Affirming Summary Judgment in Favor of Defense in Class Action Alleging Violations of FCRA (Fair Credit Reporting Act), Class Action Complaint Properly Dismissed because, as Matter of First Impression, Offer of Credit Satisfies FCRA if Creditor will not Deny Credit to Consumers who Meet Pre-Selection Criteria First Circuit Holds
Plaintiff filed a putative class action against Greenwood Credit Union alleging violations of the Fair Credit Reporting Act (FCRA) arising out of “an unsolicited letter to a consumer about the offering of credit for a home loan.” Sullivan v. Greenwood Credit Union, 520 F.3d 70, 71 (1st Cir. 2008). Greenwood had purchased credit reports for purposes of pre-screening individuals, and then sent home loan offers to “a list of individuals meeting certain minimal credit requirements”: the class action complaint alleged that the unsolicited letters fall within the FCRA and that consumer credit information had been obtained for an improper purpose; defense attorneys argued that the FCRA permits obtaining credit reports for various purposes, including extending a “firm offer of credit.” Id. The First Circuit explained at page 71, “This case is about plaintiff’s efforts to collect that statutory penalty for a class of consumers; there is no claim [he] was wrongfully denied credit.” The thrust of the class action claims was that the offer of credit “was based on such minimal criteria and the actual extension of credit was so contingent on other conditions that the letter could not be a firm offer of credit.” Id. Defense attorneys moved for summary judgment on the class action complaint, and the district court granted the motion. As a matter of first impression in the First Circuit, the Circuit Court considered the phrase “firm offer of credit” and affirmed.
Defense attorneys argued that Greenwood limited its offer of credit to homeowners “having at least $10,000 in revolving debt and a credit score of 500 or greater.” Sullivan, at 71. Greenwood did not obtain a consumer’s entire credit report; rather, it obtained from the credit reporting agency only contact information for consumers who met these criteria. Id., at 71-72. Greenwood then sent consumers a letter offering them, for a limited time, loans up to 100% of the value of their home at “some of the lowest rates in decades”; however, the letter did not provide the interest rate being offered, nor did it state the duration of the loan. Id., at 72. The letter noted, however, “Limited time offer to customers who qualify based on equity, income, debts, and satisfactory credit. Rates and terms subject to change without notice. Most loan programs require both a satisfactory property appraisal and title exam for final approval…. If at time of offer you no longer meet initial criteria, offer may be revoked.” Id. The letter also informed consumers as to the steps they could take if they wanted to stop receiving prescreened offers of credit. See id. Plaintiff responded to the letter by filing the class action complaint, id. Plaintiff’s theory was that Greenwood had not extended a “firm offer of credit” because the letter “‘is lacking crucial terms for it to be an offer’ and ‘is so vague and lacking in terms as not to constitute an “offer capable of acceptance”.’” Id. The class action complaint sought statutory damages of $1,000 per class member on behalf of approximately 2 million individuals, id.
In determining whether the district court erred in granting summary judgment, the First Circuit began with the observation that no material facts were in dispute; rather, “the issues are ones of law.” After discussing the FCRA’s statutory scheme and its purpose, see id., at 73-74, the Circuit Court explained at page 75 that plaintiff “may prevail only if he establishes that the letter he received was not a ‘firm offer of credit’ under the FCRA.” In this regard, defense attorneys noted that the FCRA expressly defines the term “firm offer of credit,” and that definition does not require that the offer include an interest rate or state the duration of the loan. Id., at 75. As a matter of first impression in the circuit, the Court agreed with defense attorneys that a “firm offer of credit” need not set forth an interest rate or identify the length of the loan term, see id., at 75-76; rather, the First Circuit held that “an offer of credit meets the statutory definition so long as the creditor will not deny credit to the consumer if the consumer meets the creditor’s pre-selection criteria,” id., at 76. Accordingly, the Circuit Court affirmed summary judgment. Id., at 77.
NOTE: In reaching its conclusion, the First Circuit distinguished at pages 76 and 77 the Seventh Circuit’s decision in Cole v. U.S. Capital, 389 F.3d 719 (7th Cir.2004), which the Seventh Circuit itself has since limited, see Murray v. New Cingular Wireless Servs., Inc., ___ F.3d ___ (7th Cir. April 16, 2008). Our article discussing Murray may be found here.