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SEVENTH CIRCUIT REVISITS "FIRM OFFER OF CREDIT" AND RESTRICTS COLE

Close on the heals of the First Circuit decision in Sullivan v. Greenwood Credit Union [see DLT Alert of April 15, 2008], the Seventh Circuit Court of Appeals has revisited its interpretation of the meaning of "firm offer of credit" in three related "firm offer" cases. See Murray v. New Cingular Wireless Services, Inc., Nos. 06-2477, 06-4368 and 07-2370, slip op., __F.3d__ (7th Cir. Apr. 16, 2008), considering Murray v. New Cingular Wireless Services, Inc., No. 04 C 7666 (N.D. Ill.), Bruce v. KeyBank, No. 2:05-cv-330 (N.D. Ind.) and Price v. Capital One Bank., No. 05-C-0947 (E.D. Wis.). In ruling in favor of all three creditors, the court limited the applicability of Cole v. U.S. Capital, Inc., 389 F.3d 719 (7th Cir., 2004), and adopted the strict constructionist approach to interpreting the Fair Credit Reporting Act ("FCRA") taken by courts outside the Seventh Circuit.

In its discussion of Cole, the court distinguished an offer of merchandise coupled with an offer of credit (as in Cole) from a "simple" offer of credit. The court opined that the principal reason why attempts in the Seventh Circuit and elsewhere to apply the Cole requirement of "value" to simple offers of credit have failed is because the FCRA calls for a "firm" offer of credit, not a "valuable" offer of credit. Cole incorporated the concept of "value" into the definition of a firm offer of credit, but only in an attempt to disentangle an offer of merchandise from an offer of credit made jointly. (In Cole, the merchant was selling motor vehicles and offered to extend credit for a small fraction of the price of a motor vehicle.) The court recognized that the concept of "value" was necessary in Cole to determine whether the offer of credit would be valuable standing alone, and not merely a pretext to obtain valuable credit information for an impermissible purpose under the FCRA (i.e., the sale of merchandise). The court refused to extend the applicability of this reasoning to simple offers of credit and stated: "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.'"

The court also rejected the argument that an offer must contain all material terms in order to be a firm offer of credit. In doing so, it relied on the language of the FCRA and the definition of firm offer as "any offer of credit or insurance to a consumer that will he 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." The court stated that the question posed by the definition of firm offer is "whether the offer will be honored . . ., not whether all the terms appear in an initial mailing," and concluded that the FCRA does not require that the initial communication to a consumer contain all of the important terms that must be agreed upon before credit is extended.

The court also addressed the issue of "conspicuous" notices, declaring that notices in 6-point type are unlikely to meet relevant standards today.

The Seventh Circuit's decision appear to resolve the previously apparent split between the circuits over (i) whether a firm offer of credit must have "value" and (ii) whether specific terms must be disclosed in order for an offer to qualify as a firm offer of credit. By adhering to the plain language of the FCRA, courts in the Seventh Circuit should follow the approach seen in other circuits in determining whether a firm offer of credit is present.

Michael Tomkies