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SEVENTH CIRCUIT FINDS NO PRIVATE RIGHT OF ACTION UNDER FCRA AND "FIRM OFFER OF CREDIT" EXISTS

The United States Court of Appeals for the Seventh Circuit has held that (i) there is no private cause of action to enforce Section 1681m of the federal Fair Credit Reporting Act and (ii) a bank’s preapproved credit card offer constituted a "firm offer of credit" under the FCRA. Perry v. First Nat'l Bank, 2006 WL 2456774 (7th Cir. 2006). The case arose from a class action complaint filed against First National Bank alleging a violation of Section 1682m(d) of the FCRA for failure to include a clear and conspicuous statement of certain disclosures required by the FCRA. The district court granted the Bank’s motion for summary judgment, finding that there was no private right of action to enforce Section 1681m. The district court also denied Perry’s motion to amend the complaint to allege that the Bank’s preapproved offer was a sham, and not a "firm offer of credit" under the FCRA.

In affirming the district court's ruling on the summary judgment motion, the appellate court found that the Fair and Accurate Credit Transactions Act's addition of Section 1681m(h)(8) to the FCRA precluded private enforcement of Section 1681m in its entirety, not just Section 1681m(h), as argued by Perry. The court reached its conclusion based on the unambiguous use of the word "section" in Section 1681m(h)(8), which the court found referred to Section 1681m as a whole. In doing so, it rejected Perry's arguments regarding placement and redundancy as reasons for limiting the word "section" to Section 1681m(h). The court also noted that nearly every district court to consider the issue has found that Section 1681m(h)(8) bars private enforcement of Section 1681m in its entirety. As to the one exception, Barnette v. Brook Road, Inc., 429 F. Supp.2d 741(E.D. Va. 2006), the court specifically rejected its interpretation.

In affirming the district court's ruling on the motion to amend the complaint, the appellate court found the preapproved credit card offer to be a "firm offer of credit" under the FCRA. Perry argued that under the court's decision in Cole v. U.S. Capital, 389 F.3d 719 (7th Cir. 2004), the Bank's offer, which consisted of a relatively small amount of credit ($250) and comparatively large fees ($184), was not a firm offer of credit. The court, however, distinguished the facts of the present case from Cole, finding that, unlike the offer in Cole, the Bank's offer clearly stated that it was preapproved, the interest rate was clearly stated and the line of credit, although low, could be used to purchase products anywhere Visa is accepted. The court noted that this latter fact made the offer vastly different than the offer examined in Cole , which limited the use of the $300 of credit offered to the purchase of a motor vehicle at a particular dealership. The court recognized that although the offer was "not an attractive deal for the great majority of consumers," the card was not without value. (Notably, a strong dissent was filed in which the dissenter concluded that the Bank’s offer was not a legitimate credit product, but rather a "sales pitch" for an "unconscionably one-sided financial deal that defies a reasonable concept of sufficient value.") Finally, the court found that the offer, unlike the offer in Cole, was not a "guise for solicitation," as the only product offered was a line of credit. The decision is a positive one for creditors, particularly in the fact that the court finds a "firm offer of credit" in an offer that has value only for a limited group of consumers.

Margaret Stolar and Elizabeth Anstaett