By: Robert J. Nahoum
What Is a Retail Installment Sales Contract?
A retail installment sales contract (often called a “RISC” or “RIC”) is the primary finance contract you sign when you buy a car on credit from a dealership instead of paying cash. In this deal, you agree to pay the dealer the price of the vehicle over time, with interest, and the dealer keeps a security interest in the car until you finish paying. The dealer usually assigns (sells) that contract to a bank, credit union, or finance company, and you then make your payments to that new company.
Unlike a simple buyer’s order or purchase agreement, the RISC is what actually creates the auto finance obligation and sets the legal terms of your auto loan.
How the Truth in Lending Act Applies to the RISC
The Truth in Lending Act (TILA) and its Regulation Z are disclosure laws designed to make the cost of consumer credit clear and comparable. In dealer‑arranged auto financing, TILA treats the dealership as the “creditor,” even if the dealer immediately assigns the contract to a lender. That means the dealer must provide specific written disclosures before you are legally obligated on the RISC, and those disclosures are usually built right into the RISC form itself.
The TILA “truth in lending” box on the RISC must clearly disclose, among other things, the annual percentage rate (APR), finance charge, amount financed, total of payments, total sale price, and the number and amount of payments. TILA also requires an itemization of the amount financed and says that any charge “incidental to the extension of credit” that you would not pay in a comparable cash deal must be treated and disclosed as a finance charge. When dealers hide or mischaracterize fees, add‑ons, or mark‑ups instead of disclosing them properly in the RISC, they can create serious TILA violations and expose themselves to statutory damages.
For more background on how dealers manipulate financing terms, see our post “Is Your Car Dealer Ripping You Off? How to Analyze a Retail Installment Sales Contract” on nahoumlaw.com.
How Electronic Signatures Enable Hidden Terms and Junk Add‑Ons
Electronic signatures and tablet‑based signing have made it easier and faster for dealers to close deals—but they have also made it far easier to hide terms in the RISC. In many modern finance offices, the consumer is handed a tablet or stylus and told to “sign here, here, and here,” while the finance manager controls the screen and the underlying documents out of the consumer’s view. If the buyer never actually sees the RISC pages being signed, the dealer can sneak in add‑ons such as service contracts, GAP insurance, or other products, as well as higher prices and fees that were never clearly disclosed.
For more on how E‑signatures are used to ripoff consumers, see our post “How Signing an Auto Sales Contract May Allow an Auto Dealer to Get Away With Fraud” at nahoumlaw.com .
Hidden Service Contracts, Packed Payments, and Inflated Prices in the RISC
One of the most common abuses tied to the RISC is the forced or hidden sale of expensive service contracts and other add‑ons. The retail installment sales contract typically includes line items or itemization sections for optional products such as extended service contracts, GAP coverage, tire and wheel protection, and other “extras.” When a dealer represents these products as required for financing, misstates their nature, or fails to clearly disclose their cost, the dealer can both violate state consumer‑protection laws and trigger TILA problems if those charges are not accurately disclosed as finance charges or properly itemized.
If an unwanted service contract or add‑on is rolled into the RISC without your informed consent, your actual “amount financed” and “total sale price” are higher than you were led to believe. This is a classic form of “payment packing,” where the dealer focuses you on the monthly payment rather than the underlying price and add‑ons, using the RISC to lock in hidden profit.
Protecting Yourself and Your Rights Under the RISC
There are practical steps consumers can take to reduce the risk of being trapped in an abusive RISC. Consumers should carefully check the itemization of the amount financed, verify whether any service contracts, GAP, or add‑ons are listed, and confirm that the price, APR, and total of payments match what was promised.
If you later discover that your RISC includes undisclosed add‑ons, inflated prices, or terms that differ from what the dealer represented, you may have claims under the Truth in Lending Act, state consumer‑protection statutes, and common‑law fraud.
At The Law Offices of Robert J. Nahoum, P.C., we represent consumers across New York and New Jersey who have been misled or exploited in auto sales and financing. Our firm investigates overcharges, hidden fees, and other forms of auto dealer fraud. We fight to recover money that should never have been taken in the first place.
If you suspect your car dealer took advantage of you through GAP insurance, contact us for a free consultation to understand your rights and options.
📞 Call (845) 232‑0202 or visit our contact page: www.nahoumlaw.com/contact