Federal District Court Grants Defense Motion for Summary Judgment and Dismisses Putative Class Action Alleging Violations of FCRA (Fair Credit Reporting Act) Holding that Promotional Offer was a “Firm Offer of Credit” and that Failure to Provide “Clear and Conspicuous” Disclosure was not Willful
A putative class action was filed against New Cingular Wireless for alleged violations of the federal Fair Credit Reporting Act (FCRA), 15 U.S.C. §§ 1681 et seq., by accessing credit reports before sending promotional offers for wireless telephone services. Murray v. New Cingular Wireless Services, Inc., 432 F.Supp.2d 788, 789 (N.D. Ill. 2006). The class action defense argued that it obtained consumer credit reports for permissible purposes within the meaning of the FCRA. Specifically, defense attorneys maintained that Cingular used the reports pursuant to § 1681b to make a “firm offer of credit” – defined by FCRA as “any offer of credit or insurance to a consumer that will be honored if the consumer is determined, based on information in a consumer report on the consumer, to meet the specific criteria used to select the consumer for the offer,” 15 U.S.C. § 1681a(1) – and that any deficiencies with respect to the required disclosures were inadvertent.
The facts underlying the lawsuit were as follows. In 2004, Cingular sent plaintiff a promotional offer for a free wireless phone with the following disclosure: “You were selected to receive this special offer because you satisfied certain credit criteria for creditworthiness, which we have previously established. We used information obtained from a consumer-reporting agency…. You have the right to prohibit information contained in your credit files with this and any other consumer-reporting agency from being used with any credit transaction that is not initiated by you …” Murray, at 789-90. Plaintiff filed a putative class action in federal court alleging that the promotion violated the FCRA. First, he argued that the promotion was not an “offer of credit” but simply an offer for a free phone, and that the word “credit” was never used in the promotion. Id., at 791. The court disagreed, explaining “wireless customers pay for services after the actual use of the services. By definition, such a payment scheme puts Cingular at risk that the customer could default on payment-which is essentially what credit is all about.” Id. (citation omitted). As the court explained at page 791,
consumers who sign up for a wireless phone plan are extended credit because they pay for service at the end of the month rather than buying the minutes in advance. The FCRA defines credit as “the right … to purchase property or services and defer payment therefore,” section 1691a(d), and this offer falls squarely within that definition. At a minimum, a consumer must sign up for a plan that is $29.99, but this credit can extend into hundreds or thousands of dollars depending on the consumer’s actual use and the plan selected . . . . Virtually 100% of the wireless phone service purchased by the consumer would be on credit. Contrary to Murray’s assertions, the FCRA does not mandate that Cingular use the term “credit” in its mailing to describe its offer nor do open-ended lines of credit have to allow balances to remain unpaid in order to qualify as “credit.”
Plaintiff also argued that the FCRA-mandated disclosures were “clear and conspicuous,” Murray¸ at 790. The district court agreed that the disclosure violated § 1681m because it “‘does nothing to draw the reader’s attention to the material.'” Id., at 793 (citation omitted). However, the court found that plaintiff was not entitled to statutory damages under § 1681n because that section requires a finding that the defendant willfully violated the FCRA, and plaintiff had introduced no evidence to support such a finding. Id., at 793-94.
NOTE: The federal court rejected plaintiff’s claim that the terms of the free offer were not specific, explaining at page 792 that pursuant to § 1681a(1), “The FCRA provides that firm offers of credit may be conditioned based on information provided to the creditor after the initial written communication is sent.”