Cavin, Lawrence N. v. Home Loan Center Inc ( 2008 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 07-1136
LAWRENCE N. CAVIN and THERESA CAVIN,
individually and on behalf of a class,
Plaintiffs-Appellants,
v.
HOME LOAN CENTER, INC., d/b/a HOMELOANCENTER.COM,
Defendant-Appellee.
____________
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 05 C 4987—Ruben Castillo, Judge.
____________
ARGUED OCTOBER 24, 2007—DECIDED JULY 2, 2008
____________
Before FLAUM, MANION, and WILLIAMS, Circuit Judges.
MANION, Circuit Judge. Home Loan Center, Inc. (“HLC”)
sent Theresa and Lawrence Cavin each a mailer announc-
ing its SmartLoan mortgage program. The Cavins did
not respond to the letters, but instead filed suit in federal
court alleging that HLC violated the Fair Credit Re-
porting Act, 15 U.S.C. § 1681 et seq., by failing to present
them with a firm offer of credit. The parties filed cross-
motions for summary judgment, and the district court
2 No. 07-1136
granted judgment in favor of HLC. The Cavins appeal,
and we affirm.
I.
In 2005, HLC mailed letters offering its SmartLoan
program to thousands of Illinois residents. Theresa and
Lawrence Cavin were both among those recipients. The
mailer was double-sided and informed the recipient that
he was “pre-approved to receive HomeLoanCenter.com’s
exclusive SmartLoan program.” In the top right corner of
the letter, there was a box in which the figures
1.00%/4.27% appeared alongside the following two
columns:
Loan Amount NEW Payment
$100,000 $322
$200,000 $643
$300,000 $965
$400,000 $1287
$500,000 $1608
$600,000 $1930
The letter also stated that there were no fees to get the loan
started and that HLC’s Mortgage Experts could “pre-
qualify [the recipient] right over the phone in minutes and
provide [the recipient] with a customized loan program
that suits [the recipient’s] needs.”
The reverse side of the letter provided that “[t]his offer
may not be extended if, after responding to this offer
you do not meet the criteria used in the selection process.
Further, HomeLoanCenter.com will verify income and
No. 07-1136 3
employment, review credit, and analyze debt and your
equity position in the subject property prior to final loan
approval.” Also on the reverse side, the starting rate for
the mortgage was listed as 1.00% fixed for thirty days
“with a fixed payment option for the first 12 months.
Terms of payment are based on a margin of 2.10% plus the
1-Month MTA Index 2.022% (as of February 16, 2005).” The
paragraph continued by listing the annual percentage
rate for a $200,000 loan for a thirty-year term, but also
stated that the APR “may change if the index adjusts after
the first 30 days.” Referring to the box on the front side
of the letter, the paragraph noted that “the APR’s corre-
sponding to the listed payments are as follows: $100,000
loan amount, 5.16% APR; $200,000 loan amount, 4.471%
APR; $300,000 loan amount, 4.437% APR; $400,000 loan
amount, 4.419% APR; $500,000 loan amount, 4.408% APR;
$600,000 loan amount, 4.401% APR.” This paragraph of
the mailer concluded:
If minimum payment option is selected, deferred
interest may accrue. Interest rate quoted assumes a
credit score of 620+ with a loan-to-value (LTV) of 80%
on a primary residence. The APR and payment will
vary based on specific terms of the loan selected and
verification of information and credits. Rates are
subject to change without notice.
The mailer again stated that not all applicants would be
approved and that terms and conditions applied. Finally,
the letter included HLC’s mailing address, as well as
its toll-free telephone and fax numbers and website.
While the Cavins did not respond to the mailer, they
filed a complaint alleging that HLC violated the Fair
Credit Reporting Act (“FCRA”), 15 U.S.C. § 1681 et seq.,
by accessing their credit information without a permis-
4 No. 07-1136
sible purpose. Specifically, the Cavins contend that the
materials HLC sent them did not constitute a firm offer.
The district court entered summary judgment in favor
of HLC and denied the Cavins’ motion concluding that
HLC’s mailing constituted a firm offer under the FCRA.
II.
We review a district court’s grant of a summary judg-
ment motion de novo. Hardrick v. City of Bolingbrook, 522
F.3d 758, 761 (7th Cir. 2008). When, as in this case, the
parties have filed cross-motions for summary judgment,
“we construe the evidence and all reasonable inferences
in favor of the party against whom the motion under
consideration is made.” Premcor USA v. Am. Home Assur-
ance Co., 400 F.3d 523, 526 (7th Cir. 2005).
Generally, a company receives a consumer’s credit
report only after the consumer initiates contact with the
company. However, the FCRA provides an that “[f]irms
may obtain lists of names and addresses that credit bureaus
generate from their databases according to the stated
criteria.” Murray v. New Cingular Wireless Servs., Inc., 523
F.3d 719, 721 (7th Cir. 2008). Under the FCRA, in order
for a finance company to obtain an individual’s credit
report, the company needs to obtain it with the intent of
extending a firm offer of credit to the potential customer.
15 U.S.C. § 1681b(c)(1)(B)(I). A “firm offer of credit” is “any
offer of credit or insurance to a consumer that will be
honored if the consumer is determined, based on infor-
mation in a consumer report on the consumer, to meet
the specific criteria used to select the consumer for the
offer except that the offer may be further conditioned . . . .”
15 U.S.C. § 1681a(l). Those conditions include a con-
No. 07-1136 5
sumer’s eligibility based on the information in his applica-
tion, verification of continued eligibility, and the consumer
furnishing any required collateral for the extension of
credit which is disclosed to the consumer in the offer. Id.
The FCRA specifically sets out what is meant by verifica-
tion:
Verification
(A) that the consumer continues to meet the specific
criteria used to select the consumer for the offer,
by using information in a consumer report on the
consumer, information in the consumer’s applica-
tion for the credit or insurance, or other information
bearing on the credit worthiness or insurability of
the consumer; or
(B) of the information in the consumer’s application
for the credit or insurance, to determine that the
consumer meets the specific criteria bearing on
credit worthiness or insurability.
15 U.S.C. § 1681a(l)(2).
On appeal, the Cavins assert that HLC’s mailer did not
present a firm offer of credit because some of the material
terms of the loan program were neither disclosed nor
explained adequately. The mailer identified the basis for
calculating interest, the length of the loan, the possibility
of a rate change after thirty days, the minimum payment
option with accompanying deferred interest, and the
information needed to obtain the loan. As we recently
noted, “[n]either § 1681a(l) nor anything else in FCRA
says that the initial communication to a consumer must
contain all of the important terms that must be agreed
on before credit is extended. Trying to disclose every-
thing in the first contact would make the document turgid
6 No. 07-1136
and, paradoxically, uninformative, because it would
be harder to read and grasp.” Murray, 523 F.3d at 723.
Similarly, the FCRA does not require that terms of the loan
be explained in the initial offer letter. In light of the infor-
mation that is presented in HLC’s mailer, the recipient is
notified of the basic information regarding the loan.
Further, we note that the proper inquiry in ascertaining
whether a letter is a firm offer is whether the offer will
be honored, not whether all of the material terms are
listed. Id.
The Cavins contend that various phrases in HLC’s letter
also call into question whether the letter presented a firm
offer of credit, pointing to language such as “not all
applicants will be approved,” “terms and conditions
apply,” and “rates are subject to change without notice,” as
indicia of the a lack of a firm offer. The Cavins’ argument
ignores that the FCRA permits a lender to condition the
offer on the consumer’s eligibility for the loan based upon
factors, such as verification of income and provision of
collateral. See 15 U.S.C. § 1681a(1)(2). These caveats may
simply reflect the FCRA’s allowed conditions, and in the
absence of evidence to the contrary, this language does
not make HLC’s offer less firm. See Murray, 523 F.3d at 723-
24. Further, additional information, such as a consumer’s
full credit history and income, is necessary for the lender
to assess the particular rates and terms depending on the
credit-worthiness of the consumer. “The statute does not
require the revelation of these details as part of a ‘firm
offer’; but unless the algorithm in all its complexity is to
be laid out, any honest offer will leave some matters for
future determination.” Id. at 724 (citing Sullivan v. Green-
wood Credit Union, 520 F.3d 70 (1st Cir. 2008)).
The Cavins point to another phrase that reads: “This
advertisement does not constitute an offer to enter into
No. 07-1136 7
an interest rate and/or discount point agreement.” The
Cavins assert that with this passage HLC “disclaimed the
making of any kind of offer.” HLC responds that this
disclaimer language is required by Minnesota state law
governing mortgage rate-lock agreements and that it did
not change the text of the mailers depending on the
recipient’s state. See Minn. Stat. § 47.206 (governing
mortgage rate-lock agreements, which are agreements in
which a lender promises to guarantee or lock in an inter-
est rate or number of discount points, or both, for a speci-
fied period of time and requiring that a written state-
ment of current loan terms and conditions be accom-
panied by a disclaimer that the statement is not an offer
to enter into a mortgage rate-lock agreement). The Cavins
emphasize the first part of the sentence, “This advertise-
ment does not constitute an offer . . . .” However, as the
district court properly noted, reading the sentence in its
entirety and in context of the entire letter “the language
is merely an attempt by [HLC] to alert recipients of the
mailers that the offer being pitched is not an offer to enter
into a mortgage-rate lock agreement.” Cavin v. Home Loan
Center, Inc., 469 F. Supp. 2d 561, 569 (N.D. Ill. 2007). There-
fore, this passage does not point to the absence of a
firm offer of credit.
The Cavins also cite the minimal number of consumers
who actually obtained the SmartLoan presented in the
letter as evidence that HLC’s letter did not present a
firm offer. We find this argument unpersuasive. First,
“most consumers who receive credit solicitations do not
apply for the offered credit, regardless of how attractive
the terms of the offer are.” Perry v. First. Nat’l Bank, 459
F.3d 816, 826 (7th Cir. 2006). While the Cavins provide
raw numbers, they do not provide a breakdown of those
8 No. 07-1136
who may have applied, but did not qualify, or the num-
ber of consumers who qualified for the SmartLoan, but
instead simply elected to choose a different loan offer.
In the absence of such evidence and also in light of the
limited response to such solicitations, we conclude that
the number of consumers obtaining the SmartLoan does
not demonstrate that HLC’s offer did not comply with
the FCRA.
Finally, citing Cole v. U.S. Capital, Inc., 389 F.3d 719, 728
(7th Cir. 2004), the Cavins contend that HLC’s mailers
presented no value for consumers and thereby violated
the FCRA. In Cole, the consumer received a letter of-
fering a product and a minuscule line of credit toward
the purchase of that product. We concluded that the
letter at issue there violated the FCRA because it was a
solicitation for merchandise rather than offering the
consumer a firm offer of credit that had value as credit. Id.
at 726-27. This case is distinct from Cole because HLC’s
letter did not offer any merchandise, such as a furniture
suite or appliances, but only presented a mortgage offer.
“When credit histories are used to offer credit (or insur-
ance) and nothing but, the right question is whether the
offer is ‘firm’ rather than whether it is ‘valuable.’” Murray,
523 F.3d at 722. Therefore, the Cavins do not prevail on
their FCRA claim by contending that HLC’s letter lacked
value. HLC offered recipients of its letter a first lien
mortgage by presenting information that the SmartLoan
program was an adjustable-rate loan, based on the
MTA index, with a 1% interest start rate, and a term of
30 years. The mailer further provided information re-
garding interest rates, monthly payments, and the
method of calculation. Therefore, we conclude that
HLC’s mailer presented a firm offer of credit.
No. 07-1136 9
III.
We conclude that HLC’s letter presented a firm offer
of credit, despite the absence of some material terms and
the minimal number of consumers who obtained the
SmartLoan. Accordingly, HLC did not violate the FCRA,
and the district court properly granted summary judg-
ment in favor of HLC. We AFFIRM.
USCA-02-C-0072—7-2-08