Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 04 C 7666-Ruben Castillo, Judge. Appeal from the United States District Court for the Northern District of Indiana, Hammond Division. No. 2:05cv330-Rudy Lozano, Judge. Appeal from the United States District Court for the Eastern District of Wisconsin. No. 05-C-947-C.N. Clevert, Judge.
The opinion of the court was delivered by: Easterbrook, Chief Judge.
Before EASTERBROOK, Chief Judge, and FLAUM and WOOD, Circuit Judges.
We have grouped for decision three appeals under the Fair Credit Reporting Act presenting issues that have arisen in numerous suits throughout the circuit. Each of the appeals presents at least two issues, several of which recur in multiple appeals. We therefore organize the opinion around these issues rather than the facts of the cases, which we use to illustrate the problems.
1. Must an offer of credit be valuable to all or most recipients? A company usually may access a consumer's credit information only if the consumer initiates the transaction. The statute makes an exception, however: Firms may obtain lists of names and addresses that credit bureaus generate from their databases according to the stated criteria. For example, a bank might ask for a list of everyone in Illinois who purchased a home, with a mortgage loan, during the last three years and is current on payment. That list may be used to make an offer of refinancing, or of a loan against the equity in the residence. The statute allows this only if the person requesting the information uses it to make "a firm offer of credit or insurance".
15 U.S.C. §1681b(c)(1)(B)(i).
Suppose someone wants to use credit information to promote merchandise. One way to do this might be to make an offer of the product (say, a television set or a suite of furniture) together with a token line of credit (say, $100 toward $10,000 worth of furniture). We held in Cole v. U.S. Capital, Inc., 389 F.3d 719 (7th Cir. 2004), that this gimmick does not work-that the offer must have value if viewed as one of credit alone. "A definition of 'firm offer of credit' that does not incorporate the concept of value to the consumer upsets the balance Congress carefully struck between a consumer's interest in privacy and the benefit of a firm offer of credit for all those chosen through the pre-screening process. 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]." Id. at 726--27.
Ever since Cole plaintiffs have contended that this approach must be applied, not only to distinguish between offers of merchandise and offers of credit, but also to decide whether even a simple offer of credit is valuable enough to justify the use of consumers' credit files. Two of the cases before us present arguments of this kind. Darrell Bruce contends that KeyBank did not make a "firm offer of credit" because its offer of home-equity financing did not include all material terms, and without knowing every term (such as whether interest was to be simple or compound) the consumer could not assess the offer's value. Ilene Price and other plaintiffs contend that Capital One Bank did not make a "firm offer of credit" because the flyer offering them Visa cards did not state the minimum line of credit each would receive, and without this knowledge the offer's worth was uncertain. Both Bruce and Price rely heavily on Cole.
As we have said, these are just the latest attempts to apply Cole to pure offers of credit. None has succeeded. See, e.g., Forrest v. Universal Saving Bank, F.A., 507 F.3d 540 (7th Cir. 2007); Perry v. First National Bank, 459 F.3d 816 (7th Cir. 2006). Some of our decisions have analyzed the offer to see whether it would be attractive to a substantial fraction of recipients. But the principal reason why none of these claims has prevailed, and why none of them can prevail, is that §1681b(c)(1)(B)(i) calls for a firm offer of credit but not a valuable firm offer of credit. A firm offer of credit suffices. Cole did not doubt this. The problem in Cole was how to disentangle an offer of merchandise from an offer of credit when they are made jointly (in Cole, the merchant was selling cars and offered to extend credit for a small fraction of the price). We asked whether the offer of credit would be valuable standing alone in order to see whether the non-consensual check of a person's credit history had been used to make an offer of merchandise, something the statute does not allow.
Murray v. GMAC Mortgage Corp., 434 F.3d 948 (7th Cir. 2006), remarked that "Cole's objective was to separate bona fide offers of credit from advertisements for products and services, determining from 'all the material conditions that comprise the credit product in question . . . [whether it] was a guise for solicitation rather than a legitimate credit product'." 434 F.3d at 955--56 (emphasis in Cole; internal citation omitted). What was an observation in Murray is now a holding. Cole is beside the point for pure offers of credit. When credit histories are used to offer credit (or insurance) and nothing but, the right question is whether the offer is "firm" rather than whether it is "valuable." That the interest rate is said to be "too high" or the line of credit "too low" or the rule for compounding interest unstated is not relevant to the question posed by §1681b(c)(1)(B)(i).
2. Does a promise of "free" merchandise mean that an offer is not one "of credit"? Thomas Murray contends that a telephone company violated FCRA by obtaining from a credit bureau a list of persons to receive a circular that touts a "free phone." This phone is available only to someone who signs up for a year or more of service, but as Murray sees things the lure of a phone makes it hard for the consumer to understand that the point of the offer is the service. True, phone service is neither "credit" nor "insurance," but the circular offers phone service on credit, because the service is provided before payment is due. Deferred payment is "credit" as the statute uses that word. 15 U.S.C. §1681a(r)(5), incorporating §1691a(d). A "free" phone is anything but free, as it can't be had apart from the service plan; payments for service include the cost of the phone, which is amortized over the length of the contract. So payment for the phone is deferred no less than payment for the phone service; the entire offer therefore is one of credit, whether or not a given consumer gets the point.
Now it is true that the credit can't be used to buy someone else's product. Verizon does not extend credit to users of AT&T's service, or the reverse. Nor will Ford lend money to buy an Audi. This does not detract from the fact that an offer of a Ford with deferred payment is an offer of credit. The offer need not be fully portable to be "credit" within the statutory definition: "The term 'credit' means the right granted by a creditor to a debtor to defer payment of debt or to incur debts and defer its payment or to purchase property or services and defer payment therefor." 15 U.S.C. §1691a(d).
3. Must the initial flyer contain all material terms? KeyBank's offer of home-equity credit stated that the interest rate would be "based on" the prime rate according to the Wall Street Journal at the time the loan was made and could vary "by district, product and credit qualification." It did not mention terms such as the loan's duration and did not specify all fees. Capital One Bank's offer of a Visa card did not state the minimum amount of credit that each card would have. Plaintiffs say that these omissions negate the existence of a "firm offer of credit." To the extent this argument rests on Cole and the proposition that an offer with omitted terms lacks value, it is wrong for the reason given already. To 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.
The term "firm offer of credit or insurance" means 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, except that the offer may be further conditioned on one or more of the following:
(1) The consumer being determined, based on information in the consumer's application for the credit or insurance, to meet specific criteria bearing on credit worthiness or ...