Seventh Rules Credit Must Be Firm, But Not Valuable Under FCRA


The Seventh U.S. Circuit Court of Appeals recently issued an opinion limiting class-action lawsuits regarding “firm offers of credit” under the federal Fair Credit Reporting Act. In Murray v. New Cingular Wireless Services, 2008 WL 1701839 (7th Cir. April 16, 2008), the Seventh Circuit also limited the scope of its 2004 decision in Cole v. U.S. Capital, Inc., 389 F.3d 719 (7th Cir. 2004). In that decision, the court said that when companies offer “a token line of credit” along with consumer goods, that credit offer must have value to the customer.

Among the issues addressed by the court are:
* Under Cole, an offer of credit entangled with an offer of merchandise must be valuable. However, Cole does not apply to “pure offers of credit” not entangled with another offer. The FCRA requires only that an offer of credit be firm, not that it be valuable to most or all of its recipients.
* An offer of “free” merchandise may be an offer of credit under some circumstances. In Murray, consumers complained that Cingular obtained their credit information in order to offer a “free phone.” However, since the free telephone was contingent on signing up for a service plan, it was not truly free. Thus, the offer of free merchandise was an offer of credit under the FCRA’s meaning.
* Advertisements need not contain all the terms of the credit under the FCRA; nothing in that law requires it. Indeed, wrote the majority, an initial offer containing the full terms of credit would be “turgid,” cumbersome and uninformative.
* Creditors may reserve the right to vary the terms of an offer and still extend an offer considered “firm” under the FCRA — under some circumstances. The issue requires discovery, said the court.
* Small type cannot be considered “conspicuous,” at least in the offer at issue in Murray. In that instance, disclosures were printed in six-point type under advertising copy printed at more than twice the point size. However, the violation was not willful in this case because the law was not settled when the offer was made.

The decision is being hailed as a victory for defendants in FCRA class actions, but plaintiffs should note that several important issues are still open to litigation, especially with regard to varying terms of credit and disclosures made in very small type.

Murray combines three appeals from lower courts in the Midwest, all of which were putative class actions alleging violations of the FCRA. Murray v. New Cingular Wireless Servs., Inc., 432 F.Supp.2d 788 (N.D. Ill. 2006); Bruce v. KeyBank N.A., 2006 WL 3743749 (N.D. Ind. December 15, 2006); Price v. Capital One Bank (USA), N.A., 2007 WL 1521525 (E.D. Wis. May 22, 2007).

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