Three Class Action Lawsuits Involving Six Issues Under the Federal Fair Credit Reporting Act (FCRA), Equally Important to Class Action and Non-Class Action Cases, Grouped Together for Resolution by Seventh Circuit
The Seventh Circuit yesterday issued an opinion that resolved various issues of interest under the federal Fair Credit Reporting Act (FCRA) presented by three lower court opinions – the putative class action styled Murray v. New Cingular Wireless Servs., Inc., out of the Northern District of Illinois, Case No. 04 CV 7666, the putative class action styled Bruce v. KeyBank N.A., out of the Northern District of Indiana, Case No. 2:05cv330, and the putative class action styled Price v. Capital One Bank (USA), N.A., out of the Eastern District of Wisconsin, Case No. 05-C-947 – explaining that the cases involve “issues that have arisen in numerous suits” and that each of the three cases “presents at least two issues, several of which recur in multiple appeals.” Murray v. New Cingular Wireless Servs., Inc., 523 F.3d 719 (7th Cir. 2008) [Slip Opn., at 2]. The Circuit Court organized its discussion around issues, rather than the facts of each appeal, id., so we summarize the opinion without providing an introductory factual summary of the cases. (For the convenience of the reader, the facts underlying the Murray class action may be found in lower court opinion at Murray v. New Cingular Wireless Servs., Inc., 432 F.Supp.2d 788 (N.D. Ill. 2006), the facts underlying the Bruce class action may be found in lower court opinion atBruce v. KeyBank N.A., 2006 WL 3743749 (N.D. Ind. December 15, 2006), and the facts underlying the Price class action may be found in the lower court opinion at Price v. Capital One Bank (USA), N.A., 2007 WL 1521525 (E.D. Wis. May 22, 2007). Additionally, our summary of the district court decision in Murray may be found here.) The issues addressed and conclusions reached by the Seventh Circuit, of importance to class action and non-class action cases alike, are: (1) whether an offer of credit must be valuable to all or most recipients, id., concluding the offer must be “firm” but need not be ‘valuable,” id., at 5, (2) whether an offer of “free” merchandise can constitute an offer of “credit,” id., concluding that it may, id., at 6, (3) whether flyers must contain all material terms of the offer of credit, id., concluding that it need not, id., at 8, (4) whether the fact that the terms of the offer may vary means that the offer is not “firm,” id., concluding that an offer may be firm even though “some matters [are left] for future determination,” id., at 10, (5) whether 6-point type is “conspicuous,” id., concluding that it is not, id., at 12, (6) whether use of 6-point type is a “willful” violation of the FCRA, id., concluding that it would be reckless “today” to do so but was not so at the time the documents in question were prepared, id., at 15.
Must an offer of credit must be valuable to all or most recipients? In Cole v. U.S. Capital, Inc., 389 F.3d 719 (7th Cir. 2004), the Seventh Circuit held that if one offers a product (such as furniture) along with a “token line of credit,” then the FCRA requires that the credit offer have value to the consumer: “’From the consumer’s perspective, an offer of credit without value is the equivalent of an advertisement or solicitation [for the product rather than the loan].’” Murray, at 3 (quoting Cole, at 726-27). The Circuit Court noted that plaintiffs have twisted Cole to argue that it requires “even a simple offer of credit [to be] valuable enough to justify the use of consumers’ credit files.” Murray, at 3. These efforts must fail, the Seventh Circuit held, because the FCRA “calls for a firm offer of credit but not a valuable firm offer of credit.” Id., at 4 (citing 15 U.S.C. § 1681b(c)(1)(B)(i)). By contrast, “[t]he problem in Cole was how to disentangle an offer of merchandise from an offer of credit when they are made jointly.” Id. Cole thus does not apply to cases involving “pure offers of credit.” Id., at 5.
Can an offer of “free” merchandise constitute an offer of “credit”? The Murray class action plaintiffs complained that a telephone company violated the FCRA by obtaining consumer credit information in order to offer a “free phone.” Murray, at 5. The Seventh Circuit rejected this argument, explaining that the “‘free’ phone is anything but free, as it can’t be had apart from the service plan” and that payment for the phone was simply amortized over the life of the service contract. Id. The offer of “free” merchandise thus constituted an offer of “credit” within the meaning of the FCRA. Id., at 5-6.
Must flyers contain all material terms of the offer of credit? In rejecting this theory, the Circuit Court held that “[t]o the extent that these arguments reflect a belief that there can be no offer of any kind without all material items, it is wrong because ‘firm offer’ is a defined phrase.” Murray, at 6. Under the Seventh Circuit’s analysis, the FCRA requires that “the offer will be honored (if the verification checks out), not [that] all terms appear in an initial mailing.” Id., at 8. To the contrary, “Trying to disclose everything in the first contact would make the document turgid and, paradoxically, uninformative, because it would be harder to read and grasp.” Id.
Does the fact that the terms of the offer may vary mean the offer is not “firm”? The Seventh Circuit explained that, in the class action cases at issue, “the lender is doing no more than the statute permits” by expressly reserving the “power to set terms later” or by omitting “a minimum line of credit and maximum interest rate” in their initial offers. Murray, at 9. The Circuit Court held at page 10 that the FCRA “does not require the revelation of these details as part of a ‘firm offer’” and that “any honest offer will leave some matters for future determination.” (Citation omitted.)
Is 6-point type “conspicuous”? In a very clever demonstration, the Seventh Circuit recreates the disclosures at issue in 6-point type, and then easily concludes that the disclosure was not “conspicuous” within the meaning of 15 U.S.C. § 1681m(d) when placed “at the bottom of a page dominated by…large-type (14 to 24 point) promotional language.” Murray, at 10-11. Importantly, the Circuit Court stressed that the 6-point type was not “‘conspicuous’ when the bulk of the page contains much larger type.” Id., at 12/
We do not here summarize the Seventh Circuit’s conclusion that Cingular’s use in 2003 of 6-point type did not constitute a “willful” violation of the FCRA. The reader will find that discussion at pages 12 through 15 of the Court’s opinion.
NOTE: The author wishes to extend his thanks to Dave Kanno at Home Loan Center for notifying me of the issuance of this opinion.