and is invalid. The act is not, within any fair meaning of the term, a health law, but is an illegal intérference with the rights of individuals, both employers and employés, to make contracts regarding labor upon such terms as they may think best, or which they may agree upon with the other parties to such contracts. Statutes of the nature of that under review, limiting the hours in which grown and intelligent men may labor to earn their living, are mere meddlesome interferences with the rights of- the individual, and they are not saved from condemnation by the claim that they are passed in the exercise of the police power and upon the subject of the health of the individual whose rights are interfered with, unless there be some fair ground, reasonable in and of itself, to say that there is material danger to the public health or to the health of the employés, if the hours of labor are not curtailed. If this be not clearly the case the individuals, whose rights are thus made the subject of legislative interference, are under the protection of the Federal Constitution regarding their liberty of contract as well as of person; and the legislature of the State has ho power to limit their right as proposed in this .statute. All that it could properly do has been doné by it with regard to the conduct of bakeries, as provided for in the other sections of the act, above set forth. These several sections provide for the inspection'of the premises where the bakery is carried on, with' regard to furnishing proper wash-rooms and water-closets, apart from the bake-room, also with regard to providing proper drainage, plumbing and painting; the sections, in' addition, provide for the height of the ceiling, the cementing or tiling of floors, where necessary in the opinion of thé factory inspector, and for other things of *62that nature; alterations are also provided for and are to be made where necessary'in the opinion of the inspector, in order to comply with the provisions of the statute. These various sections may be wise and valid regulations, and they certainly go to the full extent of providing for the cleanliness and the healthiness, so far as possible,' of the quarters in which bakeries are to be conducted. Adding to all these requirements, a prohibition to enter into any contract of labor in a bakery for more than a certain number of hours a week, is, in our judgement, so wholly beside the matter of a proper, reasonable and fair provision, as to run counter to that liberty of person and of free contract provided for in the Federal Constitution.

It was further urged on the argument that restricting the hours of labor in the case of bakers was valid because it-tended to cleanliness on the part of the workers, as a man was more apt to be cleanly when not overworked, and if cleanly then his “output” was also more likely to beso. What has already been said applies with equal force to this contention. We do not admit the reasoning to be sufficient to justify the claimed right of such interference. The State in that case would assume the position of a supervisor, or pater familias, over every act of the individual, and its right of governmental interference with his hours of labor, his hours of exercise, the character thereof, and the extent to which it shall be carried would be recognized and upheld. In our judgment it is not possible in fact to discover the connection between the number of hours a baker may work in the bakery and the healthful quality of the bread made by the workman. The connection, if any exists, is too shadowy and thin to build any argument for the interference of the legislature. If the man works ten hours a day it is all right, but if ten and a half or eleven his health is in danger and his bread may be unhealthful, and, therefore, he shall not be permitted to do it. This, we think, is unreasonable and entirely arbitrary. When assertions such as we have adverted to become necessary in order to give, if possible, a plausible foundation for the contention that the law is a “health law,” *63it gives rise to at least a suspicion that there was some other motive dominating the legislature than the purpose to sub-serve the public health or welfare.

This interference on the part of the legislatures of the several States with the ordinary trades and occupations of the people seems to be on the increase. In the Supreme Court of New York, in the case of People v. Beattie, Appellate Division, First Department, decided in 1904, 89 N. Y. Supp. 193, a statute regulating the trade of horseshoeing, and requiring the.person practicing such trade to be examined and to obtain a certificate from a board of examiners and file the same with-the clerk of the county wherein the person proposes to practice such trade, was held invalid, as an arbitrary interference with personal liberty and private property without due process of law. The attempt was made, unsuccessfully, to justify it as a health law.

The same kind of a statute was held invalid (In re Aubry) by the Supreme Court of Washington in December, 1904. 78 Pac. Rep. 900. The court held that the act deprived citizens of their liberty and property without due process of law and denied to them the equal protection of the laws. It also held that the trade of a horseshoer is not a subject of regulation under the police power of the State, as a business concerning and directly affecting the health, welfare or comfort of its inhabitants; and that therefore a law which provided for the examination and registration of horseshoers in certain cities was unconstitutional, as an illegitimate exercise of the police power.

The Supreme Court of Illinois in Bessette v. People, 193 Illinois, 334, also held that a law of the same nature, providing for the regulation and licensing of horseshoers, was unconstitutional as an illegal interference with the liberty of the individual in adopting and pursuing such calling as he may choose, subject only to the restraint necessary to secure the common welfare. See also Godcharles v. Wigeman, 113 Pa. St. 431, 437; Low v. Rees Printing Co., 41 Nebraska, 127, 145. In *64these cases the courts upheld the right of free contract and the right to purchase and sell labor upon such terms as the parties may agree to.

It is impossible for. us to shut our eyes to the fact that many of the laws of this character, while passed under what is claimed to be the police power for the purpose of protecting the public health or welfare, are, in reality, passed from other motives. We are justified in saying so when, from the character of the law and the subject upon which it legislates, it is apparent that the public health or welfare bears but the most remote relation to the law. The purpose of a statute must he determined from the natural and legal effect of the language employed; and whether it is or is not repugnant to the Constitution of the United States must be determined from the natural effect of such statutes when put into operation, and not from their proclaimed purpose. Minnesota v. Barber, 136 U. S. 313; Brimmer v. Rebman, 138 U. S. 78. The court looks beyond the mere letter of the law in such cases. Yick Wo v. Hopkins, 118 U. S. 356.

It is manifest to us that the limitation of the hours of labor as provided for in this section of .the statute under which the indictment was found, and the plaintiff in error convicted, has no such direct relation to and no such substantial effect upon the health of the employé, as to justify us in regarding' the section as really a health law. It seems'to us that the real object and purpose were simply to regulate the hours of labor between the master and his employés (all being men, sui juris), in a private business, riot dangerous in any degree to morals or in any real and substantial degree, to the health of the employés. Under such circumstances the freedom of master and employé to contract with each other in relation to their employment, and in defining the same, cannot be prohibited or interfered with, without violating the Federal Constitution.

The judgment of the Court of Appeals of New York as well as that of the Supreme Court and of the County Court of Oneida County must be reversed and the case remanded to *65the County Court for further proceedings not inconsistent with this opinion.

Reversed.

Mr. Justice Harlan, with whom Mr. Justice White and Mr. Justice. Day

concurred, dissenting.

While this court has not attempted to mark the precise boundaries of what is called the police power of the State, the existence of the power has been uniformly recognized, both by the Federal and state courts.

All the cases agree that this power extends at least to the protection of the lives, the health and the safety of the public against the injurious exercise by any citizen of his own rights.

In Patterson v. Kentucky, 97 U. S. 501, after referring to the general principle that rights given by the Constitution cannot be impaired by state legislation of any kind, this court said: “It [this court] has, nevertheless, with marked distinctness and uniformity, recognized the necessity, growing out of the fundamental conditions of civil society, of Upholding state police regulations which were enacted in good faith, and had appropriate and direct connection with that protection to life, health, and property which each State owes to her citizens.” So in Barbier v. Connolly, 113 U. S. 27: “But neither the [14th] Amendment — broad and comprehensive as it is— nor any other Amendment was.designed to interfere with the power of the State, sometimes termed its police power, to prescribe regulations to promote the health, peace, morals, education, and good order of the people.”

Speaking generally, the State in the exercise of its powers may not unduly interfere with the right of the citizen to enter into contracts that may be necessary and essential in the enjoyment of the inherent rights belonging to every one, among which rights is the right “ to be free in the enjoyment of all his faculties; to be free to use them in all lawful ways; to live and work where he will; to earn his livelihood by any lawful calling; to pursue any livelihood or avocation,” This was de*66dared in Allgeyer v. Louisiana, 165 U. S. 578, 589. But in the same case it was conceded that the right to contract in relation to persons and property or to do business, within a State, may be “regulated and sometimes prohibited, when the contracts or business conflict with the policy of the State as contained in its statutes ” (p. 591).

So, as said in Holden v. Hardy, 169 U. S. 366, 391: “This right of contract, however, is itself subject to certain limitations which the State may lawfully impose in the exercise of its police powers. While this power is inherent in all governments, it has doubtless been greatly expanded in its application during the past century, owing to an enormous increase in the number ,of occupations which are dangerous, or so far. detrimental to the health of the employes as to demand special precautions for their well-being and protection, or the safety of adjacent property. While this court has held, notably in the cases of Davidson v. New Orleans, 96 U. S. 97, and Yick Wo v. Hopkins, 118 U. S. 356, that the police power Cannot be put forward as an excuse for oppressive and unjust .legislation, it may be lawfully resorted to for the purpose of preserving the public health, safety or morals, or the abatement of public nuisances, and a large discretion 'is necessarily vested in the legislature to determine not only what the interests of the. public require, but what measures are necessary for the protection of such interests.’ Lawton v. Steele, 152 U. S. 133, 136.” Referring to the limitations placed by the State upon the hours of workmen, the court in the same case said (p. 395): “These employments, when too long pursued, the legislature has judged to be detrimental to the health of the employés, and, so long as there are reasonable grounds for- believing that this is só, its decision upon this subject cannot be reviewed by the Federal courts.”

Subsequently in Gundling v. Chicago, 177 U. S. 183, 188, this court said: “Regulations respecting the pursuit of a lawful trade or business are of very frequent occurrence,in the various cities of the country, and what such regulations shall be and *67to what particular trade, business- or occupation they shall apply, are questions for the State to determine, and their determination comes within the proper exercise of the police power by the State, and unless the regulations are so utterly unreasonable and extravagant in their nature and purpose that the property and personal rights of the citizen are unnecessarily, and in a manner wholly arbitrary, interfered with or destroyed without due process of law, they do not extend beyond the power of the State to pass, and they form no subject for Federal interference.

“As stated in Crowley v. Christensen, 137 U. S. 86, ‘the possession and enjoyment of all rights are subject to such reasonable conditions as may be deemed by the governing authority of the country essential, to the safety, health, peace, good order and morals of the community.’ ”

In St. Louis, Iron Mountain &c. Ry. v. Paul, 173 U. S. 404, 409, and in Knoxville Iron Co. v. Harbison, 183 U. S. 13, 21, 22, it was distinctly adjudged that the right of contract was not “absolute'in respect to every matter, but may be subjected to the restraints demanded by the saféty and welfare of the State.” Those cases illustrate the extent to which the State may restrict or interfere with the exercise of the right of contracting.

The authorities on the same line are so numerous that further citations are unnecessary.

I take it to be firmly established that what is called the liberty of contract may, within certain limits, be subjected to regulations designed and calculated to promote the general welfare or to guard the public health, the public morals or the public safety. t “The liberty secured by the Constitution of the United States to every person within its jurisdiction does not import,” this court has recently said, “an absolute right in each person to be, at all times and in all circumstances, wholly freed from restraint. There are manifold restraints to which every person is necessarily subject for the common good.” Jacobson v. Massachusetts, 197 U. S. 11.

*68Granting then that there is a liberty of contract which cannot be violated even under the sanction of direct legislative enactment, but assuming, as according to settled law we may assume, that such liberty of contract is subject to such regulations as the State may reasonably prescribe for the common good and the well-being of society, what are the conditions under which the judiciary may declare such regulations to be in excess of legislative authority and void? Upon this point there is no room for.dispute; for, the rule is universal that a legislative enactment, Federal, or state, is never to be disregarded or held invalid unless it be, beyond question, plainly and palpably in excess of legislative power. In Jacobson v. Massachusetts, supra, we said that the power of the courts to review legislative action in respect of a matter' affecting the general welfare exists only "when that which the.legislature has done comes within the rule that if a statute purporting to have been enacted to protect the public health, the public morals or the public safety, has no real or substantial relation to those objects, or is, beyond all question, a plain, palpable invasion of rights secured by the fundamental law” — citing Mugler v. Kansas, 123 U. S. 623, 661; Minnesota v. Barber, 136 U. S. 313, 320: Atkin v. Kansas, 191 U. S. 207, 223. If there be doubt as to'the validity of the statute, that doubt must therefore be resolved in favor of its validity, and the courts must keep their hands off, leaving the legislature to meet the responsibility for unwise legislation. If the end which the legislature seeks to accomplish be one to which, its power extends, and if the means employed to that énd, although not the wisest or best, are yet not plainly and palpably unauthorized by law, then the court cannot interfere. In other words, when, the validity of a statute is questioned, the burden of proof,’ so to speak, is upon those who assert it to be unconstitutional. McCulloch v. Maryland, 4 Wheat. 316, 421.

Let. these principles be applied to the present case. By the statute in question it is .provided that, " No employé shall be required or permitted to. work in a biscuit, bread or cake *69bakery or confectionery establishment more than sixty hours in any one week, or more than ten hours in any one day, unless for the purpose of making a shorter work day on the last day of the week; nor more hours in any one week than will make an average of ten hours per day for the number of days during such week in which such employé shall work.”

It is plain that this statute was enacted in order to protect the physical well-being of those who work in bakery and confectionery establishments. It may be that the statute had its origin, in part, in the belief that employers and employes in such establishments were not upon an equal footing, and that the necessities of the latter often compelled them to submit to. such exactions as unduly taxed their strength. Be this as it may, the statute must be taken as expressing the belief of the people of New York that, as a general rule, and in the case of the average man, labor in excess of sixty hours during a week in such establishments may endanger the health of those who thus labor. Whether or not this be wise legislation .it is not the province of the court to inquire. Under our systems of government, the courts are not concerned with the wisdom or policy of legislation. So that in determining the question of power to interfere with liberty of contract, the court may inquire whether the means devised by the State are germane to an end which may be lawfully accomplished and have a real or substantial relation to the protection of health, as involved in the daily work of the persons, male and female, engaged in bakery and confectionery establishments. But when this inquiry is entered upon I find it impossible; in view of common experience, to say that there is here no real or substantial relation between-the means employed by the State and the end sought to be accomplished by its legislation. Mugler v. Kansas, supra. Nor can I say that the statute has no appropriate or direct connection with that protection to health which each State owes to her citizens, Patterson v. Kentucky, supra; or that it is not promotiye of the health of the employés in question, Holden v. Hardy, Lawton v. Steele, *70supra; or that the regulation prescribed by the State is utterly unreasonable and extravagant or wholly arbitrary, Gundling v. Chicago, supra. Still less can I say that the statute is, beyond question, a plain, palpable invasion of rights secured by the fundamental law. Jacobson v. Massachusetts, supra. Therefore I submit that this court will transcend its functions if it assumes to annul the statute of New York. It must be remembered that this statute does not apply to all kinds of business. It applies only to work in bakery and bonfectionery establishments, in which, as all know, the air constantly breathed by workmen is not as pure and healthful as that to be found .in some other establishments or out of doors.

Professor Hirt in his treatise on the “Diseases of the Workers” has said: “The labor of the bakers is among the hardest and most laborious imaginable, because it has to be performed, under conditions injurious to the health of those engaged in it. It is hard, very hard work, not only, because it requires a great deal of physical exertion in an overheated workshop and during unreasonably long hours, but more so because of the erratic demands of the public, compelling the baker to perform the greater part of his work at night, thus depriving him of an opportunity to enjoy the necessary rest and sleep, a fact which is highly injurious to his health.” Another writer says: “The constant inhaling of flour dust causes inflammation of the lungs and of the bronchial tubes. The eyes also suffer through this dust, which is responsible for the many cases of running eyes among the bakers. The long hours of toil to which all bakers are subjected produce rheumatism, cramps and swollen legs. The intense heat in the workshops induces the workers to resort to cooling drinks, which together with their habit of exposing the greater part of their bodies to the change in the atmosphere, is another source of a number of diseases of variouA organs. Nearly all bakers’ are pale-faced arid of more delicate health than the workers of other crafts, which is chiefly due to their hard work and their irregular and unnatural mode of living, whereby the power of resistance agairist disease is *71greatly diminished. The average age of a baker is below that of other workmen; they seldom live over their fiftieth year, most of them dying between the ages of forty and fifty. During periods of epidemic diseases the bakers are generally the first to succumb to the disease, and the number swept away during, such periods far exceeds the number of other crafts in comparison to the men employed in the respective industries. When, in 1720, the plague visited the city of Marseilles, France, every baker in the city succumbed to the epidemic, which caused considerable excitement in the neighboring cities and resultéd in measures for the sanitary protection of the bakers.”

In the Eighteenth Annual Report by the New York Bureau of Statistics of Labor it is stated that among the occupations involving exposure to conditions that interfere with nutrition is that of a baker (p. 52). In that Report it is also stated that ‘‘from asocial point of view, production will be increased by any change in industrial organization which diminishes" the number of idlers, paupers and criminals. Shorter hours of work, by allowing higher standards of comfort and purer family life, promise to enhance the -industrial efficiency of the wage-working class — improved health, longer life, more content and greater intelligence and inventiveness” (p. 82).

Statistics show, that the average daily working time among workingmen in different countries is, in Australia, 8 hours; in Great Britain, 9; in the United States, 9¾; in Denmark, 9¾; in Norway, 10; Sweden, France and Switzerland, 10½; Germany, 10¼; Belgium, Italy and Austria, 11; and in Russia, 12 hours.

We judicially know that the question of the number of hours during which á workman should continuously labor has been, for a long period, and.is yet, a subject of serious consideration among civilized peoples, and by those having special knowledge of the laws of health. Suppose the statute prohibited labor in bakery and confectionery establishments in excess of eighteen hours each day. No one, I take it, could dispute the power of .the State to enact such a statute. But the statute *72before us does not embrace extreme or exceptional cases. It may be said to occupy a middle ground in respect of the hours of labor. What is the true ground for the State to take-be-., tween -legitimate protection, by legislation, of the public health and liberty of contract is not a question easily solved, nor one in respect of which there is or can be absolute certainty, There-are very few, if any, questions in political economy about which entire certainty may be predicated. One writer on relation of the State to labor has well said: "The manner, occasion, and degree in which the State may interfere with the industrial freedom of its citizens is one of the most debatable and difficult questions of social science.” Jevons, 33.

We also judicially know that the number of hours that should constitute a day’s labor in particular occupations involving the physical strength and safety of workmen has been the subject of enactments by Congress and by nearly all of the States. Many, if not most,, of those enactments fix eight hours as the proper basis of a day’s labor.

I do not stop to consider whether any particular view of this economic question presents the sounder theory. What the precise facts are it may be difficult to say. It is enough for the' determination of this case, and it is enough for this court to know, that the question is one about which there is room for debate and for an honest difference of opinion. There are many reasons of a weighty, substantial character, based upon the experience of mankind, in support of the theory that, all things considered, more than ten hours’ steady work each day, from week to week, in a bakery or confectionery establishment, may endanger the health, and shorten the lives of the. workmen, thereby diminishing their physical and mental capacity to serve the State, and to provide for those dependent upon them.

If such reasons exist that ought to be the end of this case, for-the State is not amenable to the judiciary, in respect of its legislative enactments, unless such enactments are plainly, palpably, beyond all question, inconsistent with the Constitu*73tion of the United States. We are not to presume that the State of New York has acted'in bad faith. Nor can we assume that its legislature acted without due deliberation, or that it did not determine this question upon the fullest attainable information, and for the common good: We cannot say that the State has acted without reason nor ought we to proceed upon the theory that its action is a mere sham. Our duty, I submit, is to sustain the statute as not being in conflict with the Federal Constitution, for the reason — and such is an all-sufficient reason — it is not shown to be plainly and palpably inconsistent with that instrument. Let the State alone in the management of its purely domestic affairs, so long as it does not appear beyond all question that it has violated the Federal .Constitútion. This view necessarily results from the principle that the health and safety of the people of a State are primarily for the State to guard and protect.

I take leave to say that the New York statute, in the particulars here involved, cannot be held to be in conflict with the Fourteenth Amendment, without enlarging the scope of the Amendment far beyond its original purpose and without bringing under the supervision of this court matters which have been supposed to belong exclusively to the legislative departments of the several States when exerting their conceded power to guard the health and safety of their citizens by such regulations as they in their wisdom deem best. Health laws of every description constitute, said Chief Justice Marshall, a part of that mass of legislation which “embraces everything within the territory of a State, not surrendered to the General Government; all which can be most advantageously exercised by the States themselves.” Gibbons v. Ogden, 9 Wheat. 1, 203. A decision that the New York statute is void under the Fourteenth Amendment will, in my opinion, involve consequences of a far-reaching and mischievous character; for such a decision would seriously cripple the inherent power of the States to care for the lives, health and well-being of their citizens. Those-are matters which can be best controlled by the States. *74The preservation-of the just powers of the States is quite as vital as the preservation of the powers of the General Government.

When this court had before it the question of the constitutionality of a statute of Kansas making it a . criminal offense for a contractor for public work to permit or require his employés to perform labor upon such work in excess of eight hours each day,.it was contended that the statute was in derogation, of the liberty both of employés and employer. It .was further contended that the Kansas statute'- was mischievous in. its. tendencies! This court, while disposing of the question only as it affected public work, held that the Kansas statute was. not void under the Fourteenth Amendment.' But it took occasion to say wfiat may well be here repeated: ‘‘The responsibility therefor rests upon legislators,' not upon the courts. No .evils arising - from such, legislation could be more far-reaching than those that might come to our system of government if- thé judiciary, abandoning the sphere assigned to it by the fundamental law, should enter the domain of legislation, and upon grounds merely of justice or reason or wisdom annul statutes, that had. received the sanction of the people’s representatives. We are reminded by counsel that it-is the solemn duty of the courts in cases before them to guard the constitutional rights of the citizen against merely 'arbitrary power. That is unquestionably true. But it is equally true —indeed, the public interests imperatively demand — that legislative enactments should be recognized and enforced by the courts as embodying the will of the people, unless they are plainly and palpably, beyond all question, in violation of the fundamental law of the Constitution.” Atkin v. Kansas, 191 U. S. 207, 223.

The judgment in my opinion shóuld be affirmed;

Mr. Justice Holmes

dissenting.

I rtegret sincerely that I am unable to agree with the judg*75ment in this case, and that I think it my duty to express my dissent.

This case is decided upon an economic theory which'a large part of the .country does not. entertain. If it were a question whether I agreed with that theory, I should desire to study it. further and long' before making up my mind. But I do not conceive that to be my duty, because.I strongly believe that my agreement or disagreement has nothing to do with the right of a majority to embody their opinions in law. It is settled by various decisions of this court that state constitutions and state laws may regulate life in many ways which we as legislators might think as injudicious or if you like as tyrannical as this, and which equally with this interfere with the liberty to contract. Sunday laws and usury laws are ancient examples. A more modern one is the prohibition of lotteries. The liberty of the citizen to do as he likes so long as he does not interfere with the liberty of others to do the same, which has been a shibboleth for some well-known writers, Is interfered with by school laws, by the Post Office, by every state or municipal institution which takés his money for purposes thought desirable, whether he likes it or not. The Fourteenth Amendment does not enact Mr. Herbert Spencer’s Social Statics. The other day we sustained the Massachusetts vaccination law. Jacobson v. Massachusetts, 197 U. S. 11. United States ana state statutes and decisions cutting down the liberty to contract by way of combination are familiar to this court. Northern Securities Co. v. United States, 193 U. S. 197. Two years ago we upheld the prohibition of sales of stock on margins or for future delivery in the constitution of California. Otis v. Parker, 187 U. S. 606. The decision sustaining an eight hour law for miners is still recent. Holden v. Hardy, 169 U. S. 366. Some of these laws embody convictions or prejudices which judges are likely' to share. Some may not. But a constitution is not intended to embody, a particular economic theory, whether of paternalism and the organic relation of the citizen to the State or of laissez taire. *76It is made for' people of fundamentally differing views, and the accident of our finding certain opinions natural and familiar or novel and even shocking ought not to conclude our judgment upon the question whether statutes embodying them conflict with the Constitution of the United States.

General, propositions do not decide concrete cases. The decision" will depend on a judgment or intuition more subtle than any articulate major premise. But I think that the proposition just stated, if it is accepted, will carry us far toward the end. Every opinion tends to become a law. I think that the word liberty in the Fourteenth Amendment.is perverted when it is held to prevent the natural outcome of a dominant opinion, unless it can be said that-a rational and fair man’ necessarily would admit that the statute proposed would infringe fundamental- principles .as they have been understood by the traditions of our people and our law. It does not need research to show that no such sweeping condemnation can be passed upon the statute before us. A reasonable man might think it a proper measure on the score of health. Men whom I certainly could not pronounce unreasonable would uphold it as a firsts instalment of a general regulation of the horns of work. Whether in the latter aspect it would be open to the charge of inequalitv I think it unnecessary to discuss.

Me. Justice McKenna

delivered the opinion of the court.

The question in the casé is the validity, under the Fourteenth Amendment of the Constitution of the United. States, of a statute of the State of Massachusetts (Stat. 1908,.c. 605) which (§ 7) makes invalid against the employer of a person any assignment of or order for wages to be éarned in the future to secure a loan of less than $200 until the assignment or order be accepted in writing by the employer and . the assignment or order and acceptance be filed and recorded with the clerk of the city or town in the place of residence or employment, according as the person making the assignment be or be not a resident of the Commonwealth. If such person be married, the written consent of his wife must be attached to the assignment or order.. (Section 8.) National banks and banks which are under the supervision of the bank Commissioner, and certain loan companies, áre exempt from the provisions of the act. (Section 6.)

*232The action is in contract on two promissory notes given by two different persons with an assignment by each of wages to be earned in the future in the defendant’s service (defendant in error here, and we will so designate him, and the plaintiff in error as plaintiff). The assignments were duly recorded, but were not accepted in writing by defendant. The assignor in the second assignment was a married man whose wife did not consent to the assignment.

Judgment was entered in the Superior Court for the defendant, which was affirmed by the Supreme Judicial Court of Massachusetts. 200 Massachusetts, 482.

The contention of plaintiff is (1) that the provisions of §§ 7 and 8 deprive it of due process of law, and (2) that § 6 deprives it of the equal protection of the laws.

(1) To sustain this contention it is urged that the statute being an exercise of the police power of the State, its purpose must have “some clear, real and substantial connection” with the preservation of the public health, safety, morals or general welfare, and it is insisted that the statute of Massachusetts has not such connection and is therefore invalid.

This court has had many occasions to define, in general terms, the police power and to give particularity to the. definitions by special applications. In Chicago, Burlington & Quincy Ry. Co. v. Drainage Commissioners, 200 U. S. 561, 592, it was said that “the police power of a State embraces regulations designed to promote the public convenience or the general prosperity, as well as regulations designed to promote the public health, the public morals or the public safety,” and that the validity , of a police regulation “must depend upon thacircumstánces of each case and the character of the regulation, whether arbitrary or reasonable and ‘whether really designed to accomplish a. legitimate public purpose.”

In Bacon v. Walker, 204 U. S. 311, 318, it was decided that the police power is not confined “to the suppression *233of what is offensive, disorderly or unsanitary,” but “extends to so dealing with the conditions which exist in the State as to bring out of them the greatest welfare of its people.”

In a sense, the police power is but another name for the power of government, and a contention that a particular exercise of it. off ends the due process clause of the Constitution is apt to be very intangible to a precise consideration and answer. Certain general principles, however, must be taken for granted. It is certainly the province of the State, by its legislature, to adopt such policy as to it seems best. There are constitutional limitations, of course, but these allow a very comprehensive range of judgment. And within that range the Massachusetts statute can be justified. Legislation cannot be judged by theoretical standards. It must be tested by the concrete conditions which induced it, and this test was applied by the Supreme Judicial Court of Massachusetts in passing on the validity of the statute under review.

The court hesitated to say, as at least, one court has said, that a total prohibition of the assignment of wages would be valid, but justified the partial restriction of the statute on the ground that the extravagance or improvi.dence of the wage-earner might tempt to the disposition of wages to be earned, and he and his family, deprived of the means of support, might become a public charge. It was pointed out besides that his needs might be taken advantage of by the unscrupulous. The purposes of the statute are certainly assisted by the formalities which it prescribes as.requisite to the validity of an assignment. The requirement that it (the assignment) be accepted in writing by the employer, it was pointed out, protects him and secures the assignment from dispute; and the requirement that the acceptance and. the assignment be recorded checks ah attempt of the wage-earner to procure a dishonest credit.

*234The> court found more difficulty with the provision which requires the consent of the wage-earner’s wife to the assignment, but justified it- on the general, considerations we have mentioned, and on the ground of her interest in the right use of his wages, though she have no legal title in them.

We cannot say, therefore, that the statute as a police regulation is arbitrary and unreasonable and not designed to accomplish a legitimate public purpose. We certainly cannot oppose to the legislation, our notions of its necessity, and we have expressed "the propriety of deferring to the tribunals on the spot.” Laurel Hill Cemetery v. San Francisco, 216 U. S. 358, 365.

There ar.e other grounds upon which the statute may be sustained than those expressed by the Supreme Judicial Court of the State. As we have seen, it does not prohibit assignments of wages to be earned. It prescribes conditions to the validity of such assignments, and in this it has many examples in legislation. It has the same general foundation that laws have which prescribe the evidence of transactions and the manner of the execution and authentication of legal instruments. The laws of the States exhibit in their diversities the powder of the' legislature over property, its devolution and transfer. . It is rather late in the day to question that power. See Arnett v. Reade, 220 U. S. 311.

But if we consider the Massachusetts statute strictly/ as a limitation upon the power of contract it still must be held valid. A statute not unlike it came before this ' court in Knoxsville Iron Co. v. Harbison, 183 U. S. 18. It was a statute of the State of Tennessee and required the redemption in cash of any, store orders or other evidence of indebtedness issued by employers in payment of wages due to employés. It was assailed as an arbitrary interference with the right of contract. It was sustained as a proper exercise of the power of the State.

*235There must, indeed, be a certain freedom of contract, and, as there cannot be a precise, verbal expression of the limitations of it, arguments against any particular limitation may have plausible strength, and yet many legal restrictions have been and must be put upon such freedom in adapting human laws to human conduct and necessities. A too precise reasoning should not be exercised, and before this court may interfere there must be a clear case of abuse of power. See Chicago, Burlington & Quincy R. R. Co. v. McGuire, 219 U. S. 549, where the right of contract and its limitation by the legislature are fully discussed.

(2) This contention attacks § 6 of the statute which exempts from its provisions certain banks, banking institutions and loan companies. It is urged that the provision is discriminatory and therefore denies to plaintiff, the equal protection of the laws..

We have declared so often the wide range of discretion which the legislature possesses in classifying the objects of its legislation that we may be excused from a citation of the cases. We shall only repeat that the classification need not be scientific nor logically appropriate, • and if not palpably arbitrary and is uniform within the class, it is within such discretion. The legislation under review was directed at certain evils which had arisen, and the legislature, qonsidering them and from whence they arose, might have thought or discerned that they could not or would not arise from, a greater freedom, to the institutions mentioned than to individuals.' This was the view that .the Supreme Judicial Court took, and,.we think, rightly took. The court said that the legislature might have decided that the dangers which the statute was intended to prevent would not exist in any considerable degree in loans made by institutions which were under the supervision of bank commissioners, and “believed rightly that the business done by them would not need regulation in the inter*236est of employés or employers,” citing State v. Wickenhoefer, 64 Atl. Rep. 273, a decision by the Supreme Court of Delaware. See Engel v. O’Malley, 219 U. S. 128.

But even if some degree of .evil which the statute was intended to prevent could be áscribed to loans made by the exempted institutions, their exception would not make the law unconstitutional. Legislation may recognize degrees of evil without being arbitrary, unreasonable, or in conflict with the equal protection provision of the, Fourteenth Amendment to the Constitution of the United States. Ozan Lumber Co. v. Union Bank, 207 U. S. 251; Heath & Milligan Co. v. Worst, Id. 338.

This court sustained a classification like that of the Massachusetts statute in Griffith v. Connecticut, 218 U. S. 563, where a statute of Connecticut, which fixed maximum rates of interest upon money , loaned within the State to persons subject to its jurisdiction was upheld as a valid exercise of the police power of the State; and a provision of the statute which exempted from its operation “any national bank or trust company duly incorporated under thé .laws of the State, and pawnbrokers,”, was decided to be a legal classification.

Judgment affirmed,.-

Chase, J.

On February 26, 1910, one Dougherty, an employee of the defendant, made application to a loan broker in the city of New York for a loan of $37.00 and offered as security an assignment of his prospective wages. Inquiry was made of him as to his residence, employment, salary and place of business. Later he was notified that he could obtain the loan and he was told to call again upon the loan broker. He did so and upon suggestion assented to including in the proposed note eight dollars interest for the loan of the money for one month. Upon request he signed a printed blank form for a power of attorney. The power of attorney in evidence is the one signed by him and as it now appears it is to S. Handing, a women, at that time residing in Portland, Maine, of whom he had never before heard. It gives to her very unusual and comprehensive power and authority, among other things, “To make and execute, signing my name thereto, a promissory note or promissory notes each and every of which shall be payable in the City of Portland, in the State of Maine, to the aggregate amount above stated. ($90.) Said attorney shall have full authority and power to determine the date or dates when said note or notes shall become due and payable, the rate of interest before and after maturity, the amount or rate of collection fee, if any, and the name or names of the payee or payees. To aid in the negotiation and sale of said notes my said attorney aforesaid is hereby authorized, at such time or times as may be necessary or as he may think proper, to make such an assignment, agreement, contract, or arrangement relating to my wages, now earned, now *174being earned, or hereafter to be earned, under my engagement with my present employer or under any engagement with any other employer with whom I hereafter may be engaged, as my said attorney may think necessary or desirable, the only limitation on this point being that said assignment, contract, agreement, or arrangement shall not affect my wages to any amount greater than five times the aggregate of the notes made and negotiated. * * I further authorize, empower and direct my said attorney to negotiate, sell or procure the discount of, in the said City of Portland, State of Maine, the said note or notes aforesaid or to transfer in said City said note or notes as evidence of indebtedness for the best price or amount obtainable in cash, and in negotiating, selling, procuring the discount of or delivering the said note or notes, my said attorney shall have each and every right and power which I would have if I were personally present and attended to the transaction myself. * *

“ Said attorney shall have and is hereby given the right to receive the proceeds of said negotiation, discount or sale and over my signature give full receipt therefor. I hereby agree that the above power and powers of attorney are continuing powers until any and all indebtedness contracted through or by the execution of the same is finally and completely satisfied and paid, and said attorney is authorized to agree for me with any purchaser of my notes or the receiver of any collateral, that if sufficient funds are not received by virtue thereof to satisfy said indebtedness in full, then that from time to time, further assignments of wages due or to become due, from the employer by whom I am. then employed, will be made and delivered. * * * ”

The blanks in the printed form were filled in and it was sent to S. Blanding at Porland, Maine. She received it and without making any other effort to negotiate a note for Dougherty, went to the partnership firm of N. W. Hasten Company in that city with the power of attorney, *175and offered to sell a note to be made by Dougherty of $45.00, to be dated at Portland, Maine, and to be payable at said city, April 3, 1910, and that firm offered to pay therefor $37.00, whereupon she executed in the name of Dougherty such a note and delivered it to N. W. Hasten Company, together with the power of attorney, and received $37.00. She purchased a money order for $30.85, paying the fifteen cents which was deducted from the $37.00 for the money order, and it was sent to Dougherty with a letter saying that it was the best she could do for him, and that if it was not satisfactory to return the order. The letter was delivered to Dougherty at the loan broker’s and he was there charged an additional two dollars as a brokerage fee, the net amount received by him for the note being $34.85. Miss Blanding testified that she is employed by the State Trading Corporation of New York. The relation between the State Trading Corporation and the loan broker, or between that corporation and the firm of N. W. Hasten Company, who are engaged in the business of purchasing notes at Portland, Maine, does not appear. Miss Blanding further testified that she received many similar powers of attorney and never sought to sell the notes referred to in such powers of attorney to any one other than the firm of N. W. Hasten Company, but insisted that she was in no way employed by said firm.

The note of Dougherty was not paid when due and on April 21, 1910, Miss Blanding, by virtue of such power of attorney, made a written assignment to N. W. Hasten Company of the salary due and to become due from the defendant to Dougherty. On the following day N. W. Hasten Company sent a copy of said written assignment to the defendant, by mail, together with a statement that if $60.50 were paid promptly and before the claim was put in the hands of an attorney the notice of an assignment would be withdrawn. Before the commencement of this action the N. W. Hasten Company assigned their claim against the defendant by virtue of said assignment *176to the plaintiff. In June following Dougherty offered, to pay $50.00 in settlement of the note, which was refused. The defendant did not pay the amount as demanded of it and this action was brought to recover the amount alleged to be due on said note. The words “wages ” and “salary” were used by the parties interchangeably and they are so used in this opinion.

A statute was passed in this state in 1904 (Laws of 1904, chap. 77), which was re-enacted as section 42 of chapter 45 of the Laws of 1909 (Personal Property Law, Cons. Laws, chap. 41) and as such was in force at all of the times mentioned in this case, and it is as follows:

“1. Any person or persons, firm, corporation or company, who shall after March eighteenth, nineteen hundred and four, make to any employee an advance of money, or loan, on account of salary or wages due or to be earned in the future by such individual, upon an assignment or note covering such loans or advances, shall not acquire any right to collect or attach the same while in the possession or control of the employer, unless within a period of three days after the execution of such assignment or notes and the making of such loan or loans, the party making such loan and taking such assignment shall have filed with the employer or employers of the individual so assigning his present or prospective salary or wages, a duly authenticated copy of such agreement or assignment or notes under which the claim is made.

“2. No action shall be maintained in any of the courts of this state, brought by the holder of any such contract, assignment or notes, given by an employee for moneys loaned on account of salary or wages, in which it is sought to charge in any manner the employer or employers, unless it shall appear to the satisfaction of the court that a copy of such agreement, assignment or notes, together with a notice of lien, was duly filed with the employer or employers of the person making such agreement, assignment or notes, by the person or persons, cor*177poration or company making said loan within three days after the said loan was made and the said agreement, assignment or notes were given.”

The statute quoted is for the benefit of the employer because it requires that he be given definite information of any claim by one, other than the employee, to the whole or any part of the salary or wages which the employer has promised to pay to such employee. The fact that such information is required tends to make the transaction between the borrower and lender more certain and definite, and thus to prevent to some extent subsequent annoying controversies and possible litigation in which the employer is almost inevitably involved, and by which his interests are more or less affected. In many cases it is important that the employer have the information required by the' statute that he may determine whether the faithful service which he expects of the employee is in danger of being jeopardized by the transaction.

Such statute is also for the benefit of the employee because it tends to make- him more deliberate and careful about a transaction of great importance to him. With the statute in force an employee is less likely to borrow small sums of money from persons whose only interest in the transaction is to obtain an exorbitant return for the money loaned, unless the agreement relating'to the loan and the assignment of his salary or wages due or to be earned as collateral thereto is fully understood and thoroughly appreciated.

Such deliberation and care and the partial publicity resulting from giving the notice, “and a duly authenticated copy of such agreement or assignment or notice under which the claim is made ” to the employer, would to some extent prevent improvidence and recklessness by and fraud upon the employee.

The statute is a reasonable exercise of the police power vested in the legislature and tends to preserve the public *178welfare and the particular welfare of both the employer and the employee. (Mutual Loan Co. v. Martell, 200 Mass. 482; S. C., 222 U. S. 225.)

Assuming, for the purposes of this opinion, that the statute did not require that N. W. Hasten Company file a notice of lien with the defendant when the loan was made unless Dougherty’s salary was then assigned, it is necessary to examine carefully the power of attorney in connection with the facts so far as they are disclosed in the record to determine whether the salary was then assigned or whether an agreement or arrangement was then made in connection with the advance of money or loan on the note requiring an assignment of the salary at a future date.

The purpose of the power of attorney is expressed in the recited desire of Dougherty “ To have made, executed, negotiated, delivered and sold certain notes to the aggregate amount of $90 or less.” To accomplish such desire the attorney is given authority “ at such time or times as may be necessary, or as he may think proper, to make such an assignment, agreement, contract or arrangement relating to my wages * * * as my said attorney may think necessary or desirable. * * * ”

It further provides: “In negotiating, selling, procuring the discount of or delivering the said note or notes, my said attorney shall have each and every right and power which I would have if I were personally present' and attended to the transaction myself.”

The parties attempted to make the power of attorney irrevocable so far as such loan is concerned by the following words: “I hereby agree that the above power and powers of attorney are continuing powers until any and all indebtedness contracted through or by the execution of the same is finally and completely satisfied and paid, and said attorney is authorized to agree for me with any purchaser of my notes, or the receiver of any collateral, that if sufficient funds are not received by virtue thereof *179to satisfy said indebtedness in full, then that from, time to time further assignments of wages due or to become due from the employer by whom I am then employed will be made and delivered. ”

It appears from such power of attorney that the authority of the attorney to assign Dougherty’s salary is for the purpose of aiding in the negotiation and sale of the note. Within such limitation the attorney is given authority that is only bounded by the authority of Dougherty if he were personally present. Such authority is to assign the salary in connection with and at the time of the sale of the note, or to enter into an agreement or arrangement at that time, by which the formal assignment is to be subsequently executed by her. No authority is given by the power of attorney to assign the salary except to aid in the negotiation and sale of the note. The advance of money or loan to Dougherty upon his note was either on account of salary due or to become due, or it was a loan wholly independent of any contemporaneous agreement relating to such salary. The written assignment was not made until about seven weeks after the note was actually discounted and the proceeds thereof as agreed were sent to Dougherty.

The conclusion is irresistible that the assignment was either made without authority or it was made pursuant to an agreement by the attorney with N. W. Hasten Company at the time when the note was purchased. Such an agreement would have been in pursuance of the terms of the power of attorney. An assignment of the salary seven weeks after the note was purchased, without such prior agreement, would have been without authority. In view of the facts, some of which we have recited, and many unexplained coincidents relating to the history of and relations of Dougherty’s attorney and the note purchasers, and also and particularly the fact that Miss Blanding delivered the power of attorney to N. W. Hasten Company with the note, and thereafter assumed *180that she was obligated to make such written assignment when required by N. W. Hasten Company, it may he reasonably assumed that an agreement to assign Dougherty’s salary was made at the time N. W. Hasten Company purchased the note. Such firm thereby became the equitable owner of Dougherty’s salary as of that date.

If N. W. Hasten Company became the equitable owner of the salary at the time when the note was purchased, it was necessary, under any construction of the statute, to file “ a duly authenticated copy of such agreement or assignment or notes under which the claim is made” with the defendant within three days as prescribed by the act, and the failure so to do prevents any recovery by the plaintiff herein.

Many other questions have been discussed upon this appeal, but it does not seem necessary to consider them in this opinion, particularly in view of the fact that the statute quoted was materially amended in 1911. (Laws of 1911, chap. 626.)

The judgment of the Appellate Division and also of the Municipal Court should be reversed and a new trial granted in the Municipal Court in the district in which the action was brought, with costs to abide the event.

Cullen, Ch. J., Gray, Werner, Willard Bartlett, Hiscock and Collin, JJ., concur.

Judgment reversed, etc.

Walter, J.

Plaintiffs here seek to have declared void and cancelled a note and chattel mortgage given upon the making of a loan to them by defendant, a lender licensed under article *545IX of the Banking Law. The loan was to be repaid in twelve monthly instalments. By section 353 of the Banking Law defendant was required to deliver, at the time the loan was made, a statement “ showing in clear and distinct terms the amount and date of the loan and of its maturity, the nature of the security, if any, for the loan, the name and address of the borrower and of the licensee, and the agreed rate of charge; * * Violation of that requirement renders the contract of loan void. (Banking Law, § 358.) The question presented is whether or not the statement which defendant delivered complied with the statutory requirement.

The statement so delivered contains the following: “ If default is made in any payment, then at the option of Household Finance Corporation, the whole amount of the loan then unpaid may at once become due and payable.” (Italics supplied.) The note and chattel mortgage provide that upon default in any payment the entire unpaid balance shall become due at the option of the holder of the note. The note is negotiable, and the contention pressed is that the date of the maturity of a loan, the maturity of which may be accelerated at the option of any holder of such a note, is not clearly and distinctly shown by a statement which says that its maturity may be accelerated at the option of the lender and original payee.

I must accept as settled for this court the proposition that under the requirement that the statement show the date of maturity it must show the contingencies upon which the stated maturity may be accelerated (Di Nome v. Personal Finance Co., 265 App. Div. 1047; Laham v. Domestic Finance Corp., 265 App. Div. 1047. See also, Atta v. Bergin, 120 Conn. 152), and also that inadvertent failures to comply with the statute are as fatal to the validity of the contract of loan as intentional failures. (Reich v. Railroad Employees’ Personal Loan Co., 265 App. Div. 1047.) The question here thus narrows down to the inquiry whether a statement, that upon default in one payment maturity of the entire loan will follow at the option of the payee of a negotiable note, is a clear and distinct statement that it will follow at the option of any subsequent holder thereof.

In nearly all connections, whether in statute or contract, I think it would be taken for granted that a right inhering in the payee of a negotiable note inheres also in any subsequent holder of that note, and that in nearly all connections a statement of such right as inhering in the payee would be regarded as a sufficient indication that it inheres in subsequent holders also.

*546It must be remembered, however, that the particular statute here involved was enacted for the express purpose of protecting a class of people recognized by the Legislature as knowing little or nothing of negotiability, payees, or subsequent holders; and as the evident intent of the statute'is that persons borrowing under its provisions shall be supplied with a clear and distinct statement of when they are called upon to pay, I do not feel at liberty to say that that intent is carried out by a statement that compels them to infer that because a right to accelerate maturity exists in a specifically named person it exists or may exist also in other persons of whom they never heard and with whom they never dealt.

Whether, on the whole, good or evil will result from declaring loan contracts void because of inadvertent failures to comply with highly technical requirements is a question for the Legislature and not the court.

The other questions raised do not impress me as substantial, but in view of the conclusion reached it is unnecessary to consider them.

Plaintiffs’ motion for judgment is granted, without costs. Settle judgment accordingly.

Townley, J.

This action was brought by plaintiff suing in a representative capacity on behalf of himself and all other borrowers of the Madison Personal Loan, Inc., similarly situated. The first cause of action alleges that when the plaintiff borrowed $144 from the Madison Personal Loan, Inc., and executed a note and a chattel mortgage on his automobile, the Madison Personal Loan, Inc., in violation of article 9 of the Banking Law, employed a colorable device by which it extorted an excessive charge of twelve dollars and fifty cents under the guise of an insurance fee and wrongfully withheld said sum from the plaintiff. It is further alleged that similar amounts were extorted from some 10,000 other borrowers to an aggregate amount in excess of the $25,000 bond furnished by the defendant, Seaboard Surety Company.

This cause of action amounts to a claim for money had and received. Such an action is equitable and can only be maintained when the defendant has received more than he has paid. In a transaction such as that involved here it would be necessary to show that the borrower had paid more than he received on the loan. Otherwise the borrower would have the lender’s *129money and no basis would exist for a claim of money had and received. In Schank v. Schuckman (212 N. Y. 352) plaintiffs sued to recover payments to defendant for wagons and repairs upon the ground that defendant had bribed plaintiffs’ agent to influence their conduct in relation to such orders. The action was for money had and received. The court in its opinion at page 359 said: “ * * * The law may at times refuse to aid a wrongdoer in getting that which good conscience permits him to receive; it will not for that reason aid another in taking away from him that which good conscience entitles him to retain. # * * We think, therefore, that the plaintiffs, admitting, as they do, that they have received property and services of value, which they have wholly consumed, must show, in order to reclaim the money, that its retention by the defendant is against good conscience, and that they do not show this in the absence of an allegation of some disparity between the value and the price.” See, also, Donemar, Inc., v. Molloy (252 N. Y. 360).

The payment of the insurance premiums cannot be considered as separate and apart from the loan. It is pleaded as a part of that transaction and relied on to establish its invalidity. The first cause of action is defective in that it fails to allege that the plaintiff paid more than he received.

The second cause of action alleges that plaintiff repaid on his loan of $144, the sum of $101, that thereafter the Madison Personal Loan, Inc. on the basis of a void and illegal loan and illegal chattel mortgage wrongfully seized and converted plaintiff’s property which was of the value of $400, that Madison Personal Loan, Inc. under similar void loans wrongfully converted the property of some 300 other borrowers similarly situated, and that, since the aggregate of the claims exceeds the amount of the bond, it is said that it would be just and equitable that all persons similarly situated should come in and prove their claims and that a pro rata distribution be made.

The bond involved in this case is the statutory bond required under section 342 of the Banking Law. This bond is renewed from year to year. There is no allegation in the second cause of action which establishes that the conversion occurred during the year for which the particular bond in suit was given. The second cause of action is defective for that reason.

The right of the plaintiff to maintain a representative action is also questioned. In Guff anti v. National Surety Co. (196 N. Y. 452) a representative action was brought on a statutory bond by a creditor of an agency selling steamship tickets and receiving deposits for transmission to foreign countries. The prin*130eipal had converted the money received from a large number of persons to an amount in excess of the penalty of the bond. The court in its opinion sustaining the cause of action said at page 457: “ # * * A just and equitable payment from the bond would be a distribution pro rata upon the amount of the several embezzlements. Unless in a case like this the amount of the bond is so distributed among the persons having claims which are secured thereby it must necessarily result in a scramble for precedence in payment, and the amount of the bond may be paid to the favored, or to those first obtaining knowledge of the embezzlements.” The same considerations apply to the causes of action herein.

The court below based its dismissal of the second cause of action upon the decision of the Court of Appeals in Martorano v. Capital Finance Corp. (289 N. Y. 21). That case is not applicable to the facts stated in the complaint herein. While the court there held that the actual cost of insurance upon the collateral securing a loan might be imposed by the lender without violating section 352 of the Banking Law, the court did not hold that, under the guise of insurance, an additional charge might be made which could be retained by the lender without placing insurance.

The order, so far as appealed from, should be modified by granting the motion to dismiss the first cause of action and, as so modified, affirmed, with twenty dollars costs and disbursements to the defendant-appellant, with leave to the plaintiff to serve an amended complaint in conformity with this opinion, within ten days after service of order, on payment of said costs.

Martin, P. J., Glennon, Cohn and Callahan, JJ., concur.

Order, so far as appealed from, unanimously modified by granting the motion to dismiss the first cause of action and, as so modified, affirmed, with twenty dollars costs and disbursements to the defendant-appellant, with leave to the plaintiff to serve an amended complaint in conformity with opinion, within ten days after service of order, on payment of said costs. Settle order on notice.

Hecht, J.

In this action to recover on three notes to the order of plaintiff’s assignor, plaintiff (a clerk in the office of the assignor’s attorneys) is the nominal assignee of the Boston and Albany Employees Credit Union. The assignor (hereinafter referred to as the union or B & A) is a foreign corporation duly incorporated as a credit union under chapter 171 of the General Laws of the Commonwealth of Massachusetts. Its bylaws state that “ all business of the credit union will be *435transacted in Massachusetts ”; it never had a certificate of authority to do business in this State or a license issued by the Superintendent of Banks or of any other of our State departments or agencies.

For many years the union has made, and makes, loans of less than $300 to numerous residents of our State who are employees of the New York Central Railroad, for which, purpose it maintains offices at Albany and at the Grand Central Terminal and representatives at Harrison, North White Plains, Brewster and 125th Street.

The notes executed by defendant as well as all other notes, call for repayment interest at 6% being deducted in advance, together with a service charge of $2. In the event of delinquency all fines imposed plus 15% of the amount due, plus suit fee of $7.50 and interest of 1% a month on overdue balances are collected in addition. Each note contains an authorization to the employer, the railroad company, or any future employer, to deduct and pay to the union the payments stipulated to be made in the note itself, regardless of the earnings of the maker, even though he worked one or two days during the payroll period.

It is conceded that applicants appear at its New York office, for example, where the forms are kept and are filled out by borrowers with the assistance of the union employees; and it is claimed the papers are then mailed to Boston for approval, and if approved a check is made out for the noted loan and the check is picked up by the borrower at the New York office, where the application was made.

The execution and nonpayment of the notes is admitted. The answer sets up eleven separate defenses, six of which alleging invalidity of the assignment to plaintiff herein are not pressed on this appeal. That leaves for consideration the five defenses based upon certain provisions of the New York Banking Law and General Corporation Law.

The first defense pleads that B & A violates section 200 of the Banking Law. This provides that no foreign corporation shall transact, in this State, the business of making loans, or maintaining in the State any agency for carrying on such business, unless it shall have been licensed by the Superintendent of Banks. The Attorney-General of the State of New York has advised the superintendent that the statute does not indicate a legislative intention to impose such a licensing requirement upon a foreign banking corporation conducting a business like B & A. Such advice is, of course, not binding on this court. However, even if B & A does require a license under section *436200 there is no provision in article V of the Banking Law (of which section 200 is a part) declaring that loans made by an unlicensed foreign banking corporation shall be void or unenforcible. It has been held in interpreting section 519, which is a similar provision prohibiting unlicensed foreign investment companies from doing business in this State, that any transaction entered into with such a company is, nevertheless, valid and enforcible by it (Fosdick v. Investors Syndicate, 266 N. Y. 130).

The sixth and tenth defenses plead violations by B & A of the provisions of article XI of the Banking Law relating to credit unions. It is true that B & A charges more than the rate of interest prescribed by that article but the article applies only to domestic and not to foreign credit unions; and further, article XI, like article Y, contains no provision invalidating loans which violate its requirements.

The eighth defense pleads that B & A violates section 218 of the General Corporation Law, which renders unenforcible any contract made in this State by an unlicensed foreign corporation “ other than a moneyed corporation ”. Since B & A is a moneyed corporation, it would not be subject to this prohibition even if the contract were made in this State, though the language of the notes themselves and the issuance of the checks at Boston clearly indicate that the' contracts were made in Massachusetts.

The eleventh defense pleads that B & A has violated article EX of the Banking Law, which deals with licensed lenders. Section 340 of that article reads as follows: “ No person, co-partnership, association, or corporation shall engage in the business of making loans of money, credit, goods, or things in action in the amount or of the value of three hundred dollars or less and charge, contract for, or receive a greater rate of interest, discount, or consideration therefor than the lender would be permitted by law to charge if he were not a licensee hereunder except as authorized by this article and without first obtaining a license frpm the superintendent of banks.”

Section 358 provides-that any contract or loan made in violation of section 340 shall be void and unenforcible. Defendant contends that it could establish facts upon a trial which would indicate that B & A is engaged in business in this State. There is no need to direct a trial upon this issue because it is clear from the facts contained in plaintiff’s affidavits that B & A is engaged in business in the State (Hoopeston Co. v. Cullen, 318 U. S. 313; see, also, opinion below sub nom. Hoopeston Canning Co. v. Pink, 288 N. Y. 291). The weakness in defendant's argu*437ment is that B & A does not ‘' engage in the business of making loans of money * * * in the amount * * * of three hundred dollars or less ”. B & A is engaged in the business of being a credit union, exactly like companies organized under article XI of the Banking Law except that it is organized under a similar statute in Massachusetts. It may not be argued that a domestic credit union violates section 340 even if all its loans were in the amount of $300 or less. No different result follows, in the case of a foreign credit union.

It is clear from the context of section 340 that its prohibition applies only to the business of licensed lending and not to the business of credit unions, whether domestic or foreign.

The last paragraph of section 357 of the Banking Law reads as follows: “No loan of the amount or value of three hundred dollars or less for which a greater rate of interest, consideration, or charges than is permitted by this article has been charged, contracted for, or received, wherever made, shall be enforced in this state and every person in anywise participating therein in this state shall be subject to the provisions of this article, provided that the foregoing shall not apply to loans legally made in any state which then has in effect a regulatory small loan law similar in principle to this article.”

That paragraph has no application here because the affidavit of the general counsel for the Massachusetts Commissioner of Banks states that since 1898 said Commonwealth has had a regulatory small loan law similar in principle to article IX of our Banking Law, namely, chapter 140, sections 96-112 inclusive, of the General Laws of Massachusetts.

In his brief defendant urges a defense not pleaded in his answer — that the notes are invalidated by section 181 of the Banking Law.

The first paragraph of that section invalidates notes given to any association, institution or company which employs any part of its property or is interested in any fund employed for the purpose of receiving deposits, making discounts, receiving for transmission or transmitting money in any manner whatsoever, or issuing notes or other evidences of debt to be loaned or put into circulation. B & A is not engaged in any such business.

Plaintiff’s judgment and order should be affirmed, with $10 costs.

Hammer and Edeb, JJ., concur.

Judgment and order affirmed, etc.

POSNER, Chief Judge.

We have consolidated the appeals from the decisions dismissing on the pleadings three class-action suits against Chicago-area automobile dealers for violation of the Truth in Lending Act, 15 U.S.C. §§ 1601 et seq. These suits are among some fifteen almost identical class actions filed by the same law firm against such dealers. For unexplained reasons the cases, having initially been randomly assigned to different district judges in the Northern District of Illinois, were not reassigned to a single judge, as authorized by N.D. 111. R. 2.31, but remained with the original judges, eleven of whom have ruled on motions to dismiss the complaint or to grant summary judgment for the defendant. Six have denied such motions and five, including the three whose rulings are brought to us by these consolidated appeals, have granted them.

The facts are very simple, and can be illustrated by Gibson’s ease. She bought a used car from Bob Watson Chevrolet on credit. The dealer gave her a statement captioned “Itemization of Amount Financed.” The statement contains a category referred to as “Amounts Paid to Others on Your Behalf,” under which appears an entry that reads: “To North American for Extended Warranty $800.00.” The dealer admits that a substantial though at present unknown amount of the $800 was retained by him rather than paid over to the company that issued the warranty (North American). The question is whether the failure to disclose this retention violates the Truth in Lending Act.

There are two possible violations. First, when the dealer sells cars for cash rather than on credit, it marks up the warranty less (according to the plaintiffs), and hence re*285tains a smaller amount of the warranty charge. Because the charge by the issuer of the warranty is presumably unaffected by the amount of the dealer’s mark-up, the dealer is levying an additional charge on its credit customers that plaintiffs call a “finance charge,” which must be disclosed to the customer. 15 U.S.C. §§ 1605(a), 1638(a)(3); 12 C.F.R. § 226.18(d) and Pt. 226, Supp. I § 4(a); Cowen v. Bank United of Texas, FSB, 70 F.3d 937, 940 (7th Cir.1995).

Second, the Act requires the lender or creditor to provide “a written itemization of the amount financed,” including “each amount that is or will be paid to third persons by the creditor [the dealer here] on the consumer’s behalf, together with an identification of or reference to the third person.” 15 U.S.C. § 1638(a)(2)(B)(iii). The argument that Bob Watson Chevrolet (as before, we’re using Gibson’s ease as typical of all three eases) violated this provision is straightforward, and let us start with it. The amount to be paid to North American on Gibson’s behalf is not stated correctly in the written itemization of the amount financed that Gibson received. It is true that the consumer is not entitled to the statement unless he makes a written request for it, § 1638(a)(2)(B); 12 C.F.R. § 226.18(e)(2), and there is no indication that Gibson did. But the creditor is allowed to skip this stage and simply provide the itemization of the amount financed without being asked for it. 12 C.F.R. Pt. 226, Supp. I § 18(c)(1). That appears to be what Bob Watson Chevrolet did. In any event, it furnished the itemization, and the itemization contains a false representation.

The defendants emphasize quite properly that the Act is not a general prohibition of fraud in consumer transactions or even in consumer credit transactions. Its limited office is to protect consumers from being misled about the cost of credit. If the dealer retains the same amount of the warranty charge on credit purchases as he does on cash purchases, he is not misleading the consumer about the cost of buying on credit. But it is a contested issue whether the retention (mark-up) is the same; and even if it is, this is not a defense to the claim of inaccurate itemization. Section 1638(a)(2)(B)(iii) is free-standing. It requires disclosure — meaning, we do not understand the defendants to deny, accurate disclosure, Fairley v. Turan-Foley Imports, Inc., 65 F.3d 475, 479 (5th Cir.1995) — of amounts paid to third persons by the creditor on the consumer’s behalf, whether or not cash customers pay less. Bob Watson Chevrolet did not accurately disclose the amount that it paid North American for the extended warranty on the car that Gibson purchased. It said it paid $800; in fact it paid less.

The defendants argue that the Federal Reserve Board, the oracle of the Truth in Lending Act, 15 U.S.C. § 1604(a); Anderson Bros. Ford v. Valencia, 452 U.S. 205, 219, 101 S.Ct. 2266, 2273-74, 68 L.Ed.2d 783 (1981); Ford Motor Credit Co. v. Milhollin, 444 U.S. 555, 565-69, 100 S.Ct. 790, 796-99, 63 L.Ed.2d 22 (1980); McGee v. Kerr-Hickman Chrysler Plymouth, Inc., 93 F.3d 380, 383 (7th Cir.1996); Cowen v. Bank United of Texas, FSB, supra, 70 F.3d at 943, has issued an Official Staff Commentary that authorizes the dealers to do what they did here. The commentary (a part of the Federal Reserve Board’s Regulation Z) addresses the situation in which the creditor retains a portion of the fee charged to a customer for a service provided by a third party, such as an extended warranty. It provides that “the creditor in such cases may reflect that the creditor has retained a portion of the amount paid to others. For example, the creditor could add to the category ‘amount paid to others’ language such as ‘(we may be retaining a portion of this amount).’” 12 C.F.R. Pt. 226, Supp. I § 18(c)(l)(iii)(2). The commentary, being limited to the case in which the fee “is payable in the same amount in comparable cash and credit transactions,” id., has no bearing on the claim that the dealers in these cases are hiding a finance charge. But as to the other possible violation, the failure to itemize accurately, the defendants contend that the words “may” and “could” show that they can if they want disclose that they are retaining some of the fee, but that they are not required to do so. In other words, they read the commentary to say: “You may conceal the fact that you are pocketing part of the fee that is ostensibly for a *286third party, but if you are a commercial saint and would prefer to tell the truth, you may do that too.” So interpreted, however, the commentary not only would be preposterous; it would contradict the statute. The only sensible reading of the commentary is as authorizing the dealer to disclose only the fact that he is retaining a portion of the charge, rather than the exact amount of the retention. Even this is a considerable stretch of the statute; and it is as far as, if not farther than, the statute will stretch.

The defendants’ only other argument is that they have a safe harbor in form H-3 (another part of Regulation Z), 12 C.F.R. Pt. 226, App. H-3. A disclosure that complies with the form is not actionable. 15 U.S.C. '§§. 1604(b), 1640(f); 12 C.F.R. Pt. 226, Supp. I Introduction para. 1. Captioned “Amount Financed Itemization Model Form,” the form contains a line for “Amounts paid to others on your behalf,” and underneath it a line which reads “$_to (other).” Compliance with the form in Gibson’s case would have required Bob Watson Chevrolet to list next to North American’s name the actual amount paid to North American for the extended warranty. So the H-3 defense fails too — and for the further and independent reason that the safe harbor is unavailable to disclosures required to be given numerically, such as disclosure of the amount financed. 15 U.S.C. § 1604(b).

Two observations, one procedural, the other substantive, remain to be made about the issue of the undisclosed markup as a finance charge, the first alleged violation. In only one of our three cases (Hernandez’s) was it actually pressed as a separate violation. In the others it was folded in with the failure-to-itemize claim, perhaps because the latter is a stronger claim but doesn’t permit as large an award of damages. 15 U.S.C. § 1640(a). But since we must reverse all three eases with respect to the second violation, so that further proceedings in the district court are necessary in any event, and since the other two cases were dismissed on the pleadings, we do not think that the claim of a hidden finance charge can be deemed waived in those cases by not having been made more perspicuously in the complaints. But, coming to our substantive observation, we emphasize that the claim has merit only if the dealer’s markup on third-party charges is systematically higher on sales to credit customers than on sales to cash customers. If a dealer merely charges what the traffic will bear, the fact that a particular credit customer may be paying a higher mark-up than a particular cash customer would not transform the difference in mark-ups into a finance charge; it would have in fact no causal relation to the extension of credit. We cannot find a case that holds this, but it seems clear as a matter of principle; and it may very well describe this ease — but the plaintiffs are entitled to an opportunity to show that it does not.

It wouldn’t surprise us if the district judges in these three cases, and the judges in the similar cases that have been dismissed, thought that the plaintiffs’ law firm is harassing Chicago-area automobile dealers with complaints about purely technical violations of a highly technical and much-criticized statute. Yet it is far from clear that the alleged violations should be regarded as entirely technical, even the violation of the requirement of accurate itemization of third-party charges. The consumer would have a greater incentive to shop around for an extended warranty, rather than take the one offered by the dealer, if he realized that the dealer was charging what the defendants’ lawyer described as a “commission,” and apparently a very sizable one, for its efforts in procuring the warranty from a third party. Or the consumer might be more prone to haggle than if he thought that the entire fee had been levied by a third party and so was outside the dealer’s direct control. Or he might go to another dealer in search of lower mark-ups on third-party charges.

It is true that exposing this little fraud is a benefit only tenuously related to the objectives of the Truth in Lending Act, on which see 15 U.S.C. § 1601 (declaration of purpose). It is almost as great a fraud on cash purchasers as on credit purchasers; yet its exposure will benefit only the latter. (The relation that we are describing as tenuous lies in the fact that the size of the dealer’s “commission” may be a clue to the presence *287of a hidden finance charge.) But statutes often outrun their rationales. We do not know why the drafters wanted third-party transactions listed separately, and by both amount and payee. There may have been a concern that nominal third-party payees might turn out to be affiliates of the creditor, or a desire to help consumers separate credit charges from other charges; the latter goal in particular would tie the requirement a little more securely to the underlying purposes of the statute. But we are just guessing.

The claim that what the dealers were doing here is concealing a finance charge has a closer connection to the Act’s purposes. If the amount retained of the fee for an extended warranty or other third-party service is greater in credit transactions than in cash transactions, then in deciding whether to pay cash or buy on credit the consumer will assume that if he pays cash he will have to pay the same additional fee to get the extended warranty; if the facts are as the plaintiffs claim, he would not. The purchaser thinks he’ll have to pay $800 for an extended warranty whether he pays cash or buys on credit, whereas if the retention really is smaller on cash purchases than on credit purchases and the third party’s fee net of the retention is the same, the customer will not have to pay $800 if he pays cash for the ear. This is a type of fraud that goes to the heart of the concerns that actuate the Truth in Lending Act. Cf. Mourning v. Family Publications Service, Inc., 411 U.S. 356, 366-68, 93 S.Ct. 1652, 1659-60, 36 L.Ed.2d 318 (1973).

Anyway the issue is not whether these violations are technical, or whether technical violations should be actionable, or whether consumer class actions should be discouraged, but whether the complaints in these cases state a claim. And since they do, the dismissal of the plaintiffs’ state-law fraud claims on the ground that disclosures that comply with the Truth in Lending Act do not violate the Illinois consumer protection laws, 815 ILCS 375/5(4), 505/2, which confer immunity for acts “specifically authorized” by a federal or state agency, 815 ILCS 505/10b(l); Lanier v. Associates Finance, Inc., 114 Ill.2d 1, 101 Ill.Dec. 852, 859, 499 N.E.2d 440, 447 (1986), was erroneous too. The judgments are therefore reversed with instructions to reinstate the lawsuits. We hope it’s not too late for the district court to reassign all the identical Truth in Lending auto dealer class actions to one judge.

Reversed and Remanded.

JUSTICE MILLER

delivered the opinion of the court:

After paying the balance of an installment loan in September 1983, eight years prior to its due date in 1991, plaintiff Alma Lanier instituted a class action against defendants, Associates Finance, Inc., and its alleged parent corporation, Associates Corporation of North America. Plaintiffs class was comprised of persons who had prepaid, or were currently parties to, *5credit obligations entered into with the defendant Associates Finance, in which the credit agreements computed interest payments according to the Rule of 78’s. The plaintiff contended that use of the Rule of 78’s to compute interest in loans made to unsophisticated borrowers, absent explanation to the borrower about the effects of the rule upon early repayment, was fraudulent and violated unspecified provisions of the Consumer Fraud and Deceptive Business Practices Act (Ill. Rev. Stat. 1981, ch. 121V2, pars. 261 through 271).

The circuit court of Cook County granted defendants’ motion to dismiss plaintiff’s lawsuit, pursuant to section 2 — 615 of the Civil Practice Law (Ill. Rev. Stat. 1983, ch. 110, par. 2 — 615). Finding that the loan-disclosure provisions violated neither the Federal Truth in Lending Act (15 U.S.C. secs. 1601 through 1665 (1982)) nor State law, the appellate court affirmed the dismissal (134 Ill. App. 3d 183). We allowed plaintiff’s petition for leave to appeal under Rule 315(a) (103 Ill. 2d R. 315(a)) and now affirm the dismissal.

On August 24, 1981, plaintiff obtained a loan in the amount of $24,961.68 from defendant Associates Finance, Inc., at a stated annual percentage rate of 21.59%. In addition, plaintiff was required to pay a service fee of $748.85. The loan was secured by a first mortgage on plaintiff’s home and was to be repaid in monthly installments over a 10-year period. The loan agreement provided for prepayment of the outstanding balance of the loan, with a refund of the unearned finance charge computed according to the Rule of 78’s, in the following language:

“This Loan Agreement may at the option of the Borrowers) be paid in whole or in part prior to the last payment date. If Borrower(s) prepays the loan in full, the Lender will allow a refund credit of the interest charge for the months prepaid using the ‘Rule of 78’s’ method. *6No portion of the service fee will be refunded. No refund less than $1.00 will be made.”

After making 23 monthly installment payments totaling $11,854.57, plaintiff inquired of Associates Finance as to the amount required to pay off her loan at that time. Associates informed plaintiff that the payoff figure was $27,706. Plaintiff paid that amount and initiated the present lawsuit.

Plaintiff states that, because defendants used the Rule of 78’s to compute the interest on her loan, the amount required for plaintiff to pay off the balance of her loan was $4,654.42 more than it would have been had the defendant Associates Finance computed the interest on the loan according to the actuarial method. Plaintiff claims that, because of the Rule of 78’s, plaintiff was charged an effective annual interest rate of 31.31% for the 23-month period ending when she paid off her loan, rather than the 21.59% APR stated in the agreement. Plaintiff argues that, since the effect of the rule on interest refunds following early repayment is understood by few borrowers, the defendants had an obligation to explain the Rule of 78’s at the time of the loan.

Under the Rule of 78’s, which is also known as the sum-of-the-digits method, a higher percentage of the total finance charge for a loan is attributable to the first months of the loan than is attributable to the last months. In a 12-month loan, for example, the borrower will pay 12/?8 of the total finance charge during the first month of the loan, and will pay n/78 of the total charge during the second month. In each succeeding month of a 12-month loan, the amount of the total finance charge paid is reduced by Vis, of the total charge, until only Vis of the total finance charge remains to be paid during the final month. Since the creditor earns most of the finance charge during the early months of the loan term, the amount of unearned finance charge which the debtor will *7be entitled to in the event of prepayment rapidly declines. Thus, if the debtor prepays after the first month of a 12-month loan using the Rule of 78’s, the creditor will have earned 12/ts of the finance charge, and the debtor would be entitled to mh& of the total finance charge as a credit against the total amount owed. After two months, prepayment will save the debtor from 55/t8 of the total finance charge. After six months, or halfway through the stated term of the loan, prepayment will save the debtor only Z1h& of the total finance charge. See generally Hunt, The Rule of 78: Hidden Penalty for Prepayment in Consumer Credit Transactions, 55 B.U.L. Rev. 331 (1975) (hereafter Hunt); Comment, Consumer Protection: Truth-in-Lending Disclosure of the Rule of 78ths, 59 Iowa L. Rev. 164 (1973).

Use of the actuarial method, as opposed to the Rule of 78’s, to compute interest on loans measures true interest yield; the amount of interest attributed to each month or payment period bears a direct relationship to the amount of money held by the borrower and the time for which that amount is held. Drennan v. Security Pacific National Bank (1981), 28 Cal. 3d 764, 769, 621 P.2d 1318, 1320, 170 Cal. Rptr. 904, 906, cert. denied (1981), 454 U.S. 833, 70 L. Ed. 2d 112, 102 S. Ct. 132.

Unlike the actuarial method of computing finance charges, the Rule of 78’s does not provide an accurate approximation of unearned finance charges. (See Ballew v. Associates Financial Services Co. of Nebraska, Inc. (N.D. Neb. 1976), 450 F. Supp. 253.) Rather, the Rule 'of 78’s allocates too much of the finance charge to the creditor during the early months of the credit transaction; (Hunt, 55 B.U.L. Rev. 331, 338 (1975).) As a result, refunds of unearned finance charges on prepayment/ of a credit obligation by a debtor are always lower when using the Rule of 78’s than when using thé actuarial method. (See Drennan v. Security Pacific National *8Bank (1981), 28 Cal. 3d 764, 621 P.2d 1318, 170 Cal. Rptr. 904.) The Supreme Court of California, although upholding the use of the rule in consumer credit transactions, described the rule as a hidden charge on the consumer, unjustified by the economic needs of the lender. 28 Cal. 3d 764, 621 P.2d 1318, 170 Cal. Rptr. 904.

The parties agree that the loan-agreement form provided by defendant Associates Finance and signed by plaintiff did not explain how the Rule of 78’s operates; the agreement also did not inform borrowers that the Rule of 78’s would yield a lower finance-charge rebate upon prepayment than would the actuarial method of computing these rebates.

In count I of the complaint, the plaintiff alleges that, although the annual percentage-rate figure stated in her loan agreement is clear, the “Rule of 78’s” method of computing interest is “complicated and obtuse.” Plaintiff contends that there was no meeting of the minds when she signed her loan contract. Plaintiff requests that she and others who have prepaid loans obtained from the defendants be allowed to recover the difference between the amount which they tendered to pay off their loans under the Rule of 78’s, and the lesser amount which would have been required for prepayment had the interest been computed according to the actuarial method. The plaintiff also seeks to reform the loan agreements of those persons currently obligated to the defendants, to provide for use of the actuarial method, rather than the Rule of 78’s presently required by the loan contracts, in computing interest rates upon prepayment.

The plaintiff does not allege in count I that the term “Rule of 78’s” is ambiguous, nor does she allege that the term was mistakenly included in the written agreement. Rather, because the plaintiff apparently did not understand the operation of the Rule of 78’s at the time she entered into the contract, she now seeks to substitute in *9the loan contract a provision more advantageous to her and to the members of her class. The court cannot, however, make a new contract for the parties. (See Slezak v. Fleming (1946), 392 Ill. 387, 390; Walgreen Co. v. American National Bank & Trust Co. (1972), 4 Ill. App. 3d 549, 554; see also Freeland v. Edwards (1957), 11 Ill. 2d 395, 401 (court cannot, by construction, establish a contract different from that expressed in the written agreement).) To permit a contracting party to escape contractual obligations by claiming not to have understood the meaning of the terms clearly expressed in the agreement would entirely remove the certainty inherent in written agreements. The plaintiff has alleged no ground in count I upon which to obtain the relief she seeks.

In count II, the plaintiff alleges that the defendants fraudulently misrepresented the interest rate in the loan agreement. Plaintiff claims that although the loan contract recited an annual percentage rate of interest of 21.59%, the actual interest rate charged was much higher because the plaintiff prepaid her loan and the defendant computed the resulting interest rebate under the Rule of 78’s. Plaintiff notes that, because the Rule of 78’s attributes a higher proportion of the total interest charge to the early months of the loan term than to the final months of the term, use of the Rule of 78’s to determine the interest rebate upon prepayment results in an.actual interest rate for the period in which the loan was outstanding higher than the rate stated in the loan agreement. Plaintiff contends that the defendants knew that it was likely, from a statistical standpoint, that the loan would be repaid before its scheduled due date and that the result would be a higher effective interest rate than that listed in the loan agreement.

The Federal Truth in Lending Act (15 U.S.C. secs. 1601 through 1665 (1982)) requires issuers of consumer credit to make certain disclosures in credit agreements *10(12 C.F.R. sec. 226.18 (1985)). The 21.59% figure listed on the plaintiff’s loan agreement was the annual percentage rate (APR) of interest, required to be disclosed by the Truth in Lending Act (12 C.F.R. sec. 226.18(e) (1985)). The APR states the yearly cost of credit to the consumer and is computed using the entire term of the loan agreed upon by the parties. See 12 C.F.R. sec. 226, App. J (1985).

In the present case, the plaintiff and the defendant Associates Finance agreed upon a loan term of 10 years. The plaintiff, however, paid her obligation in full after approximately 23 months. That the effective interest rate for the 23-month period is different than the APR stated in the loan agreement does not mean that the APR stated in the agreement was misrepresented. The APR is calculated according to the full agreed-upon period of the loan, and is not meant to reflect the various interest rates which might result if a borrower pays his credit obligation in full prior to its due date. Under the Truth in Lending Act, all creditors covered by the Act must compute and disclose the APR and the loan finance charge in the same way. (See R. Clontz, 1 Truth in Lending Manual sec. 5.02(ll)(d) (Cum. Supp. 1986).) There is no requirement under the Truth in Lending Act that the APR figure equal the interest percentage at each interim period in the loan if the borrower chooses to pay his credit obligation prior to its due date. In the case of the plaintiff’s loan, the effective interim rates of interest would vary daily. Listing the changing interim rates on the loan agreement would be both difficult and confusing.

The plaintiff in the present case cannot successfully claim that the defendant committed common law misrepresentation by properly stating the APR on the loan agreement. Under the plaintiff’s argument, a creditor would find himself in the anomalous position, whenever *11the APR and the rate for any period less than the full loan term differed, of being guilty of common law misrepresentation by specifically complying with the mandates of the Federal Truth in Lending Act. We find, contrary to the plaintiffs assertion, that by listing an APR of 21.59% as defined by the Truth in Lending Act, the defendant did not misrepresent the interest rate per annum in the event of prepayment by the plaintiff.

In addition to her claims under common law, plaintiff also alleges that the failure of defendant Associates Finance to explain the operation of the Rule of 78’s violates the Consumer Fraud and Deceptive Business Practices Act (Ill. Rev. Stat. 1981, ch. 121V2, pars. 261 through 271) (Consumer Fraud Act). The plaintiff has not specified in her complaint, however, which provisions of the Consumer Fraud Act were violated. In response to the plaintiff’s claim, the defendant maintains that it complied with the disclosure requirements of the Federal Truth in Lending Act, and that compliance with the Federal act is a defense to liability under the Illinois statute. We must consider, therefore, whether the loan-agreement form signed by the plaintiff comports with the Federal requirements for disclosure in consumer credit, and then consider whether compliance with the Federal Truth in Lending Act precludes liability under the Illinois statute.

The Truth in Lending Act was enacted by Congress to assure meaningful disclosure of credit terms, so that consumers can readily compare various credit options available to them. (15 U.S.C. sec. 1601 (1981).) Congress granted the Federal Reserve Board the authority to prescribe regulations to carry out the purposes of the Truth in Lending Act. (15 U.S.C. sec. 1604 (1981).) Pursuant to that authority, the Board enacted a comprehensive set of rules, known as Regulation Z (12 C.F.R. sec. 226 (1981)), implementing the principles of the Truth in Lending Act.

*12Regulation Z has been substantially revised since plaintiff obtained her loan in August 1981. The revisions to Regulation Z did not become mandatorily effective until October 1, 1982, however, subsequent to the formation of plaintiff's loan agreement. Although conceivably relevant to the issue of certification of the plaintiff’s asserted class (see Ill. Rev. Stat. 1983, ch. 110, par. 2— 801(2)), a question not reached by the trial court and not at issue here, the revisions do not apply to the plaintiff’s loan agreement. See 4 S. Williston, Contracts sec. 615 (3d ed. 1961).

At the time plaintiff signed her loan agreement, section 226.8(b)(7) of Regulation Z (12 C.F.R. sec. 226.8(b)(7) (1981)) was in effect. Section 226.8(b)(7) required, in consumer credit transactions, “[identification of the method of computing any unearned portion of the finance charge in the event of prepayment in full which includes precomputed interest charges.” Plaintiff argues that mere reference to the Rule of 78’s by name is insufficient under section 226.8(b)(7) of Regulation Z because few borrowers understand the operation of the Rule of 78’s. Plaintiff suggests that merely naming the rule is inconsistent with the meaningful-disclosure requirements of section 1601 of the Truth in Lending Act (15 U.S.C. sec. 1601 (1981)).

In 1973, the Federal Reserve Board staff issued section 226.818 (12 C.F.R. sec. 226.818), which is an official interpretation of sections 226.8(b)(6) and (7) of Regulation Z. In section 226.818(c), the Board balanced the idea of requiring lenders to explain the rule with the alternative of permitting lenders to mention the rule by name, without describing its operation, in order to avoid confusion and informational overload. The Board concluded in section 226.818(c) that simple reference by name to the Rule of 78’s satisfies the identification requirement of section 226.8(b)(7). The Board found that the Rule of *1378’s involved complex mathematical formulations which cannot be accurately condensed into simple statements. The Board determined that if these formulas were repeated at length on loan-disclosure forms, they could detract from other important disclosures required by Regulation Z.

Although not binding upon the courts, the Federal Reserve Board’s formal interpretations are entitled to a great degree of deference. This deference is especially appropriate in interpreting the Truth in Lending Act and the Board’s own Regulation Z. (See Bone v. Hibernia Bank (9th Cir. 1974), 493 F.2d 135.) The Supreme Court has stated that “[u]nless demonstrably irrational, Federal Reserve Board staff opinions construing the Act or Regulation [Z] should be dispositive.” (Ford Motor Credit Co. v. Milhollin (1980), 444 U.S. 555, 565, 63 L. Ed. 2d 22, 31, 100 S. Ct. 790, 797.) See also Anderson Bros. Ford v. Valencia (1981), 452 U.S. 205, 219, 68 L. Ed. 2d 783, 794, 101 S. Ct. 2266, 2274 (Board’s interpretation of its own regulation should be accepted by the courts absent some obvious repugnance to the Truth in Lending Act).

The Board is the agency empowered by Congress to prescribe implementing and interpretive regulations for the Truth in Lending Act. (15 U.S.C. sec. 1604(a) (1982); Ford Motor Credit Co. v. Milhollin (1980), 444 U.S. 555, 566, 63 L. Ed. 2d 22, 32, 100 S. Ct. 790, 797.) The Board, therefore, is entitled to the greatest respect in the interpretation of its own regulations. In Milhollin, the Supreme Court noted that it is unimportant that formal interpretations are issued by Federal Reserve staff rather than the Board, for deference to administrative views is founded upon respect for the expertise of the agency. (444 U.S. 555, 566 n.9, 63 L. Ed. 2d 22, 32 n.9, 100 S. Ct. 790, 797 n.9.) Moreover, Congress included compliance with official staff interpretations when it ab*14solved creditors from liability under the Truth in Lending Act for “any act done or omitted in good faith in conformity with any rule, regulation, or interpretation thereof by the Board or in conformity with any interpretation or approval by an official or employee of the Federal Reserve System duly authorized by the Board to issue such interpretations.” (15 U.S.C. sec. 1640(f) (1980).) Section 1640 evinces a clear congressional determination to treat the Board’s administrative interpretations under the Truth in Lending Act as authoritative. This adherence to the Board’s interpretations was motivated, at least in part, by a desire to avoid inconsistent interpretations of the Truth in Lending Act by the courts. 444 U.S. 555, 567-68, 63 L. Ed. 2d 22, 32-33, 100 S. Ct. 790, 797-98.

It is the duty of the Board in interpreting the meaningful-disclosure provisions of the Truth in Lending Act to strike a balance between competing considerations of complete disclosure and the need to avoid informational overload. (Ford Motor Credit Co. v. Milhollin (1980), 444 U.S. 555, 567-69, 63 L. Ed. 2d 22, 32-33, 100 S. Ct. 790, 797-98.) As stated, the Federal Reserve staff has concluded, in official staff interpretation section 226.818(c), that mere reference to the Rule of 78’s by name is sufficient disclosure under Regulation Z. Because the conclusion reached in section 226.818(c) is not demonstrably irrational, and because the defendant acted in conformity with this interpretation, we hold that the defendant did not violate section 226.8(b)(7) of Regulation Z by failing to explain the operation of the Rule of 78’s. Accord, Gantt v. Commonwealth Loan Co. (8th Cir. 1978), 573 F.2d 520; Bone v. Hibernia Bank (9th Cir. 1974), 493 F.2d 135; Kramer v. Marine Midland Bank (S.D.N.Y. 1983), 559 F. Supp. 273, 280; Nesbitt v. Blazer Financial Services, Inc. (N.D. Ill. 1982), 550 F. Supp. 819, 825 n.4; Drennan v. Security Pacific National *15Bank (1981), 28 Cal. 3d 764, 621 P.2d 1318, 170 Cal. Rptr. 904; Beneficial Discount Co. v. Johnson (1975), 215 Va. 582, 211 S.E.2d 571.

Plaintiff suggests that Johnson v. Associates Finance, Inc. (S.D. Ill. 1974), 369 F. Supp. 1121, mandates a contrary result. In Johnson, the court concluded that the lender’s failure to explain the operation of the Rule of 78’s in rebating precomputed interest violated section 226.8(b)(7). The decision in Johnson, however, fails to mention the Federal Reserve Board’s official interpretation in section 226.818(c), which had been issued only a short time before the court announced its decision. In Nesbitt v. Blazer Financial Services, Inc. (N.D. Ill. 1982), 550 F. Supp. 819, 825 n.4), decided eight years after Johnson, the United States District Court for the Northern District of Illinois relied upon section 226.818(c) in finding that reference by name to the Rule of 78’s satisfies the identification requirements of section 226.8(b)(7). In view of the weight of authority contrary to Johnson, and because of the deference due the Board’s interpretation of Regulation Z in section 226.818 and our finding that the Board’s interpretation is not demonstrably irrational, we decline to follow the conclusion reached in Johnson.

Plaintiff next contends that, because the Rule of 78’s in credit transactions produces a smaller credit of unearned finance charges upon prepayment than does the actuarial method, the rule penalizes early repayment of credit obligations by consumers. This reduced interest rebate, plaintiff argues, is a penalty charge which must be disclosed under Regulation Z, section 226.8(b)(6) (12 C.F.R. sec. 226.8(b)(6) (1981)). Subsection (b)(6) required a “description of any penalty charge that may be imposed by the creditor or his assignee for prepayment of the principal obligation *** with an explanation of the method of computation of such penalty.” 12 C.F.R. sec. *16226.8(b)(6) (1981).

In paragraph (b) of official staff interpretation section 226.818, the Federal Reserve Board concluded that the lesser rebate resulting from the use of the Rule of 78’s is not a prepayment penalty. The Board stated:

“[Although in a precomputed obligation the finance charge rebate to a customer may be less when calculated according to the ‘Rule of 78’s’ or ‘sum of the digits’ or other method than if calculated by the actuarial method, such' difference does not constitute a penalty charge for prepayment that must be described pursuant to section 226.8(b)(6).” (12 C.F.R. sec. 226.818(b) (1981).)

As -with the interpretation of section 226.8(b)(7), we find here that the conclusion reached by the agency Congress has empowered to adopt and interpret regulations consistent with the Truth in Lending Act is not irrational; for the reasons suggested by the Supreme Court in Ford Motor Credit Co. v. Milhollin (1980), 444 U.S. 555, 63 L. Ed. 2d 22, 100 S. Ct. 790, we adopt the Federal Reserve Board’s position regarding section 226.8(b)(6). (See Mourning v. Family Publications Service, Inc. (1973), 411 U.S. 356, 36 L. Ed. 2d 318, 93 S. Ct. 1652.) We hold, therefore, that the lesser rebate of unearned interest resulting from the Rule of 78’s is not a penalty and need not be disclosed or explained under section 226.8(b)(6). See Gantt v. Commonwealth Loan Co. (8th Cir. 1978), 573 F.2d 520; Bone v. Hibernia Bank (9th Cir. 1974), 493 F.2d 135.

We next consider whether compliance with the Federal statute is a defense to liability under Illinois’ Consumer Fraud Act. Similar Illinois consumer credit statutes, inapplicable to plaintiff’s loan and not cited in her complaint, provide that creditors and credit agreements that comply with the Truth in Lending Act, its amendments, and regulations issued thereunder, are in compliance with the State acts. (Consumer Installment Loan *17Act (Ill. Rev. Stat. 1981, ch. 17, par. 5420); “An Act in relation to the rate of interest” (Ill. Rev. Stat. 1981, ch. 17, par. 6410); Retail Installment Sales Act (Ill. Rev. Stat. 1981, ch. 121%, par. 505); Motor Vehicle Retail Installment Sales Act (Ill. Rev. Stat. 1981, ch. 121%, par. 565).) These statutes specifically provide that creditors must make certain disclosures in credit agreements. The Consumer Fraud Act, under which plaintiff complains, does not mandate any particular form or subject of disclosure, but rather is a general prohibition of fraud and misrepresentation. Because the Illinois consumer credit statutes requiring specific disclosures are met by compliance with the Truth in Lending Act, we believe that the Consumer Fraud Act’s general prohibition of fraud and misrepresentation in consumer transactions did not require more extensive disclosure in the plaintiff’s loan agreement than the disclosure required by the comprehensive provisions of the Truth in Lending Act. Rather, we perceive in the disclosure provisions of Illinois’ consumer credit statutes a consistent policy against extending disclosure requirements under Illinois law beyond those mandated by the Truth in Lending Act, in situations where both the Act and the Illinois statutes apply.

Section 10b(l) of the Consumer Fraud Act provides that the Consumer Fraud Act does not apply to “[ajctions or transactions specifically authorized by laws administered by any regulatory body or officer acting under statutory authority of this State or the United States.” (Ill. Rev. Stat. 1981, ch. 121%, par. 270b(l).) Under this provision, conduct which is authorized by Federal statutes and regulations, such as those administered by the Federal Reserve Board, is exempt from liability under the Consumer Fraud Act. (See Mario’s Butcher Shop & Food Center, Inc. v. Armour & Co. (N.D. Ill. 1983), 574 F. Supp. 653.) The disclosure in the loan transaction between the plaintiff and the defendant *18complies with Federal Regulation Z, and thereby comports with the Truth in Lending Act. Because the Act is a law administered by the Federal Reserve Board, we find that, under section 10b(l) of the Consumer Fraud Act, the defendant’s compliance with the disclosure requirements of the Truth in Lending Act is a defense to liability under the Illinois Consumer Fraud Act in the present case.

Although not raised in her complaint, plaintiff maintains here that, due to the harsh effects of the Rule of 78’s on persons such as herself who prepay their credit obligations, the Rule of 78’s is subject to judicial control as violative of the public policy of Illinois. Plaintiff cites a report of the Senate Committee on Banking, Housing, and Urban Affairs which called the use of the Rule of 78’s on long-term credit transactions “indefensible,” and encouraged State legislatures to prohibit use of the rule in long-term consumer credit obligations. (Sen. Rep. No. 923, 96th Cong., 2d Sess. 11 (1980).) However, the decision to prohibit the use of the Rule of 78’s in consumer credit transactions is not a matter for the courts, but rather involves policy decisions more properly addressed by the legislature. (See Drennan v. Security Pacific National Bank (1981), 28 Cal. 3d 764, 779, 621 P.2d 1318, 1327, 170 Cal. Rptr. 904, 913.) We decline, therefore, to restrict or prohibit use of the Rule of 78’s on public policy grounds, but we urge the legislature to promptly consider this matter which reflects an apparent injustice under the law as it currently exists.

Finding neither misrepresentation nor a violation of the Consumer Fraud and Deceptive Business Practices Act, we affirm the judgment of the appellate court.

Judgment affirmed.

JUSTICE SIMON,

specially concurring:

Bare reference to the Rule of 78’s by name in a loan *19contract fails to disclose a key aspect of the agreement to the borrower and thus imposes a hidden charge. I also submit that, in view of the volatility of interest rates, borrowers need to be alerted to the full impact of their prepayment decisions. I feel compelled, however, to concur in the conclusion reached by the majority only because I doubt the availability of any legal remedy to the plaintiff in this case.

The plaintiff maintains that the failure to explain the method of computing the unearned finance charge violated the Illinois Consumer Fraud and Deceptive Business Practices Act (Consumer Fraud Act). The majority concludes that section 10(b) of the Consumer Fraud Act, which provides that “transactions specifically authorized by laws .administered by any regulatory body or officer acting under statutory authority of *** the United States” (Ill. Rev. Stat. 1985, ch. 1211/2, par. 270(b)(1)) are not subject to the Act, exempts from our scrutiny the failure to make greater disclosure to the plaintiff.

Whether or not this is correct, I feel it is impossible for other reasons to conclude on the record and briefs before us that the plaintiff has a cause of action under the Consumer Fraud Act. The plaintiff’s complaint does not specify which section of the Consumer Fraud Act was violated by the failure to make greater disclosure of how the rule operates. The sweeping language of section 2 of the Act (Ill. Rev. Stat. 1985, ch. 1211/2, par. 262), which prohibits material omissions in the conduct of commerce, appears broad enough to encompass the failure to make adequate explanation of loan terms. To give section 2 such a meaning, however, would seem to render superfluous other sections of the Act which incorporate statutes regulating disclosures in loan contracts. For instance, “An Act in relation to the rate of interest ***” (Ill. Rev. Stat. 1985, ch. 17, par. 6401 et seq.) (Interest Act) contains express provisions concerning disclo*20sures. Section 2E of the Consumer Fraud Act (Ill. Rev. Stat. 1985, ch. 121V2, par. 262E) makes it unlawful under the Act to commit (as determined in a judicial proceeding) three or more violations of the Interest Act or other acts regulating credit in a single calendar year. Section 2F of the Consumer Fraud Act similarly provides a remedy under that act against a lender who has been proved in a judicial proceeding to have violated a loan statute if that violation was wilful and material. If section 2 of the Consumer Fraud Act reaches a single violation of the disclosures required by the Interest Act, I cannot see what meaning is left to the limitations in sections 2E and 2F of Consumer Fraud Act requiring judicially established multiple or wilful violations; the plaintiff has failed to explain this apparent inconsistency.

None of this is to say, as the majority seemingly does, that all borrowers aggrieved by inadequate disclosure of the Rule of 78’s are necessarily without legal recourse. Statutes like the Interest Act and the Consumer Installment Loan Act (Ill. Rev. Stat. 1985, ch. 17, par. 5401) mandate disclosure of the use of the Rule of 78’s. The Interest Act, for example, states that under certain circumstances the contract must provide “an identification of the method of computing any unearned portion of the finance charge in the event of prepayment of the loan.” (Ill. Rev. Stat. 1985, ch. 17, par. 6410(f)(13); see also Ill. Rev. Stat. 1985, ch. 17, par. 5420(m).) The obstacle which defeats the plaintiff in this case is that she stands only on the Consumer Fraud Act. She does not allege violations of the disclosure requirements of the Interest Act or other Illinois loan statutes and consequently has not demonstrated their applicability.

The State disclosure provisions requiring “identification of the method” effectively track Federal Regulation Z. The State statutes also make clear that a lender who complies with the Federal Truth in Lending Act and reg*21ulations issued under that act complies with State law. (Ill. Rev. Stat. 1985, ch. 17, par. 6410(i); Ill. Rev. Stat. 1985, ch. 17, par. 5420.) From these facts, the majority divines a “consistent policy” against commanding greater disclosure under Illinois law than is required under the Truth in Lending Act. (114 Ill. 2d at 17.) The difficulty I have with this conclusion is that the Federal Reserve Board’s staff interpretation, no matter how persuasive, is not itself a part of Truth in Lending Act or Regulation Z (114 Ill. 2d at 17-18; Bright v. Ball Memorial Hospital Association (7th Cir. 1980), 616 F.2d 328; Continental Oil Co. v. Burns (D. Del. 1970), 317 F. Supp. 194). Compliance with the interpretation, as opposed to the Truth in Lending Act or Regulation Z, does not therefore assure compliance with Illinois disclosure provisions. The Illinois courts are free to interpret our State disclosure laws more expansively than the Federal interpretation.

Of course, in construing State laws we would naturally consider the Board’s interpretation of an analogous Federal regulation. Although its reading is instructive, I believe the Board, like other human agencies, may be mistaken on occasion. Administrative decisions may also be influenced by the “natural affinity *** which in time develops between the regulator and the regulated.” (Sierra Club v. Morton (1972), 405 U.S. 727, 745-46, 31 L. Ed. 2d 636, 649, 92 S. Ct. 1361, 1371 (Douglas, J., dissenting).) As judges we have the advantage of being further removed from the everyday intricacies of regulating the credit industry, and may therefore bring a fresher perspective to the problem. I would decline to follow the Board in interpreting our similarly worded State loan-disclosure laws.

In arriving at its interpretation of Regulation Z, the Board apparently failed to consider any options for disclosing the Rule of 78’s other than the polar extremes of *22either merely naming the rule or providing a precise mathematical explanation of its operation. The vice-chairman of the Board explained that “the alternative [to naming the rule] would seem to require a lengthy and complicated mathematical statement which would have the added disadvantage of further complicating the disclosure statement and detracting from other disclosures.” (Bone v. Hibernia Bank (9th Cir. 1974), 493 F.2d 135, 140; see also 12 C.F.R. sec. 226.818(c).) This analysis is both superficial and unimaginative. A mathematical statement of the operation of the rule would mean as little to judges and lawyers as to other borrowers; on the other hand, identifying the rule merely by name conveys nothing to most borrowers, and in fact would not even put them on notice to inquire because it appears entirely innocuous. A more sensible approach would be a statement informing the borrower that because the refund on prepayment would be figured according to the Rule of 78’s, the time when prepayment was made could affect the ultimate cost of the credit. (See Drennan v. Security Pacific National Bank (1981), 28 Cal. 3d 764, 780, 621 P.2d 1318, 1327, 170 Cal. Rptr. 904, 914.) Advising the borrower that the method of computation will affect his pocketbook does not overload him with incomprehensible information, but simply raises a red flag to alert him to inquire if he is concerned about the cost of prepayment.

While this plaintiff’s allegations do not appear to entitle her to a remedy, I concur specially to underline the fact that the decision in this case may not be the last word in this State on the proper disclosure of the effect of the Rule of 78’s.

RIPPLE, Circuit Judge.

Carl and Margaret Walker (“the Walkers”) brought this lawsuit against Wallace Auto Sales (“Wallace”) and Guardian National Acceptance Corporation (“Guardian”) on behalf of themselves and all others similarly situated. In their nine-count amended complaint, the Walkers alleged that the defendants systematically imposed hidden finance charges on automobile purchases in violation of the Truth in Lending Act (“TILA”), 15 U.S.C. §§ 1601-1693r, the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 *929U.S.C. §§ 1961-1968, the Illinois Consumer Fraud Act, 815 ILCS 505/2, and the Illinois Sales Finance Agency Act, 205 ILCS 660/8.5. The district court dismissed the Walkers’ TILA claim because the conduct alleged by the Walkers did not constitute a violation of that Act. In addition, the court dismissed the Walkers’ remaining claims because, in its view, those claims could not survive in the absence of the TILA violation. For the reasons set forth in the following opinion, we reverse the district court’s dismissal of the Walkers’ TILA claim against Wallace, affirm its dismissal of the TILA claim against Guardian and remand the Walkers’ remaining claims to the district court for further consideration.

I

BACKGROUND

A. Facts1

On August 31,1995, the Walkers agreed to purchase a used 1989 Lincoln Continental from Wallace. In order to finance this purchase, the Walkers entered into a retail installment contract (“the contract”) with Wallace. The contract listed the cash price of the automobile as $14,040.2 In addition to that amount, the Walkers agreed to pay $699 for an extended warranty and $61 for license, title and taxes. The Walkers made a down payment of $1,500, leaving $13,300 as the amount to be financed on the sales contract. The Walkers agreed to finance this balance at an annual percentage rate of 25% over a period of four years (48 monthly installments of $441 each). Under these terms, the Walkers were to pay $7,868 in interest over the course of those four years, giving the sales contract a total value of $21,168. All of this information was clearly delineated on the face of the contract.

After the sale was complete, Wallace promptly assigned the contract to Guardian, “a specialized indirect consumer finance company engaged primarily in financing the purchase. of automobiles through the acquisition of retail installment contracts from automobile dealers.” R.21 ¶ 7. Guardian purchased the contract at a discount of $7,182 from the total value.

B. Proceedings in the District Court

As noted above, the Walkers filed a nine-count amended complaint against Wallace and Guardian in the district court alleging violations of TILA RICO and two state law consumer protection statutes. The gravamen of the Walkers’ complaint is that Wallace artificially inflated the cost of the vehicle to cover the discount at which Guardian purchased the Walkers’ sales contract and therefore imposed a “hidden finance charge” on them in violation of TILA, 15 U.S.C. § 1638(a)(3).3 This same allegation serves as the basis for the Walkers’ RICO and state law-based claims.

Wallace and Guardian filed a motion to dismiss the Walkers’ amended complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). The district court first examined the Walkers’ TILA claim. The court began its analysis of that claim by noting that the regulations interpreting TILA’s disclosure requirements exempt specific charges from those requirements. Specifically, the Official Staff Commentary to the regulations provides that:

Charges absorbed by the creditor as a cost of doing business are not finance charges, even though the creditor may take such costs into consideration in determining the interest rate to be charged or the cash *930price of the property or services sold. However, if the creditor separately imposes a charge on the consumer to cover certain costs, the charge is a finance charge if it otherwise meets the definition.

12 C.F.R. Pt. 226, Supp. I at 308-09. The commentary further states that “[a] discount imposed on a credit obligation when it is assigned by a seller-creditor to another party is not a finance charge as long as the discount is not separately imposed on the consumer.” Id. In the district court’s view, the “hidden finance charge” alleged by the Walkers was in fact a “cost of doing business” and was therefore exempt from TILA’s disclosure requirements. The court therefore held that the Walkers had not pleaded sufficient facts to state a claim under TILA. In addition, the court dismissed the Walkers’ RICO and state law-based claims because, in its view, those claims could not survive in the absence of a TILA violation.

II

DISCUSSION

We review de novo the district court’s decision to dismiss, taking the Walkers’ factual allegations as true and drawing all reasonable inferences in their favor. See Kauthar SDN BHD v. Sternberg, 149 F.3d 659, 669-70 (7th Cir. 1998). In evaluating the Walkers’ complaint, we read them complaint as a whole, see Black v. Lane, 22 F.3d 1395, 1400 (7th Cir.1994), and shall affirm the district court’s order of dismissal only if “ ‘it appears beyond doubt that [the Walkers] can prove no set of facts in support of [their] claim which would entitle [them] to relief,’ ” Strasburger v. Board of Educ., 143 F.3d 351, 359 (7th Cir.1998) (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)).4

A. The Walkers’ TILA Claim

In order to assess the sufficiency of the Walkers’ TILA claim against Wallace and Guardian, we must first examine the statutory and regulatory framework under which it arises.

Congress enacted TILA “to assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him and avoid the uninformed use of credit, and to protect the consumer against inaccurate and unfair billing and credit card practices.” 15 U.S.C. § 1601(a); see also Gibson v. Bob Watson Chevrolet-Geo, Inc., 112 F.3d 283, 285 (7th Cir.1997) (stating that TILA’s purpose is “to protect consumers from being misled about the cost of credit”); Brown v. Marquette Sav. & Loan Ass’n, 686 F.2d 608, 612 (7th Cir.1982) (stating that Congress enacted TILA to “provide information to facilitate comparative credit shopping and thereby the informed use of credit by consumers”). In order to effectuate this purpose, TILA requires creditors to disclose clearly and accurately to consumers any finance charge that the consumer will bear under the credit transaction. See 15 U.S.C. § 1638(a)(3). These stringent disclosure requirements are designed to prevent creditors from circumventing TILA’s objectives by burying the cost of credit in the price of the goods sold. See Mourning v. Family Publications Serv., Inc., 411 U.S. 356, 364, 93 S.Ct. 1652, 36 L.Ed.2d 318 (1973); see also Gibson, 112 F.3d at 287 (stating that, under TILA, if merchant charges credit customers a higher “cash” price for an item than cash customers, then that extra charge is a finance charge and must be disclosed as such).

*931TILA defines a “finance charge” 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.” 15 U.S.C. § 1605(a). In addition, the regulations implementing TILA (known collectively as “Regulation Z”) provide that:

The finance charge is the cost of consumer credit as a dollar amount. It includes any charge payable directly or indirectly by the consumer and imposed directly or indirectly by the creditor as an incident to or a condition of the extension of credit. It does not include any charge of a type payable in a comparable cash transaction.

12 C.F.R. § 226.4(a). Regulation Z further provides that the term “finance charge” includes “[c]harges imposed on a creditor by another person for purchasing or accepting a consumer’s obligation, if the consumer is required to pay in cash, as an addition to the obligation, or as a deduction from the proceeds of the obligation.” Id. § 226.4(b)(6).

These provisions, however, are qualified by the Federal Reserve Board’s Official Staff Commentary to Regulation Z5 which exempts specific charges from TILA’s disclosure requirements:

Costs of doing business. Charges absorbed by the creditor as a cost of doing business are not finance charges, even though the creditor may take such costs into consideration in determining the interest rate to be charged or the cash price of the property or services sold. However, if the creditor separately imposes a charge on the consumer to cover certain costs, the charge is a finance charge if it otherwise meets the definition. For example:

A discount imposed on a credit obligation when it is assigned by a seller-creditor to another party is not a finance charge as long as the discount is not separately imposed on the consumer.

12 C.F.R. Pt. 226, Supp. I at 308-09.

In this case, the Walkers allege that the defendants violated TILA by artificially inflating the “cash price” of the vehicle purchased by the Walkers to cover the cost of the discount at which Guardian purchased the Walkers’ sales contract. The Walkers contend that, by passing on the cost of Guardian’s discount to the Walkers, the defendants imposed a “hidden finance charge” on them in violation of TILA, 15 U.S.C. § 1638(a)(3). The defendants, however, contend that the Walkers’ TILA claim must be dismissed because the “hidden finance charge” alleged by the Walkers was in fact a “cost of doing business” and was therefore exempt from TILA’s disclosure requirements. See 12 C.F.R. Pt. 226, Supp. I at 308-09.

As an initial matter, we note that, under TILA, Guardian may only be charged as an assignee, not a creditor. See 15 U.S.C. § 1602(f); 12 C.F.R. Pt. 226, Supp. I at 300. Accordingly, the Walkers must properly allege a cause of action against Wallace (the creditor) before it "can assert a claim against Guardian (the assignee). We therefore turn first to the issue of whether the Walkers’ amended complaint states a valid TILA claim against Wallace.

1. Wallace’s Liability

In paragraph 27 of the Walkers’ amended complaint, they allege that:

It is the standard policy of Wallace and other dealers who receive financing from Guardian to charge hidden finance charges on vehicles sold on time. The purported cash price of vehicles sold in this manner substantially exceeds the value of the vehicle, and the price at which comparable vehicles are sold for cash, and includes part of the finance charge.

R.21 ¶ 27. In the next paragraph, the Walkers further allege that this “hidden finance charge resulted from the need of [Wallace] to pass on to the consumer the discount imposed by Guardian.” Id, ¶ 28. It is our task to discern whether these allegations are sufficient to state a claim against Wallace under TILA.

*932As we noted above, TILA requires creditors to disclose clearly and accurately any finance charge that the consumer will bear in a particular credit transaction. As the definitions set forth above indicate, this means that a creditor-merchant must disclose to a consumer buying on credit exactly how much he will pay for that credit. See 12 C.F.R. § 226.4(a) (defining finance charge as “the cost of consumer credit as a dollar amount”). In this case, the Walkers allege that Wallace is charging higher prices to customers who are buying cars on credit than to customer who are paying cash. In other words, credit customers, such as the Walkers, are paying higher “cash” prices only because they are buying on credit. The higher cash price paid by these customers is therefore part of the cost of buying on credit. Under TILA, such a cost is a finance charge and must be disclosed to the consumer as such. Accordingly, wte conclude that the Walkers have alleged sufficient facts to state a cause of action against Wallace under TILA.

Our conclusion that the Walkers allege sufficient facts to state a cause of action under TILA is supported by the Supreme Court’s exposition of the concept and effect of a “hidden finance charge” in Mourning. In that case, the Court noted that “[o]ne means of circumventing the objectives of the Truth in Lending Act, as passed by Congress, was that of ‘burying’ the cost of credit in the price of goods sold.” Id. at 366, 93 5.Ct. 1652. The Court explained further that, in many credit transactions, creditors sought to evade TILA’s mandate by claiming that no finance charge had been charged and assuming “the cost of extending of credit as an expense of doing business, to be recouped as part of the price charged in the transaction.” Id. To illustrate this concept, the Court provided the following example:

[T]wo merchants might buy watches at wholesale for $20 which normally sell at retail for $40. Both might sell immediately to a consumer who agreed to pay $1 per week for 52 weeks. In one case, the merchant might claim that the price of the watch was $40 and that the remaining $12 constituted a charge for extending credit to the consumer. From the consumer’s point of view, the credit charge represents the cost which he must pay for the privilege of deferring payment of the debt he has incurred. From the creditor’s point of view, much simplified, the charge may represent the return which he might have earned had he been able to invest the proceeds from the sale of the watch from the date of the sale until the date of payment. The second merchant might claim that the price of the watch was $52 and that credit was free. The second merchant, like the first, has forgone the profits which he might have achieved by investing the sale proceeds from the day of the sale on. The second merchant may be said to have ‘buried’ this cost in the price of the item sold. By whatever name, the $12 differential between the total payments and the price at which the merchandise could have been acquired is the cost of deferring payment.

Id. at 366 n. 26, 93 S.Ct. 1652. The facts in this case are substantially similar to those in the Court’s hypothetical. Indeed, the Walkers allege that Wallace, like the second merchant, buried part of the cost of credit in the “cash” price.6 As the Court noted, this extra charge above the amount paid by a cash customer is “the cost of deferring payment.” Id. Under TILA, that cost must be disclosed as a finance charge.

Moreover, our conclusion is further strengthened by this court’s recent decision in Gibson v. Bob Watson Chevrolet-Geo, Inc., 112 F.3d 283 (7th Cir.1997). In that case, we consolidated three appeals from district court decisions dismissing claims that car dealers violated TILA by charging higher prices for warranties in credit transactions than in cash transactions. Specifically, the plaintiffs alleged that the difference between the price of the warranty in credit transactions and the *933price of the warranty in cash transactions constituted a finance charge that must be disclosed under TILA. In assessing the plaintiffs’ allegations, we concluded that the dealers’ alleged concealment of credit costs in the warranty price circumvented the objectives of TILA by preventing consumers from accurately gauging the cost of credit.7 Indeed, in reversing the district courts’ dismissals of plaintiffs’ lawsuits, we stressed that the dealers’ alleged conduct constituted the “type of fraud that goes to the heart of the concerns that actuate the Truth in Lending Act.” Id. The same can be said of Wallace’s alleged practices in this case. Instead of hiding the additional finance charges in the price of warranties, Wallace allegedly hid a portion of the finance charge in the “cash” price of the cars sold to credit customers. This fraud is no different from that alleged in Gibson—in both cases, the dealers allegedly misled the consumers about the true cost of buying on credit.

Wallace, however, contends that, even if we characterize the cost allegedly imposed on the Walkers and other credit customers as a finance charge, the particular type of charge involved here, “a discount imposed on a credit obligation when it is assigned by a seller-creditor to another party,” see 12 C.F.R. Pt. 226, Supp. I at 308-09, is exempt from TILA’s disclosure requirements. As we noted earlier, the Official Staff Commentary to Regulation Z exempts certain charges from TILA’s disclosure requirements:

Costs of doing business. Charges absorbed by the creditor as a cost of doing business are not finance charges, even though the creditor may take such costs into consideration in determining the interest rate to be charged or the cash price of the property or services sold. However, if the creditor separately imposes a charge on the consumer to cover certain costs, the charge is a finance charge if it otherwise meets the definition. For example:

A discount imposed on a credit obligation when it is assigned by a seller-creditor to another party is not a finance charge as long as the discount is not separately imposed on the consumer.

Id. This regulation makes clear that mer-chantcreditors are not necessarily required to disclose to consumers that they plan on selling the retail installment contract at a discount. However, if a creditor-merchant “separately imposes” the cost of the discount on the particular credit consumer, then that cost does not fit within the “cost of doing business” exemption, but rather is a finance charge and must be disclosed to the consumer as such. Therefore, the critical issue in this case is the meaning of the term “separately imposed” and whether Wallace's alleged conduct constitutes such a separate imposition.

In this case, the district court concluded that the Walkers failed to allege that Wallace “separately imposed” the cost of the discount on them. In the district court’s view, even if Wallace artificially inflated the “cash price” of the automobile sold to the Walkers to cover the cost of the discount imposed by Guardian, the discount was not “separately imposed” on the Walkers because those charges were included in the cash price of the car. We cannot accept the district court’s interpretation of the term “separately imposed.” Indeed, under the district court’s interpretation, a creditor would be allowed to impose a cost on consumers buying on credit without disclosing to those customers that they are paying more only because they are buying on credit.8 Ac-*934eeptance of this view would therefore eviscerate TILA’s’ stated purpose to “assure a meaningful disclosure of the credit terms so that the consumer will be able to compare more readily various credit terms available to him and avoid the uninformed use of credit.” 15 U.S.C. § 1601. By contrast, we believe that the term “separately imposed” must be interpreted in a manner consistent with TILA’s purpose of ensuring that consumers are informed fully of the costs of buying on credit. Accordingly, we hold that a charge should be considered “separately imposed” on a credit consumer when it is imposed in credit transactions but not in cash transactions.9

In their amended complaint, the Walkers allege that Wallace passed on the cost of the discount imposed by Guardian, that this cost was passed on in credit transactions only and that Wallace failed to disclose it as a finance charge. At this early stage in the proceedings, these allegations are sufficient to prevent the dismissal of the Walkers’ TILA claim against Wallace. In order to prevail in the end, however, the Walkers will have to prove their allegation that Wallace separately imposed the cost of Guardian’s discount on them. As we noted above, the commentary to Regulation Z makes it clear that it is permissible for a ear dealer to assign retail installment contracts to a finance company at a discount, without disclosing the discount to customers. See 12 C.F.R. Pt. 226, Supp. I at 30809. Moreover, the commentary specifically provides that a “charge directly or indirectly imposed by a creditor” is not considered to be a finance charge if the charge “is imposed uniformly in both cash and credit transactions.” 12 C.F.R. § 226.4(a) & Pt. 226, Supp. I at 308. Accordingly, Wallace need not disclose the cost of the discount as a finance charge if it attempts to recoup that cost by charging all customers higher prices. Under that scenario, the discounts would not be “separately imposed” on credit consumers like the Walkers, but, like any other overhead item, would be taken into account in the price of all vehicles sold.

Finally, in arriving at the holding we reach today, we stress that nothing in the law prevents a merchant-creditor from passing on the full cost of a discount imposed by an assignee to a credit purchaser. However, if the merchant-creditor chooses this route, TILA requires that it disclose that amount to the purchaser as a finance charge.

2. Guardian’s Liability

Because we have concluded that the Walkers have stated a claim against Wallace under TILA, we must consider whether they have stated a claim against Guardian.10 As we noted earlier, under TILA, Guardian may only be charged as an assignee, not a creditor. Section 131 of TILA, 15 U.S.C. § 1641, limits the liability of subsequent assignees to those situations in which the violation of TILA is “apparent on the face of the disclosure statement.” That section provides in pertinent part:

Liability of assignees

(a) Prerequisites

Except as otherwise specifically provided in this subchapter, any civil action for a violation of this subchapter or proceeding under section 1607 of this title which may be brought against a creditor may be *935maintained against any assignee of such creditor only if the violation for which such action or proceeding is brought is apparent on the face of the disclosure statement, except where the assignment was involuntary. For the purpose of this section, a violation apparent on the face of the disclosure statement includes, but is not limited to (1) a disclosure which can be determined to be incomplete or inaccurate from the face of the disclosure statement or other documents assigned, or (2) a disclosure which does not use the terms required to be used by this subchapter.

Id.

The Walkers advance two arguments as to why their amended complaint sufficiently states a TILA claim for assignee liability against Guardian. First, the Walkers contend that the limitations on assignee liability in § 131(a) are inapplicable in this case because Guardian is bound by the terms of the retail installment contract it purchased from Wallace. That contract repeats the language of the FTC’s Holder Notice (as 16 C.F.R. § 433.2 requires) which provides:

ANY HOLDER OF THIS CONSUMER CREDIT CONTRACT IS SUBJECT TO ALL CLAIMS AND DEFENSES WHICH THE DEBTOR COULD ASSERT AGAINST THE SELLER OF GOODS OR SERVICES OBTAINED PURSUANT HERETO OR WITH THE PROCEEDS HEREOF. RECOVERY HEREUNDER BY THE DEBTORS-HALL NOT EXCEED AMOUNTS PAID BY THE DEBTOR HEREUNDER.

Id. In the Walkers’ view, this provision subjects the holder (Guardian) to “all claims” which the consumer (the Walkers) has against the seller (Wallace), including violations of TILA. In the alternative, the Walkers assert that Guardian is liable under § 131 because Wallace’s violation of TILA is apparent on the face of the sales contract. Specifically, in their amended complaint, the Walkers allege that “Guardian is conscious of the fact that the dealer has a strong incentive to pass the discount onto the customer.” R.21 ¶ 9. The Walkers contend that this allegation, combined with their allegation that the purported “cash price” of the vehicle was substantially in excess of its true value, is sufficient to state a TILA claim for assignee liability against Guardian. In short, they maintain that, given Guardian’s knowledge of Wallace’s incentive to pass the cost of the discount on to its credit customers, Guardian could discern from the exorbitant “cash price” appearing on the face of the sales contract that Wallace had concealed a portion of the finance charge in the cash price.

We turn first to the Walkers’ contention that they may maintain a TILA action against Guardian due to the inclusion of the FTC’s Holder Notice in their contract with Wallace. In essence, the Walkers assert that, when Guardian accepted the assignment, it voluntarily waived any right to rely on the statutory defense provided by § 131(a). This court recently addressed this very issue in Taylor v. Quality Hyundai, Inc., 150 F.3d 689, 693 (7th Cir.1998). In that case, the court held that the inclusion of the FTC’s Holder Notice in a retail installment contract did not trump the clear command of § 131 that subsequent assignees can be held liable under TILA only when the violation is apparent on the face of the disclosure statement. See id. (citing Robbins v. Bentsen, 41 F.3d 1195, 1198 (7th Cir.1994) (“Regulations cannot trump the plain language of statutes.... ”)).

Given our conclusion that the inclusion of the FTC’s Holder Notice in the Walkers’ sale contract does not override the limitations on assignee liability in § 131, we turn to the Walkers’ contention that Guardian may nonetheless be held liable under § 131 because, given Guardian’s “knowledge” of Wallace’s practices, Wallace’s failure to disclose a portion of the finance charge was apparent on the face of the Walkers’ retail installment contract. Again, this contention is answered by Taylor. In that case, the plaintiffs argued “that the apparentness (or lack thereof) of a violation should be ascertained in light of the knowledge that a reasonable assignee similarly situated to the defendants should have.” Id. at 694. In the Taylor plaintiffs’ view, the assignees, “as active participants in the financing market,” know that creditors often hide finance charges in other items (in that case, the price of an extended warranty, in this case, the “cash price” of the automobile) and therefore *936must have known that the contracts issued to the plaintiffs contained hidden finance charges. The court rejected the plaintiffs’ argument and held that, under the plain wording of the statute, an assignee can be held Hable only if the violation is apparent on the face of the documents assigned. See id.

In addition to the argument based on Guardian’s knowledge of industry practices, the Walkers assert that the TILA violation was apparent on the face of the disclosure statement due to the fact that the “cash price” of the vehicle purchased by the Walkers was substantially in excess of the vehicle’s actual value. This argument is also without merit. One cannot assume that Guardian could tell from the face of the sales contract that the auto was overpriced; more importantly, even if Guardian did know that the vehicle was overpriced, such knowledge cannot be equated with knowledge that Wallace was burying a portion of the finance charge in the price of the vehicle.11

Finally, even if the Walkers’ amended complaint could be construed to allege that Guardian had actual knowledge of Wallace’s practice of disguising finance charges, such allegations are not sufficient, under the plain wording of the statute, to state a TILA claim for assignee liability against Guardian. Instead, the Walkers must allege that the violation was “apparent on the face” of the assigned documents. The Walkers do not, and cannot, make such an allegation. Accordingly, we hold that the Walkers have failed to state a TILA claim against Guardian.12

B. The Walkers’ RICO and State Law Based Claims

In addition to their TILA claim against Wallace and Guardian, the Walkers’ amended complaint contains eight other counts alleging that Wallace, Guardian and certain unnamed officers of those companies (“John Does 1-10”) violated RICO and two Illinois consumer protection statutes. As we noted earlier, these remaining counts are based on the same factual predicate as the Walkers’ TILA claim. Once the district court determined that the Walkers had failed to state a claim under TILA, it dismissed the remaining claims because, in its view, those claims could not survive in the absence of a TILA violation. The court did not independently assess the sufficiency of the Walkers’ allegations in the remaining counts.

Because the district court did not reach the issue of whether the plaintiffs’ remaining claims are viable and the parties have not briefed that issue on appeal, we remand that issue to the district court for its consideration in the first instance.13 In returning these counts to the district court, we also leave for that court’s consideration in the first instance the issue of whether, despite the fact that Guardian cannot be held liable as an assignee under TILA, the Walkers may still be able to allege that Guardian had a level of knowledge compatible with liability under RICO (Count II), the Ilhnois Consumer Fraud Act (Counts VII & VIII) and the Illinois Sales Finance Agency Act (Count IX).

*937Conclusion

We reverse the district court’s judgment dismissing the Walkers’ TILA claim (Count I) against Wallace, but affirm the dismissal of the TILA claim against Guardian. We also remand the remaining counts (Counts II through IX) to the district court for further consideration consistent with this opinion.

Affirmed in Part;

REVERSED AND REMANDED IN PART.