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FIRST CIRCUIT INTERPRETS "FIRM OFFER OF CREDIT"

The United States Court of Appeals for the First Circuit has recently decided two cases regarding the meaning of a "firm offer of credit" under the Fair Credit Reporting Act ("FCRA"). In Sullivan v. Greenwood Credit Union, --- F. 3d ---, 2008 WL 726135 (1st Cir., Mar. 19, 2008) and Dixon v. Shamrock Financial Corp., --- F.3d ---, 2008 WL 902200 (1st Cir., Apr. 3, 2008), the court affirmed the lower courts' decisions in favor of the creditors, which held that the creditors had extended firm offers of credit.

The FCRA generally prohibits a creditor from obtaining a consumer's credit information without the consumer's consent. However, the statute allows a creditor, in the absence of such consent, to purchase pre-screened lists of names and addresses of consumers who meet certain criteria as long as the creditor plans to extend a "firm offer of credit."

In both Sullivan and Dixon, the offers contained almost no material terms, such as the interest rate or the term of the loan. However, in determining what constitutes a "firm offer of credit" the court strictly relied, in both cases, on the statutory language of the FCRA in holding that the FCRA does not require the inclusion of specific loan terms within a firm offer. The court also rejected the arguments, made by the Appellants in both cases, that the common law definition of "offer" should be used to interpret the meaning of "firm offer of credit." The court reasoned that the definition of "firm offer of credit" was not subject to the common law meaning of "offer" because the term is explicitly defined in the FCRA. The court held that an offer of credit meets the FCRA definition so long as the creditor will not deny credit to the consumer if the consumer meets the creditor's pre-selection criteria. Lastly, the court rejected claims of invasion of privacy; in Sullivan the court reasoned that the invasion of privacy was minimal and was offset by the value of the information in the offer, and in Dixon the court found that a consumer's remedy for an invasion of privacy was in the FCRA's "opt-out" procedure for pre-screened offers, and not in the courts.

These decisions by the First Circuit Court of Appeals further the split among the circuits in determining what it means to extend a "firm offer of credit." Courts in the Seventh Circuit, as well as courts in the Eastern District of Missouri, generally require that an offer have "sufficient value" or "some value" and may also require the disclosure of the "material terms" of the offer in order for it to qualify as a "firm offer of credit." See e.g., Cole v. U.S. Capital, Inc., 389 F.3d 719 (7th Cir., Nov. 19, 2004); Perry v. First Nat'l Bank, 459 F.3d 816 (7th Cir., Aug. 25, 2006); Johnson v. Juniper Bank, 2007 WL 4219431 (7th Cir., Nov. 28, 2007); Klutho v. Corinthian Mortgage Corp., 2007 WL 2002495 (E.D. Mo., July 5, 2007). However, courts in other Circuits have typically followed a strict constructionist approach in determining whether there is a firm offer of credit, and so adhere to the plain language of the FCRA. See e.g., Villagran v. Central Ford, 2007 WL 3125297 (S.D. Tex., Oct. 23, 2007); Farrow v. Capital One Auto Finance, 2007 WL 4707634 (D.Md., Nov. 9, 2007). These courts refuse to impute a requirement of "sufficient value" or "some value" into the statutory definition of firm offer and characteristically do not require the disclosure of specific terms, other than the required disclosures under the FCRA. The First Circuit, in Sullivan and Dixon, did not require the disclosure of specific terms, which is in line with the holdings of courts outside the Seventh Circuit. However, it did not specifically reject, nor did it expressly adopt, the interpretation that an offer must have "value," although it did discuss the concept in both opinions. Whether the United States Supreme Court will grant a writ of certiorari to resolve this issue is unclear.

Michael Tomkies