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Courts should get to test-drive claim over credit report

Court should get to test-drive claim over credit report: court

BYLINE: PATRICIA MANSON

A federal appeals court has reinstated a lawsuit that claims an auto dealer’s offer to extend credit was a sham used to gain access to the plaintiff’s credit report.

The 7th U.S. Circuit Court of Appeals held Friday that there was enough disputed evidence to allow plaintiff Oneta S. Cole to pursue her claims under the Fair Credit Reporting Act.

Cole alleges that an auto dealership and a finance company violated the FCRA when they pulled her credit report before sending her an unsolicited flyer announcing that she had been “pre-approved” for credit.

U.S. District Judge John W. Darrah dismissed Cole’s suit after concluding that the flyer complied with the requirements of the FCRA, 15 U.S.C. sec1681.

In reversing that ruling, the 7th Circuit acknowledged that the FCRA allows consumer reporting agencies to release a credit report without the consumer’s permission in certain circumstances.

Those circumstances include instances in which a credit provider is extending the consumer a “firm offer of credit,” according to the court.

Quoting the FCRA, the court said such an offer is one “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.”

But the court said it was not clear whether the offer made by Jerry Gleason Chevrolet Inc. and U.S. Capital Inc. met that definition.

The court rejected the notion that a credit provider need only guarantee some amount of credit — even if it is only $ 1 — to comply with the FCRA.

Such a definition “eviscerates the explicit statutory purpose of protecting consumer data and privacy,” the court said.

“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,” Judge Kenneth F. Ripple wrote for a three-member panel of the 7th Circuit. “From the consumer’s perspective, an offer of credit without value is the equivalent of an advertisement or solicitation.”

The panel said separating firm offers of credit from advertisements involves looking at the big picture.

“To determine whether the offer of credit comports with the statutory definition, a court must consider the entire offer and the effect of all the material conditions that comprise the credit product in question,” Ripple wrote.

The panel said Cole had made allegations that raised doubt over whether the flyer she received constituted a firm offer of credit.

In fact, the panel said, “the language of the flyer itself creates a question whether the offer of credit will be honored.”

While the flyer at one point said Cole was guaranteed a line of credit of at least $ 300 at Jerry Gleason Chevrolet, at another point it said that approval was “neither express nor implied,” according to the panel.

The panel also noted that the relatively small amount of credit combined with the fact that Cole was required to use it to buy a vehicle “raises a question of whether the offer has value to the consumer.”

And the panel said the offer did not include such terms as the repayment period, the interest rate — it said only that the rate could vary from 3 percent to 24.9 percent — or the method that would be used to compound interest.

“These missing terms render it impossible for a court to determine from the pleadings whether the offer has value,” Ripple wrote. “Because the allegations of the complaint state facts that would permit Ms. Cole to establish that the communication had no real value, the District Court erred in dismissing Ms. Cole’s complaint.”

Joining the opinion were Judges Michael S. Kanne and Ann Claire Williams. Oneta S. Cole v. U.S. Capital Inc., et al., No. 03-3331.

Chicago attorney Daniel A. Edelman represented Cole before the 7th Circuit.

Attorney Daniel S. Kaplan of Northfield represented U.S. Capital.

Chicago attorney Kevin B. Duff argued the case before the appeals court on behalf of Jerry Gleason Chevrolet and AutoNation USA Corp., a corporation that Cole alleged was affiliated with the dealership.

Attorney Lawrence DeMille-Wagman of the Federal Trade Commission in Washington, D.C., filed an amicus brief in the case at the request of the 7th Circuit panel.

Copyright 2004 Law Bulletin Publishing Company

Chicago Daily Law Bulletin

November 22, 2004, Monday

Reprinted with permission, Chicago Daily Law Bulletin