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Zawacki v. Discover Financial Services

February 23, 2007

KIMBERLY S. ZAWACKI, PLAINTIFF,
v.
DISCOVER FINANCIAL SERVICES, INC., DEFENDANT.



The opinion of the court was delivered by: Judge Virginia M. Kendall

MEMORANDUM OPINION AND ORDER

Plaintiff Kimberly S. Zawacki ("Plaintiff") brings a putative class action against Discover Financial Services, Inc. ("Defendant") for allegedly accessing her credit report in violation of the Fair Credit Reporting Act ("the FCRA"), 15 U.S.C. § 1681 et seq.; specifically, for failing to include a "firm offer of credit" in Defendant's home equity loan offer to Plaintiff as required by 15 U.S.C. § 1681b(c)(1)(B)(i). Defendant has moved to dismiss the Complaint pursuant to Fed. R. Civ. P. 12(b)(6) for failure to state a claim upon which relief may be granted. Because Defendant's loan offer discloses all material terms and there is no reasonable inference that it is a guise for solicitation rather than a legitimate credit offer, it comports with the FCRA's definition of "firm offer."

Background

In July 2006, Plaintiff received an unsolicited home equity loan offer from Defendant. (Compl. ¶ 8.) The front-side of Defendant's offer stated, in relevant part:

As a valued Discover(r) Cardmember and homeowner, you're already pre-approved for a Discover(r) Home Equity Line of Credit (emphasis included in the original), with rates as low as Prime -- .50% (currently 7.25% APR) to Prime 1.25% (currently 9.00% APR).*

The offer further stated that "[t]his 'prescreened' offer of credit" is based on information in your credit report indicating that you meet certain criteria." (Ex. A at 2.) Plaintiff did not authorize Defendant to access or use her consumer report. (Compl., ¶ 12.) The asterisk at the end of Defendant's offer further set forth certain terms and conditions:

*This offer is non-transferable and available to homeowners who are 18 years of age or older. Valid for owner-occupied, single-family residences, townhouses and condominiums and for new home equity lines only from $10,000 to $250,000 with a 90% or less loan-to value ratio. Not available for co-ops and mobile homes. If approved, you will receive a rate ranging from Prime - 0.50% (currently 7.25% APR) to Prime 1.25% (currently 9.00% APR), depending on your financial information and creditworthiness. The APR will vary as the Prime Rate varies. The Prime Rate is published in the Money Rates section of The Wall Street Journal and was 7.75% on 4/17/06. Maximum rate is 18%. All loans are subject to satisfactory appraisal, title and property insurance. Credit lines of $250,001 or greater and credit lines with a loan-to-value over 90% are available at different terms. Please contact a loan consultant for details. A $50 annual fee is waived the first year, lines of credit have a 10 year term and you must pay any remaining balance in a single balloon payment.

Plaintiff does not allege that she responded to the offer or that she applied for credit from Defendant.

Standard of Review

A motion to dismiss under Rule 12(b)(6) challenges the sufficiency of the complaint. In reviewing a motion to dismiss, this Court will construe all allegations in the complaint in the light most favorable to the plaintiff and accept all well-pleaded facts and allegations as true. Bonfkowski v. First Nat'l Bank of Cicero, 998 F.2d 459, 461 (7th Cir. 1993). A complaint should be dismissed only when "it appears beyond a reasonable doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46 (1957).

Discussion

Congress enacted the FCRA to ensure that consumer reporting agencies protected the privacy of the consumer information that they maintained. See 15 U.S.C. § 1681(a)(4). Pursuant to the FCRA, a consumer's credit report may be obtained (often referred to as "prescreening") only with written consent of the consumer or for specified "permissible purposes." 15 U.S.C. § 1681b(a). One such permissible purpose is to extend a "firm offer of credit" to the consumer. 15 U.S.C. § 1681a(l). Congress believed that releasing consumer credit information to a company that intended to make a firm offer of credit, "balance[d] any privacy concerns created by prescreening with the benefit of a firm offer of credit or insurance for all consumers identified through the screening process." See S.Rep. No. 103-209, 13 (1993); accord Cole v. U.S. Capital, 359 F.3d 719 (7th Cir. 2004).

I. A "Firm Offer of Credit"

A. 15 U.S.C. 1681a(l): Statutory ...


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