Cole, Oneta S. v. US Capital Inc ( 2004 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 03-3331
ONETA S. COLE,
Plaintiff-Appellant,
v.
U.S. CAPITAL, INCORPORATED,
AUTONATION USA CORPORATION,
and JERRY GLEASON CHEVROLET,
INCORPORATED,
Defendants-Appellees.
____________
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 02 C 1858—John W. Darrah, Judge.
____________
ARGUED FEBRUARY 17, 2004—DECIDED NOVEMBER 19, 2004
____________
Before RIPPLE, KANNE and WILLIAMS, Circuit Judges.
RIPPLE, Circuit Judge. Oneta S. Cole filed a complaint, and
later an amended complaint, in which she alleged violations
of the Fair Credit Reporting Act (“FCRA”). The defendants,
U.S. Capital, Inc., AutoNation USA Corp. (“AutoNation”),1
1
AutoNation is a Florida corporation that is alleged to be
(continued...)
2 No. 03-3331
and Jerry Gleason Chevrolet, Inc. (“Gleason Chevrolet”),
moved to dismiss the second amended complaint. The
district court granted the defendants’ motion. For the
reasons set forth in the following opinion, we reverse the
judgment of the district court and remand the case for
further proceedings consistent with this opinion.2
I
BACKGROUND
A. Facts
Ms. Cole received a promotional credit flyer from U.S.
Capital, Inc. and Gleason Chevrolet. The flyer, which she
attached to her complaint, states that Ms. Cole is “pre-
approved to participate in an exclusive offer from U.S.
Capital and Jerry Gleason Chevrolet.” R.37, Ex.A. The flyer
explains that she is eligible to “receive a Visa or MasterCard
with limits up to $2000 as well as up to $19,500 in AUTO-
MOTIVE CREDIT!” Id. The flyer then discusses Ms. Cole’s
ability to purchase a car from Gleason Chevrolet without
payments until 2002. Under large, bold letters it instructs
Ms. Cole how to activate her card by responding prior to
December 8, 2001.
In the bottom one inch (approximately) of the page, in
1
(...continued)
affiliated with auto dealerships throughout the Country, includ-
ing Jerry Gleason Chevrolet, Inc.
2
After oral argument, the court invited the Federal Trade
Commission (“FTC”), the agency charged with administering the
FCRA, to file a brief as amicus curiae. The FTC accepted
the court’s invitation, and the court expresses its thanks to the
FTC for the assistance that it has rendered.
No. 03-3331 3
much smaller type, the flyer informs Ms. Cole that:
We have determined that you meet our initial criteria
for inclusion in this special credit offer. Because it is an
exclusive opportunity we could not offer it to every one.
You were selected based on information obtained in
your consumer report from Trans Union L.L.C. and the
final acceptance is subject to your ability to meet our full
eligibility requirements.
Id. The text then specifies the criteria that she would have to
meet to take advantage of the offer. Among the require-
ments, the recipient of the offer must not have a monthly car
payment that exceeds 50% of her gross income, the recipient
must be eighteen years of age with an annual income of at
least $18,000, and all bankruptcies must be discharged. The
flyer then states that:
Lender reserves the right to require consumer to pay off
currently financed vehicle and may require consumer to
increase down payment, which will affect equity and
collateral. In any event, you are guaranteed to receive a
credit line of at least three hundred dollars for the
purchase of a vehicle, GRSI, Coral Springs, FL. If at the
time of offer consumer no longer meets the initial
criteria, offer may be revoked. We hope you are pleased
with the opportunity it affords. If you prefer that your
name be omitted from future offerings, please contact
Trans Union, Marketing Opt Out, and PO BOX 97328,
Jackson, MS 39288-7328 or call 1-888-546-8688.
Id. Finally, the flyer concludes with a “CREDIT CARD
DISCLAIMER.” Id. It states that the customer authorizes
U.S. Capital Financial Services to act as an agent to obtain a
credit card for the customer. It then explains that “[g]uar-
anteed approval is neither expressed nor implied, interest
4 No. 03-3331
rates may vary from 2.9% to 24.9% based on individual
credit worthiness and lenders credit parameters.” Id.
B. District Court Proceedings
After receiving the flyer, Ms. Cole brought the pres-
ent action in district court seeking statutory damages
and attorneys’ fees for alleged violations of the FCRA.3
In her initial complaint, Ms. Cole alleged that she had not
requested the materials that she had received from the
defendants. Furthermore, she had not authorized anyone to
access her credit report, and therefore, there was no legiti-
mate reason for the defendants to access her credit informa-
tion. Specifically, Ms. Cole alleged that the materials did not
qualify as a firm offer of credit as used in the FCRA. She
claimed that “[a]n offer of a $300 line of credit useable only
to finance the purchase of an automobile is a sham.” R.37 at
3 ¶ 12.a. The offer was made, she averred, to obtain credit
information; it was not extended with the expectation that
consumers would avail themselves of the offer.
Ms. Cole also alleged that the terms of the offer were too
vague to constitute an offer capable of acceptance. In
support of this allegation, Ms. Cole pointed to the fact
that the flyer reserves the right to set material terms.
Additionally, the offer is ambiguous; the $300 line of credit
is characterized first as “guaranteed,” but the flyer later
states that “[g]uaranteed approval is neither expressed nor
implied.” Id. ¶ 12.c (quoting R.37, Ex.A). Finally, she
claimed that the reservation of the right to require the
consumer to pay off existing automobile loans “effectively
3
Ms. Cole also sought class certification.
No. 03-3331 5
constitutes an option to withdraw the $300 line of credit.” Id.
¶ 12.d.
The district court dismissed Ms. Cole’s first amended
complaint. It held that the defendants had obtained the
plaintiff’s credit report for a permissible purpose under
the FCRA. Specifically, the court held that the defendants
obtained the report for the extension of a firm offer of credit.
The court rejected Ms. Cole’s contention that the $300 credit
line was “too paltry a sum to be a ‘firm offer.’ ” R.27 at 6. It
reasoned that “the complaint does not allege the $300 credit
line to be a sham nor is any inference in the mailing.” Id.
The court found the offer of “at least” $300 was consistent
with the FCRA because the FCRA “permits conditioning a
firm offer of credit on ‘the consumer being determined,
based on information in the consumer’s application for the
credit[,] . . . to meet specific criteria bearing on credit
worthiness’ ” that were established before the selection of
the consumer for the offer. Id. (quoting 15 U.S.C. §
1681a(l)(1)(A), (B)). Accordingly, the court concluded that
the complaint failed to state a claim upon which relief could
be granted.4
Ms. Cole then filed a second amended complaint in which
she alleged that the flyer was not a firm offer of credit
because (1) it was a sham to justify obtaining credit informa-
tion; (2) it contained an offer that is too vague to
4
Soon after the dismissal, Ms. Cole moved for reconsideration.
She asserted that the court had failed to address her conten-
tions that no offer was made because the terms were insufficient
to permit acceptance, the offer was not clear and conspicuous,
and the offer of $300 was too small to constitute a firm offer. The
court denied the motion for reconsideration; it held that Ms.
Cole’s arguments had been addressed and rejected in its decision.
The court again permitted leave to file an amended complaint.
6 No. 03-3331
be accepted; (3) the language of the flyer was ambiguous
or mutually inconsistent; (4) the reservation of a right to
require the consumer to pay off existing car loans consti-
tuted an option to withdraw the $300 offer; and (5) the
disclosure did not comply with the requirements of
§ 1681m(d) because it is not clear and conspicuous.
Again, the defendants moved to dismiss the complaint,
and the district court granted the motion. The court found
that there was a guarantee of a $300 credit line and that
the flyer indicated that the offer would be honored as
required by the FCRA. The court explained that there was
no suggestion, other than Ms. Cole’s conclusory allegations,
that the $300 credit amount would not have been honored.
Additionally, the court reasoned, some consumers would be
eligible for more than the minimum amount of credit.
The district court also rejected Ms. Cole’s argument that
the offer was too vague to constitute an offer under Illinois
law. The court held that Illinois law did not apply to
the offer because there was a presumption, unrebutted
in this case, that Congress did not make the application
of the federal law dependent on state law. The court be-
lieved that Congress intended the FCRA to have uniform
application, and, therefore, the definition of what constitutes
an offer under Illinois law was not relevant to the determi-
nation of whether the flyer constituted a firm offer of credit
under § 1681. The court therefore dismissed the complaint
as amended.
Ms. Cole timely appealed.
No. 03-3331 7
II
DISCUSSION
A. Standard of Review
We review the district court’s decision to grant a motion
to dismiss de novo. See American United Logistics, Inc. v.
Catellus Dev. Corp., 319 F.3d 921, 925-26 (7th Cir. 2003). We
consider the allegations in the light most favorable to
the nonmoving party, Ms. Cole, and take all well-pleaded
facts and allegations as true. See Delgado v. Jones, 282 F.3d
511, 575 (7th Cir. 2002). “A complaint should not be dis-
missed ‘unless it appears beyond doubt that the plaintiff can
prove no set of facts in support of his claim which would
entitle him to relief.’ ” Johnson v. Martin, 943 F.2d 15, 16 (7th
Cir. 1991) (quoting Conley v. Gibson, 355 U.S. 41, 45-46
(1957)). “The issue is not whether a plaintiff will ultimately
prevail but whether the claimant is entitled to offer evidence
to support the claims.” Scheuer v. Rhodes, 416 U.S. 232, 236
(1974).
B. Firm Offer of Credit
As set forth above, the district court dismissed Ms. Cole’s
second amended complaint on the ground that the offer
contained in the flyer was a “firm offer of credit” for
purposes of the FCRA. In its view, because the extension of
a “firm offer of credit” was a permissible reason for access-
ing an individual’s information under the FCRA, the
defendants’ actions did not violate the FCRA. Our consider-
ation of the district court’s dismissal begins with the statute
itself.
8 No. 03-3331
1. Applicable Provisions of the FCRA
a. the statutory definition in context
In interpreting the FCRA provisions applicable to Ms.
Cole’s claims, we must keep in mind the “language and
design of the statute as a whole.” Milwaukee Gun Club v.
Schulz, 979 F.2d 1252, 1255 (7th Cir. 1992). We must “con-
strue statutes in the context of the entire statutory scheme
and avoid rendering statutory provisions ambiguous,
extraneous, or redundant; we favor the more reasonable
result; and we avoid construing statutes contrary to the clear
intent of the statutory scheme.” In re Merchants Grain, Inc.,
93 F.3d 1347, 1353-54 (7th Cir. 1996).
Section 1681 sets forth the congressional findings that
prompted the adoption of the FCRA as well as the purpose
of the Act. In this section, Congress made it clear that the
FCRA is designed to preserve the consumer’s privacy in the
information maintained by consumer reporting agencies. See
15 U.S.C. § 1681(a)(4). Specifically, Congress stated: “There
is a need to insure that consumer reporting agencies exercise
their grave responsibilities with fairness, impartiality, and
a respect for the consumer’s right to privacy.” Id.; see also
Trans Union Corp. v. FTC, 81 F.3d 228, 234 (D.C. Cir. 1996)
(“Along with accuracy of collected information, a major
purpose of the Act is the privacy of a consumer’s credit-
related data.”); Amicus Br. at 15-16. One means by which
Congress effectuated this purpose was prohibiting the
release of consumer credit reports unless the release occurs
for one of the permissible purposes set forth in 15 U.S.C. §
1681b(a). Section 1681b(a) in turn provides that, “[s]ubject
to subsection (c) of this section, any consumer agency may
furnish a consumer report under the following circum-
stances and no other . . . .”
No. 03-3331 9
Many of the enumerated permissible purposes set forth in
§ 1681b are transactions initiated by the consumer; these
purposes therefore do not create significant privacy con-
cerns.5 The subsection does set forth, however, limited
situations in which a consumer credit agency may furnish
a consumer report even though the consumer has not
initiated or authorized the release. One such instance is
when a credit or insurance provider is extending the
consumer a “firm offer of credit.” § 1681b(c)(1)(B)(i). In
allowing consumer agencies to release information for the
purpose of a “firm offer of credit,” Congress “balance[d]
any privacy concerns created by pre-screening with the
benefit of a firm offer of credit or insurance for all consum-
ers identified through the screening process.” See S. Rep.
No. 103-209, 13 (1993). “In exchange for allowing credit and
insurance providers to obtain lists based on more sensi-
tive information . . . the bill requires that the credit or
insurance provider make a ‘firm offer,’ as defined in section
101 of the Committee bill, of credit or insurance to all
consumers on the list.” Id. at 14. As one of our sister circuits
has observed, “Congress apparently believe[d] that people
are more willing to reveal personal information in return for
guaranteed offers of credit than for catalogs and sales
pitches.” Trans Union Corp. v. FTC, 267 F.3d 1138, 1143 (D.C.
Cir. 2001).
b. the statutory definition
The term “firm offer of credit” is defined in the FCRA as
“any offer of credit or insurance to a consumer that will be
5
For example, when the consumer applies for credit, employ-
ment, insurance or a license, the consumer reporting agency may
release the consumer’s report. See 15 U.S.C. § 1681b(a)(3)(A)-(F).
10 No. 03-3331
honored if the consumer is determined, based on informa-
tion in a consumer report on the consumer, to meet the
specific criteria used to select the consumer for the offer.” 15
U.S.C. § 1681a(l). The statute provides that the offer may be
conditioned on three specific requirements. First, the
creditor may apply additional pre-selected criteria bearing
on the consumer’s creditworthiness. See § 1681a(l)(1).
Second, the firm offer may be conditioned on verification
“that the consumer continues to meet the specific criteria
used to select the consumer for the offer.” § 1681a(l)(2).
Finally, the offer may be conditioned on the consumer’s
furnishing any collateral that was both established before
the selection of the consumer for the offer and disclosed
to the consumer in the offer. See § 1681a(l)(3).
2. Application
Ms. Cole maintains that the offer contained in the flyer
was merely a sham to justify obtaining her credit report. She
argues that, given the insignificant amount of credit, the
offer was not made with the expectation that a significant
number of consumers would accept the offer, and, therefore,
it cannot constitute a “firm offer of credit” for purposes of
the statute.6
6
Ms. Cole also contends that the offer was too vague, ambiguous
and inconsistent to constitute an offer under Illinois law. We
believe that Ms. Cole’s reliance on state law is misplaced. The
meaning of an undefined term in the FCRA, a federal statute, is a
question of Congress’ intent. See Mississippi Band of Choctaw
Indians v. Holyfield, 490 U.S. 30, 43 (1989). There is no question
that Congress intended a uniform application of the meaning
(continued...)
No. 03-3331 11
The defendants counter that the lynchpin of “firm offer of
credit” is that some amount of credit—however small—is
guaranteed. According to the defendants, “the FCRA does
not require a minimum amount” of credit to be offered and
therefore the “ ‘preapproval could be for any amount,
perhaps even as low as $1.’ ” Appellees’ Br. at 16-17 (quot-
ing Sampson v. Western Sierra Acceptance Corp., 2003 WL
21785612, at *2 (N.D. Ill. Aug. 1, 2003)). Thus, in the defen-
dants’ view, the fact that the offer was only for $300 does
not take it outside of the statutory definition.
We believe that the reading of “firm offer of credit”
suggested by the defendants, and accepted by the district
court, eviscerates the explicit statutory purpose of protecting
consumer data and privacy. See 15 U.S.C. § 1681(a)(4).
Indeed, such a definition would permit anyone to gain
access to a sea of sensitive consumer information simply
by offering some nominal amount of guaranteed credit. The
statutory scheme of the FCRA makes clear that a “firm
offer” must have sufficient value for the consumer to justify
the absence of the statutory protection of his privacy. A
definition of “firm offer of credit” that does not incorporate
the concept of value to the consumer upsets the balance
6
(...continued)
of “firm offer of credit.” It provided: “Notwithstanding any
definition of the term ‘firm offer of credit or insurance’ (or any
equivalent term) under the laws of any State, the definition
of that term contained in section 1681(a)(1) of this title shall
be construed to apply in the enforcement and interpretation
of the laws of any State governing consumer reports.” 15 U.S.C.
§ 1681t(c). If, as suggested by Ms. Cole, the meaning of “firm offer
of credit” varies from state to state based on each state’s defini-
tion of an “offer,” Congress’ intent that the FCRA have uniform
meaning and application among the states would be thwarted.
12 No. 03-3331
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 con-
sumer’s perspective, an offer of credit without value is the
equivalent of an advertisement or solicitation. It is clear that
Congress did not intend to allow access to consumer credit
information “for catalogs and sales pitches.” Trans Union
Corp., 267 F.3d at 1143. Such importuning simply—and
understandably—is not among the permissible reasons for
which a credit agency may disclose a consumer’s credit
information. See Trans Union Corp., 81 F.3d at 234; see also
Tucker v. Olympia Dodge of Countryside, Inc., 2003 WL
21230604, at *3 (N. D. Ill. May 28, 2003).7 Defining a firm
offer of credit as merely any offer that will be honored
elevates form over substance, “exalt[s] artifice above reality
and . . . deprive[s] the statutory provision in question of all
serious purpose.” Gregory v. Helvering, 293 U.S. 465, 470
7
The FTC also has recognized the need for an offer to have value
in order to preserve the balance struck by Congress. In explaining
its interpretation of “prescreening” contained in the official
commentary to the FCRA, it stated:
[T]he prescreening process is offset by a substantial potential
gain—an actual offer of credit. However, it also believes that a
liberalized interpretation that would permit the creditor to
send only promotional material to the “survivors” of the
prescreen would not be justified because the consumers would
not be receiving the same clear benefit in exchange for the
creditor’s use of their credit histories in the prescreening
process.
Federal Trade Comm’n, Statement of General Policy: Commen-
tary on the Fair Credit Reporting Act, 55 Fed. Reg. 18,804, 18,807
(May 4, 1990) (Supplemental Information).
No. 03-3331 13
(1935); see also Clark v. Rent-It-Corp., 685 F.2d 245, 248 (8th
Cir. 1982) (stating that the Truth In Lending Act (“TILA”)
“is remedial in nature, and the substance rather than the
form of credit transactions should be examined in cases
arising under it” (internal quotation marks and citation
omitted)).
We believe therefore that the district court’s focus on
whether the offer would have been honored was inappro-
priately narrow.8 Although the statute requires that an offer
8
Other cases in the district courts of this circuit also have treated
whether an offer is guaranteed as the sine qua non of a “firm offer
of credit.” For example, in Sampson v. Western Sierra Acceptance
Corp., 2003 WL 21785612, at *2 (N.D. Ill. Aug. 1, 2003), the district
court reasoned:
Defendants’ certificate contains no minimum amount of
credit and only states the holder is “preapproved for an auto
loan” and must call to find out the amount. Theoretically,
this pre-approval could be for any amount, perhaps even as
low as $1. Nonetheless the FCRA “does not require a ‘firm
offer’ to be in any particular amount,” see Tucker [v. Olympia
Dodge of Countryside, Inc., 2003 WL 21230604, at *3 (N.D. Ill.
May 28, 2003)], and the statute merely states that firm offer
of credit is “any offer . . . that will be honored . . . .” 15 U.S.C.
§ 1681a(1). Plaintiffs do not allege that defendants failed to
honor the offer of credit, thus plaintiffs failed to state a claim.
Id. at *2. For the reasons set forth in this opinion, “[t]he fact that
the creditor would honor such an offer—even if no rational
consumer would redeem it—should not provide the creditor with
a permissible purpose for obtaining credit information.” Amicus
Br. at 18. “If the important privacy protections of the FCRA are to
retain their vitality, users of consumer report information must
not be permitted to evade them through the use of sham offers of
credit that have no appreciable economic value to consumers.” Id.
(continued...)
14 No. 03-3331
of credit be honored in order to qualify as a “firm offer of
credit,” see 15 U.S.C. § 1681a(l) (“The term ‘firm offer of
credit or insurance’ means any offer of credit or insurance
to a consumer that will be honored . . . .”), this element is
not dispositive. To determine whether the offer of credit
comports with the statutory definition, a court must con-
sider the entire offer and the effect of all the material condi-
tions that comprise the credit product in question. If, after
examining the entire context, the court determines that the
“offer” was a guise for solicitation rather than a legitimate
credit product, the communication cannot be considered a
firm offer of credit.
In making this assessment, one important term for courts
to evaluate is the amount of credit to be extended. However,
neither a creditor nor a debtor considers the amount of
credit in a vacuum; both must know the other terms at-
tached to that credit to determine whether it is advanta-
geous to extend or to accept the offer. The terms of an offer,
such as the rate of interest charged, the method of comput-
ing interest and the length of the repayment period, may be
so onerous as to deprive the offer of any appreciable value.9
8
(...continued)
at 17.
9
The FTC shares our view that there “are a variety of factual
issues that are relevant to th[e] inquiry” of whether the flyer
constitutes a “bona fide firm offer of credit.” Amicus Br. at 21.
According to the FTC, the following are all considerations in
this inquiry:
What type of credit was offered? What would be the terms of
the credit? Did the creditor have a business plan in place that
fully complied with the requirements for firm offers of credit
under Section § 1681a(l), including establishing in advance
(continued...)
No. 03-3331 15
Here, the pleadings reasonably support the plaintiff’s
claim that the offer was a sham made to justify access to the
consumer credit reports. First, it is far from clear from the
flyer that the offer of credit will be honored even if the
consumer meets the conditions set forth in the offer. The
offer initially states that, “[i]n any event you are guaranteed
to receive a credit line of at least three hundred dollars for
the purchase of a vehicle, GRSI, Coral Springs, FL.” R.37,
Ex.A. However, later within the offer, the following lan-
guage appears: “Guaranteed approval is neither express nor
implied.” Therefore, the language of the flyer itself creates
a question whether the offer of credit will be honored.
Additionally, the relatively small amount of credit
combined with the known limitations of the offer—that it
must be used to purchase a vehicle—raises a question of
whether the offer has value to the consumer. Finally, several
material terms are missing from the offer. Although the
offer indicates that interest rates may vary from 3.0 to 24.9
percent, the precise rate of interest for a particular consumer
is unknown. Furthermore, the offer does not specify the
method by which interest will be compounded nor the
repayment period, although these factors are essential
considerations in determining whether the offer has any
value. These missing terms render it impossible for a court
9
(...continued)
the criteria for the credit? Did any consumers apply for, or
actually get, this credit? If not, why not? For example, was
the offer so unintelligible—were the terms so inherently
confusing, contradictory or buried in fine print—that no one
applied? Was there any guarantee? Was the credit offer so
trivial, or were there so many conditions, that it was not
meaningful? . . .
Id.
16 No. 03-3331
to determine from the pleadings whether the offer has
value. 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.
C. Clear and Conspicuous Statement
Ms. Cole also contends that, even if the flyer contains
a firm offer of credit, it nonetheless violates the FCRA for
failing to make required disclosures in a clear and con-
spicuous manner. The district court granted the defendants’
Rule 12(b)(6) motion with respect to this claim without
discussion. Whether the disclosures contained in the flyer
are clear and conspicuous is a matter of law that we review
de novo. See Lifanda v. Elmhurst Dodge, Inc., 237 F.3d 803,
805-06 (7th Cir. 2001); Smith v. Check-N-Go of Illinois, Inc., 200
F.3d 511, 514 (7th Cir. 1999).10
10
We note in passing that, under these circumstances, a dismissal
pursuant to Federal Rule of Civil Procedure 12(b)(6) was im-
proper. We previously have held in reviewing a TILA claim that
“allegations that disclosures are not ‘clear and conspicuous’ state
a claim upon which relief may be granted.” Lifanda v. Elmhurst
Dodge, Inc., 237 F.3d 803, 805-06 (7th Cir. 2001) (citing Smith v.
Check-N-Go of Illinois, Inc., 200 F.3d 511, 514 (7th Cir. 1999)). “The
possibility that the allegation is false—even that attachments to
the complaint demonstrate its falsity— does not mean that the
complaint fails to state a claim.” Check-N-Go, 200 F.3d at 514.
However, the presence of the attachment to the complaint
authorizes “the district court to grant judgment on the pleadings
under Rule 12(c) . . . .” Id. Therefore, because Ms. Cole alleged
that the disclosures were not clear and conspicuous, she stated a
(continued...)
No. 03-3331 17
1. Disclosures Required by the FCRA
The FCRA provides that any person using a consumer
report to make a firm offer of credit “shall provide with
each written solicitation made to the consumer regarding
the transaction a clear and conspicuous statement” disclosing
statutorily required information. 15 U.S.C. § 1681m(d)
(emphasis added).11 The notice must inform the consumer
that: (1) the recipient’s consumer credit report was used in
determining who should be sent the offer; (2) the consumer
was selected because the consumer satisfied certain criteria;
(3) the offer may not be extended if the consumer does not
continue to meet the criteria bearing on creditworthiness or
provide the required collateral; (4) the consumer has the
right to opt out of future offers by prohibiting the unsolic-
ited use of information contained in their consumer file; and
(5) the consumer may exercise that right by calling
10
(...continued)
claim under Rule 12(b)(6), and the district court should have
referenced Rule 12(c) in entering judgment on this claim.
However, regardless of whether the complaint was dismissed
pursuant to Rule 12(b)(6) or judgment was entered pursuant to
Rule 12(c), our review is de novo. See Lifanda, 237 F.3d at 806.
11
The requirements of clear and conspicuous disclosures are only
triggered if a valid firm offer was extended. Section 1681m(d)
provides that “[a]ny person who uses a consumer report on any
consumer in connection with any credit or insurance transaction
that is not initiated by the consumer, that is provided to that
person under section 1681b(c)(1)(B) of this title [a firm offer of
credit or insurance], shall provide with each written solicitation
made to the consumer regarding the transaction” “a clear and
conspicuous statement” of the required disclosures. Conse-
quently, if a solicitation is not provided pursuant to §
1681b(c)(1)(B), i.e., is not a firm offer of credit, § 1681m(d) is not
applicable. See Amicus Br. at 24, n.9.
18 No. 03-3331
a specified toll-free number or by contacting the credit
agency at a given address. See id.
The FCRA does not define the term “clear and conspicu-
ous,” and, in fact, there is little case law interpreting the
term as used in § 1681m. See Sampson, 2003 WL 21785612, at
*3 (commenting on the lack of case law defining “clear and
conspicuous” in the FCRA). However, the term “clear and
conspicuous” is a staple in commercial law. See Channel v.
Citicorp Nat’l Servs., Inc., 89 F.3d 379, 382 (7th Cir. 1996)
(noting that neither the Consumer Leasing Act nor regula-
tions defined the term but that the “words were staples of
commercial law”). Accordingly, courts that have addressed
the term in the FCRA often have turned to cases involving
the Uniform Commercial Code (“UCC”) and TILA for
guidance. See Stevenson v. TRW Inc., 987 F.2d 288, 295 (5th
Cir. 1993) (defining “clear and conspicuous” language used
in 15 U.S.C. § 1681i(d) with reference to TILA and UCC
cases); Tucker v. New Rogers Pontiac, Inc., 2003 WL 22078297,
at *4 (N.D. Ill. Sept. 9, 2003) (addressing the phrase in 15
U.S.C. § 1681m(d)(1) by relying on a TILA decision);
Sampson, 2003 WL 21785612, at *3-4 (relying on cases from
the Fair Debt Collection Practices Act, TILA and other
sections of the FCRA to interpret the term in § 1681m).
For example, in Stevenson, 987 F.2d 288, the only federal
court of appeals case to consider the meaning of “clear and
conspicuous” in the context of the FCRA, the Fifth Circuit
looked to how the term had been interpreted for purposes
of the UCC. That court stated:
The term “conspicuous” has been construed most
frequently with the Uniform Commercial Code
§ 2-316(2), which requires that any exclusion or mod-
ification of the implied warranty of merchantability
be conspicuous, and that any exclusion or modification
No. 03-3331 19
of the implied warranty of fitness for a particular
purpose be made in a conspicuous writing. A contract’s
warranty disclaimer satisfies the conspicuous require-
ment when it is printed in all capital letters, when it
appears in a larger type than the terms around it, or
when it is in a larger and boldface type. Likewise, a
disclaimer in boldface type, printed in all capitals on the
face of the warranty above the buyer’s signature meets
the definition of conspicuousness. A disclaimer is not
conspicuous, however, when it is printed in small print
on the back of the document, when it is the same size
and typeface as the terms around it, or when it is not in
boldface or capital lettering.
Stevenson, 987 F.2d at 296 (internal citations omitted). After
reviewing these standards, the court evaluated the notice at
issue to determine whether it was conspicuous:
TRW’s notice of the consumer’s right to have corrected
reports sent to creditors was printed in the same size
type as the other terms in the same paragraph. The
paragraphs around the notice appeared in larger,
boldface type. Even if Stevenson read the back of his
first credit report, there was nothing to draw his atten-
tion particularly to the statutory notice. We conclude
that the district court did not err in finding that TRW
negligently violated the notice requirement of §
1681i(d).
Id.12
12
See also Sampson, 2003 WL 21785612, at *4 (looking to TILA,
UCC and Fair Debt Collection Practice Act cases in interpreting §
(continued...)
20 No. 03-3331
Like the Fifth Circuit, we believe it is appropriate to
draw upon the wealth of UCC and TILA case law in deter-
mining the meaning of “clear and conspicuous” under the
FCRA. The UCC defines conspicuous as “so written,
displayed, or presented that a reasonable person against
which it is to operate ought to have noticed it.” U.C.C. § 1-
201(10). When evaluating a disclaimer of warranty against
this standard, we have looked to how many times a cus-
tomer was made aware of the notice, whether the notice was
on the front or back of the document in question, whether
the language of the notice was emphasized in some way
(such as by bolding the text or by employing all capitals)
and whether the notice was set off from the rest of the
document so as to draw attention to it. See H.B. Fuller Co. v.
Kinetic Sys., Inc., 932 F.2d 681, 689 (7th Cir. 1991).
We also have considered the definitions of “clear” and
“conspicuous” with respect to TILA. At issue in Lifanda, 237
F.3d at 805-06, was whether a disclosure of the term of
insurance and the amount of the premium was clear and
conspicuous. We stated:
The term of the insurance is set forth in the Auto Theft
Registration form, but is set forth in the smallest type on
the form, which is so minuscule as to be barely legible.
12
(...continued)
1681m and finding that disclosures under § 1681m were
not conspicuous when they were on the back with no reference on
the front and in six-point font where the rest of the text ranged
from 10.5 to 28-point font); Tucker v. New Rogers Pontiac, Inc., 2003
WL 22078297, at *4 (N.D. Ill. Sept. 9, 2003) (referencing TILA
applications of “clear and conspicuous” and concluding that
disclosures that were “not on the reverse side” but that were
barely legible were not conspicuous).
No. 03-3331 21
Although the district court notes that TILA does not
mandate any minimum type size, it simply does not
follow that type size is irrelevant to a determination of
whether a disclosure is “conspicuous.” If the term
“conspicuous” is to retain any meaning at all, it cannot
be met as a matter of law by type disproportionately
small to that in the rest of the document, and which is
itself barely legible. Far from being conspicuous, the
“disclosure” here is quite the opposite.
Id. at 808 (internal citation omitted).
The above cases make it clear that there is not one aspect
of a notice that necessarily will render it “clear and conspic-
uous” for purposes of the FCRA. We must consider
the location of the notice within the document, the type size
used within the notice as well as the type size in comparison
to the rest of the document. We also must consider whether
the notice is set off in any other way—spacing, font style, all
capitals, etc. In short, there must be something about the
way that the notice is presented in the document such that
the consumer’s attention will be drawn to it.
2. Application
Turning to the flyer, the required disclosures are con-
densed into a single paragraph at the very bottom of the
flyer. The paragraph consists of nine lines of text that
occupy, generously speaking, one inch of space. The font
size is no larger than six-point and is the smallest font on the
page by several sizes. The notice is not distinct in any way
(except in how small it is)—either through color, emphasis
22 No. 03-3331
or font style.13 The remainder of the flyer, however, utilizes
all caps, bold, italics and various font sizes to emphasize
other information being communicated.
Under any test of conspicuousness, the notice must
fail. The type in this disclaimer fairly can be described as
disproportionately small compared to the surrounding
text; indeed, its size approaches that which cannot be
read with the naked eye. The text is the smallest text on
a page that is filled with larger type, as well as type that
is bolded and italicized. The notice does nothing to draw the
reader’s attention to this material; to the contrary, the flyer
appears to be designed to ensure minimal attention by the
reader. Consequently, we must conclude that the district
court erred in holding that the defendants’ disclosures were
clear and conspicuous as a matter of law; indeed, the
opposite appears to be the case.14
13
The only text in the bottom paragraph that appears in any kind
of differentiated type is the phrase “CREDIT CARD
DISCLAIMER,” which appears in the same font size, but in
all capital letters.
14
The defendants make one last argument that we need address
only briefly. They claim that “[t]he FCRA imposes liability for the
dissemination of consumer credit reports by consumer reporting
agencies, and therefore is not applicable to the defendants, who
allegedly merely obtained the Plaintiff’s credit report.” Appellees’
Br. at 23. However, as noted by the FTC and as recognized by
every circuit to address the issue, the 1996 amendments to the
FCRA included § 1681b(f) which provides: “A person shall not
use or obtain a consumer report for any purpose unless—(1) the
consumer report is obtained for a purpose for which the con-
sumer report is authorized to be furnished under this section; and
(continued...)
No. 03-3331 23
Conclusion
For the foregoing reasons, we reverse the judgment of
the district court and remand the case for further proceed-
ings consistent with this opinion. Ms. Cole may recover her
costs in this court.
REVERSED and REMANDED
A true Copy:
Teste:
_____________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
14
(...continued)
(2) the purpose is certified in accordance with section 1681e of
this title by a prospective user of the report through a general or
specific certification.” (emphasis added). Thus, it is clear that the
FCRA now imposes liability for using or obtaining a consumer
report in violation of the FCRA, not simply for releasing or
disseminating a report.
USCA-02-C-0072—11-19-04