Thelma PERRY, Plaintiff-Appellant, v. FIRST NATIONAL BANK, doing business as First National Credit Card, Defendant-Appellee.
No. 05-3867.
United States Court of Appeals, Seventh Circuit.
Argued May 10, 2006. Decided Aug. 25, 2006.
459 F.3d 816
Kevin B. Duff (argued), Rachlis, Durham, Duff & Adler, Chicago, IL, for Defendant-Appellee.
Michael P. Conway, Grippo & Elden, Chicago, IL, for Amicus Curiae.
Before FLAUM, Chief Judge, BAUER and EVANS, Circuit Judges.
FLAUM, Chief Judge.
Plaintiff-Appellant Thelma Perry filed a class action suit against Defendant-Appellee First National Bank, d/b/a First National Credit Card (“First National“) under the Fair Credit Reporting Act (“FCRA” or “Act“),
First National filed a motion for summary judgment. The district court granted First National‘s motion, finding that amendments to FCRA had eliminated private rights of action to enforce
Perry sought to amend her complaint to allege that First National‘s offer of credit was a sham, not a firm offer of credit, and that, pursuant to
Perry appeals the grant of summary judgment for First National and the denial of her motion to amend. For the following reasons, we affirm.
I. Background
Perry received a credit solicitation mailing from First National, dated February 14, 2005, offering her a pre-approved Visa credit card with a $250 limit. The mailing contained a letter as well as a brochure setting forth the terms and conditions of the offer. One paragraph of the brochure, titled “Fair Credit Report Act Notice” (“Notice“) advised recipients in bold letters that “the credit bureau gave us your name and address and indicated that you met our minimum credit criteria,” and that “you can tell credit bureaus to stop using your credit information for this purpose.” The solicitation letter itself does not specifically refer to the Notice.
Perry did not authorize First National to access her consumer credit report. She alleges that First National accessed her consumer report and used a consumer reporting agency to target certain people, e.g., individuals with poor credit or individuals who recently obtained bankruptcy discharges, for sub-prime credit offers.
Perry alleged in her complaint that First National violated
The district court found that Perry did not have a statutory right to bring a private cause of action under
Perry also argued that even if her claim under
II. Discussion
Our review of the district court‘s decision on a motion for summary judgment is de novo. See, e.g., In re Copper Antitrust Litigation, 436 F.3d 782, 788 (7th Cir. 2006). Summary judgment is appropriate when, taking all of the pleadings and evidence in the light most favorable to the non-moving party, “there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law.”
A. Private Right Of Action To Enforce 15 U.S.C. § 1681m
Perry brought suit to enforce
Congress amended parts of
(h) Duties of users in certain credit transactions
. . . .
(8) Enforcement
(A) No civil actions
Sections
1681n and1681o of this title shall not apply to any failure by any person to comply with this section.(B) Administrative enforcement
This section shall be enforced exclusively under
section 1681s of this title by the Federal agencies and officials identified in that section.
Perry argues that FACTA only eliminated private rights of action to enforce
We cannot accept Perry‘s interpretation. Instead, we find that the phrase “this section” unambiguously refers to section
This hierarchy is set forth in drafting manuals prepared by the legislative counsel‘s offices in the House and the Senate. The House manual provides:
“To the maximum extent practicable, a section should be broken into”
“(A) subsections (starting with (a));”
“(B) paragraphs (starting with (1));”
“(C) subparagraphs (starting with (A));”
“(D) clauses (starting with (i)) ....”
House Legislative Counsel‘s Manual on Drafting Style, HLC No. 104-1, p. 24 (1995).
The Senate manual similarly provides:
“A section is subdivided and indented as follows:”
“(a) Subsection.-”
“(1) Paragraph.-”
“(A) Subparagraph.-”
“(i) Clause.” Senate Office of the Legislative Counsel, Legislative Drafting Manual 10 (1997).
Koons, 543 U.S. at 60-61 (citation omitted). Cf. In re Farley Inc., 236 F.3d 359, 361-62 (7th Cir.2000) (“A legislature that chooses language with time-tested effects does not have to narrate those effects in order to achieve them; a statute is not a legal encyclopedia and need not ape one in order to specify the normal consequences of ordinary legal words and phrases.“).
Congress used these standard designations in
In a few places,
Perry argues that the placement of
Perry also argues that if we read all references to “this section” in
Perry points out another supposed redundancy caused by reading “this section” to mean the entirety of
Although this argument has appeal, redundancy “does not always produce ambiguity.” Lamie v. U.S. Trustee, 540 U.S. 526, 536, 124 S.Ct. 1023, 157 L.Ed.2d 1024 (2004). A “preference for avoiding surplusage constructions is not absolute.” Id. “Where there are two ways to read the text“—one that is consistent with the plain meaning of the text but produces surplusage, and another that avoids surplusage but creates ambiguity in the text—“apply-
Additionally, there is a reasonable explanation for why Congress included a specific exemption from the private remedies provision in
So far as we are aware, every district court considering this issue—save one—has found that
Perry has directed our attention to the one case in which a district court decided that “this section” in
We respectfully disagree with the Barnette court‘s analysis. While section 312(f) of FACTA provides that the amendments shall not “affect any liability” under
In sum, we affirm the district court‘s decision to dismiss Perry‘s claim. The unambiguous language of
B. Firm Offer of Credit Under 15 U.S.C. § 1681b(c)(1)(B)(i)
Perry argued before the district court that she should be allowed to amend her complaint to allege that First National‘s credit solicitation was not a firm offer of credit and thus that First National was prohibited by
Under
In determining “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. 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.” Cole, 389 F.3d at 727-28; see also Murray, 434 F.3d at 955-56.
Perry relies on Cole to argue essentially that First National‘s credit solicitation was a sham, not a firm offer of credit, because it offered only a small amount of credit and required payment of comparatively large fees. Perry alleged:
The solicitation offers a minimum credit line of $250. However, if the offer is accepted, the consumer is charged a processing fee of $9.00 (which is due with the application), an “acceptance” fee of $119.00, an annual membership fee of $50.00, and a “participation” fee of $72.00 per year (charged at a rate of $6.00 per month), for a total of $184.00 in fees for the opening of a credit card account, with $175.00 appearing on the first bill that the cardholder would receive. This means that the effective amount of credit being granted with the card is $75.00, with an outstanding balance of $175.00 that is subject to an annual percentage rate of 18.9%. The amount of credit being offered is therefore virtually worthless, and does not constitute a firm offer of credit.
We agree with the district court that First National‘s credit solicitation constituted a firm offer of credit. In Cole, we identified three factors supporting the appellant‘s argument that the defendant‘s solicitation was not a firm offer: 1) it was not clear that credit approval was guaranteed; 2) the precise rate of credit and other material terms were not included in the solicitation; and 3) the credit card limit, $300, was relatively small in relation to the known limitations of the card, which could be used only toward a vehicle purchase at a particular car dealership. Cole, 389 F.3d at 728. The Cole Court found that the appellant‘s pleadings reasonably supported the appellant‘s claim that the defendant‘s offer was a sham, made only to justify accessing consumer credit reports and solicit buyers for the car dealership. Id. The credit solicitation expressly stated that “[g]uaranteed approval is neither express nor implied,” which “create[d] a question whether the offer of credit would] be honored.” Id. Additionally, “the relatively small amount of credit combined with the known limitations of the offer—that it must be used to purchase a vehicle—raise[d] a question of whether the offer ha[d] value to the consumer.” Id. The Court also found that the missing material terms from the credit solicitation “render[ed] it impossible for the court to determine from the pleadings whether the offer ha[d] value.” Id.
Third, although the credit limit is quite low, the card can be used to purchase any products or services for which Visa is accepted. This is in stark contrast to the credit offered in Cole, which could be used only toward the purchase of a vehicle at a particular car dealership. In Cole, the cost of purchasing a vehicle dwarfed the value of the credit offer. According to Perry, the credit line she was offered actually was much worse than the one at issue in that case, because Cole concerned a $300 credit line, whereas she was offered only “$75 in effective credit.” Perry‘s argument is somewhat misleading. $75 would be the available credit limit in the first month the credit card was used. The processing fee ($9) and acceptance fee ($119) are one-time charges. Once these are paid, the credit recipient would be required to pay $6 per month for the participation fee and $50 the following year for the yearly membership fee.
We recognize that First National‘s credit solicitation requires card holders to pay a significant amount of money in fees, which are quite high in relation to the credit line offered. We realize that this is not an attractive deal for the great majority of consumers. However, the card is not without value. If the credit card holder paid off the card each month, the card would allow him or her to make almost $3000 in purchases in one year. The credit card holder would also build up a credit rating, which is useful to individuals who are trying to establish credit for the first time or to reestablish good credit. Additionally, First National‘s offer was not a “guise for solicitation,” Cole, 389 F.3d at 728, or “a sham offer used to pitch a product rather than extend credit,” Murray, 434 F.3d at 955. The only product First National offered was a credit line. Taking these factors together, we find that the district court did not err by denying Perry‘s request to amend her complaint to add her claim under
Additionally, we affirm the district court‘s ruling to deny Perry‘s request to obtain discovery on the percentage of consumers who responded to First National‘s
III. Conclusion
For the foregoing reasons, we AFFIRM the district court in full.
EVANS, Circuit Judge, dissenting.
I respectfully dissent, because I do not agree that the solicitation First National sent to Perry can reasonably be considered a “firm offer of credit.”
True, the solicitation in this case does not present the exact same problems as the one at issue in Cole v. U.S. Capital, 389 F.3d 719 (7th Cir.2004). In this case, recipients are “preapproved,” the interest rate and other terms are disclosed, and the card can be used to do more than simply buy a car at a particular dealership. If those narrow factors were all that Cole required for a “firm offer of credit,” I would gladly join the majority opinion.
But Cole emphasizes that under the FCRA, a firm offer of credit must have “sufficient value for the consumer,” 389 F.3d at 726. The majority opinion, I believe, glosses over this larger point. As we explained, “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.” Id. at 726-27. The three factors discussed by the majority are not the entire analysis. In Cole we recognized more broadly that the “terms of an offer may be so onerous as to deprive the offer of any appreciable value.” Id. at 728. To determine whether an offer meets the standards of the FCRA,
a court must consider the entire offer and the effect of all the material conditions 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.
I am troubled when I imagine the consumer for whom First National‘s product—with its $9 “processing fee,” $119 “acceptance fee,” $50 “annual membership fee,” and $72 annual “participation fee,” all coming out of a mere $250 line of credit—would be considered to carry appreciable value. Credit card companies employ savvy marketing analysts and sophisticated algorithms to target their offers toward particular niches of consumers. For anyone who understands credit card marketing schemes, it is difficult not to conclude
The majority, echoing a point made by First National‘s counsel at oral argument, explains that the card is, in theory, “not without value” because a card holder who paid off her entire balance every month would have almost $3,000 in purchasing power (albeit in small revolving increments) each year. Of course, a consumer who has the cash flow to pay her bills in full every month has no actual need for credit. She would be better off with a bank account debit card, for which she would not be required to enrich First National by $250 the first year and $122 each year thereafter.
Thus, the only person for whom First National‘s product objectively might have some utility is the consumer whose financial history is so catastrophic that a card encumbered by usurious fees, along with 18.9% interest, is the only option for rehabilitating a credit rating. Even so, before I could accept assurances about the card‘s theoretical value for such a consumer, I would need to know how many such card holders—who dutifully avoid late payments and maxed-out balances—actually are among First National‘s customers or within its target market for this particular product. I suspect not many, because they‘d have better options.
Even if the FCRA is intended only to protect consumers’ privacy, not to safeguard them against predatory credit practices and their own poor financial judgment, I conclude that First National‘s offer is not a “legitimate credit product,” id., which is distinguishable from a “sales pitch[],” id. at 727. In Cole, the sales pitch was for a car; in this case, it is for an unconscionably one-sided financial deal that defies a reasonable concept of sufficient value. On my reading of the relevant statute and our precedent, “[s]uch importuning simply and understandably—is not among the permissible reasons for which a credit agency may disclose a consumer‘s credit information. Defining a firm offer of credit as merely any offer that will be honored elevates form over substance” and deprives the FCRA “of all serious purpose.” Id. (citations omitted). For these reasons, I cannot join the majority opinion.