Perry, Thelma v. First National Bank

In the

United States Court of Appeals

For the Seventh Circuit

____________

No. 05-3867

THELMA PERRY,

Plaintiff-Appellant,

v.

FIRST NATIONAL BANK, doing business as

FIRST NATIONAL CREDIT CARD,

Defendant-Appellee.

____________

Appeal from the United States District Court

for the Northern District of Illinois, Eastern Division.

No. 05 C 1470—Robert W. Gettleman, Judge.

____________

ARGUED MAY 10, 2006—DECIDED AUGUST 25, 2006

____________

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”), 15 U.S.C. § 1681 et seq. Perry alleged that the

company violated 15 U.S.C. § 1681m(d) by failing to include

a clear and conspicuous statement of certain disclosures

required under the FCRA.

First National filed a motion for summary judgment. The

district court granted First National’s motion, finding that

2 No. 05-3867

amendments to FCRA had eliminated private rights of

action to enforce § 1681m. The district court also granted

First National’s motion to strike an expert report that Perry

attempted to submit in support of her claim.

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 15 U.S.C. § 1681b(c)(1)(B)(i),

First National was prohibited from accessing her consumer

credit report. The district court denied Perry’s motion to

amend, finding that the credit offer was a firm offer and

that amending the complaint would be futile.

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 report-

ing agency to target certain people, e.g., individuals with

poor credit or individuals who recently obtained bankruptcy

discharges, for sub-prime credit offers.

No. 05-3867 3

Perry alleged in her complaint that First National

violated 15 U.S.C. § 1681m(d) by failing to include a “clear

and conspicuous” statement of certain disclosures required

by the FCRA. Perry tried to introduce the report of Timothy

Shanahan (“Shanahan report”), a professor of education at

the University of Illinois at Chicago, to support her argu-

ment that the Notice was not “clear and conspicuous.” The

Shanahan report included a “legibility analysis.”

The district court found that Perry did not have a statu-

tory right to bring a private cause of action under

§ 1681m(d), due to a 2003 amendment to the FCRA that

eliminated the right to bring such actions. The district court

therefore granted summary judgment for First National.

The district court also granted First National’s motion to

strike Shanahan’s report, explaining that “[b]ecause no

private right of action exists under § 1681m, an evaluation

of the Notice is not relevant to the instant case.”

Perry also argued that even if her claim under § 1681m(d)

could not succeed, she should be allowed to amend her

complaint to plead a violation of 15 U.S.C.

§ 1681b(c)(1)(B)(i). Section 1681b(c)(1)(B)(i) permits a

consumer credit agency to furnish a consumer report even

though the consumer has not initiated or authorized the

release only if the credit or insurance provider is extend-

ing the consumer a “firm offer of credit.” Perry contends

that the credit solicitation was not a firm offer of credit

because it was for such a small amount of credit that it was

virtually worthless. The district court disagreed and found

that Perry could not state a claim under § 1681b(c)(1)(B)(i),

because First National’s credit offer was a “firm offer of

credit.” The district court denied Perry’s motion to amend,

finding that although the minimum amount of credit that

First National offered was small, the interest rate was

clear, approval was guaranteed, and the credit card did not

contain usage limitations.

4 No. 05-3867

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.” Fed. R. Civ. P. 56(c); see also

Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). “We

review a denial of a motion to amend only for an abuse

of discretion.” Butts v. Aurora Health Care, Inc., 387 F.3d

921, 925 (7th Cir. 2004).

A. Private Right of Action To Enforce 15 U.S.C.

§ 1681m

Perry brought suit to enforce 15 U.S.C. § 1681m(d),

relying on the private right of action provisions contained

in 15 U.S.C. §§ 1681n and 1681o. The district court dis-

missed Perry’s claim, finding that an amendment to the

FCRA had eliminated private rights of action under

§ 1681m.

Congress amended parts of 15 U.S.C. § 1681m on Decem-

ber 4, 2003, as part of the Fair and Accurate Credit Trans-

actions Act (“FACTA”), Pub. L. 108-159. The question here

is whether the newly added §1681m(h)(8) was designed to

preclude private enforcement of the entirety of § 1681m, or

just § 1681m(h).1 15 U.S.C. §1681m(h)(8) provides:

1

In Murray v. GMAC Mortgage Corp., 434 F.3d 948 (7th Cir.

2006), we stated that FACTA “abolishe[d] private remedies for

violations of the clear-disclosure requirement, which in the future

will be enforced administratively.” Id. at 951. Unlike the present

(continued...)

No. 05-3867 5

(h) Duties of users in certain credit transactions

....

(8) Enforcement

(A) No civil actions

Sections 1681n and 1681o 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.

15 U.S.C. § 1681m(h)(8) (emphasis added).

Perry argues that FACTA only eliminated private rights

of action to enforce § 1681m(h), not § 1681m in its entirety.

According to Perry, § 1681m(h)(8) is ambiguous on its face.

Specifically, Perry argues that the term “section” as used in

§ 1681m(h)(8) is ambiguous. Perry maintains that we

should interpret the phrase “this section” to apply only

to subsection 1681m(h).

We cannot accept Perry’s interpretation. Instead, we find

that the phrase “this section” unambiguously refers to

section 1681m as a whole. “Congress ordinarily adheres to

a hierarchical scheme in subdividing statutory sections.”

Koons Buick Pontiac GMC, Inc. v. Nigh, 543 U.S. 50, 60

(2004). As the Supreme Court explained in Koons:

1

(...continued)

case, Murray concerned a credit solicitation offer made before the

effective date of FACTA, id., and the parties did not brief the

question at issue here. Thus, as Perry argues, our statement

about the effect of FACTA on private remedies was dicta, which

is not controlling in this case.

6 No. 05-3867

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 Legisla-

tive 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 Coun-

sel, 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 § 1681m.

“Section” clearly is used to refer to § 1681m as a whole. For

example, in § 1681m(h)(8)(A)—which provides that the

private right of action provisions of the FCRA do not

apply to violations of “this section”—sections “1681n” and

“1681o” are referred to as “Sections.” In § 1681m(h)(8)(B)—

No. 05-3867 7

which provides that enforcement of “this section” shall be

exclusive to certain federal agencies and officials—“1681s”

is designated a section. It is only logical to assume, then,

that Congress was referring to section 1681m when it

used “this section” in § 1681m(h)(8). Subsection 1681m(h)

also uses the phrase “this subsection” consistently when

referring just to § 1681m(h) and its notice requirements,

rather than § 1681m. See 15 U.S.C. § 1681m(h)(1), (3), (4),

(5), and (6). In this case, the assumption “that Congress

intended the same terms used in different parts of the same

statute to have the same meaning” weighs heavily in favor

of our interpretation of “this section” in § 1681m(h)(8).

Belom v. Nat’l Futures Ass’n, 284 F.3d 795, 798 (7th Cir.

2002); see also Firstar Bank, N.A. v. Faul, 253 F.3d 982, 990

(7th Cir. 2001); Taracorp, Inc. v. NL Indus., Inc., 73 F.3d

738, 744 (7th Cir. 1996).

In a few places, § 1681m uses “section” to refer to a

smaller subdivision of the statute than the entire section.

However, these uses are entirely clear: the statute specifi-

cally says, for example, “section 1681a(k)(1)(A) of this title,”

or “section 1681a(k)(1)(B) of this title.” 15 U.S.C.

§ 1681m(b)(2)(B); see also § 1681m(d)(1), 1681m(d)(2), and

1681m(h)(5)(D). All of the generic uses of the term “section”

refer to § 1681m as a whole. Cf. Murray v. Household Bank

(SB), N.A., 386 F. Supp. 2d 993, 997 n.4 (N.D. Ill. 2005).

Perry argues that the placement of §1681m(h)(8) within

the FCRA demonstrates that it applies only to § 1681m(h).

Paragraph (8) is the only part of subsection 1681m(h) that

concerns enforcement. According to Perry, if Congress

intended §1681m(h)(8) to apply to all of § 1681m, it would

have made §1681m(h)(8) into its own subsection,

§ 1681m(i). We are not persuaded. It was logical for Con-

gress to place §1681m(h)(8) where it did, at the very end of

the statute. It is an enforcement provision that applies to

the entire preceding section of the statute. It is also the only

subdivision of § 1681m that concerns enforcement.

8 No. 05-3867

Perry also argues that if we read all references to “this

section” in § 1681m(h) to refer to § 1681m as a whole,

§ 1681m(c) becomes superfluous and redundant because

both § 1681m(h)(7) and § 1681m(c) create a “reasonable

procedures” defense. Again, we disagree with Perry’s

reasoning. If we read all the uses of “this section” in

§ 1681m(h) to mean “subsection,” we would have to at-

tach the same meaning to the other references to “this

section” in § 1681m. See Taracorp, Inc., 73 F.3d at 744

(“’[W]e assume that the same words mean have the same

meaning in a given act[.]”). Two of these references appear

in § 1681m(c), which provides, in its entirety, that “No

person shall be held liable for any violation of this section if

he shows by a preponderance of the evidence that at the

time of the alleged violation he maintained reasonable

procedures to assure compliance with the provisions of

this section.” 15 U.S.C. § 1681m(c) (emphasis added). It

would not make sense to interpret these two references to

mean “subsection,” because § 1681m(c) itself does not

contain any rules that can be violated or complied with.

Perry points out another supposed redundancy caused

by reading “this section” to mean the entirety of § 1681m:

“Section 1681s-2(c),” which was also amended by FACTA,

“expressly provides that the private remedies sections, 15

U.S.C. §§ 1681n and 1681o, do not apply to one portion of

§ 1681, namely 15 U.S.C. § 1681m(e), the provision deal-

ing with ‘red flagging’ of reports affected by identity

theft.” According to Perry, “Congress would not amend 15

U.S.C. § 1681s-2(c) to exempt § 1681m(e) from private

remedies if all of § 1681m were already exempt from private

remedies by virtue of § 1681m(h)(8).”

Although this argument has appeal, redundancy “does not

always produce ambiguity.” Lamie v. U.S. Trustee, 540 U.S.

526, 536 (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

No. 05-3867 9

that avoids surplusage but creates ambiguity in the

text—“applying the rule against surplusage is, absent other

indications, inappropriate.” Id. Instead, “[w]e should prefer

the plain meaning since that approach respects the words

of Congress. In this manner we avoid the pitfalls that

plague too quick a turn to the more controversial realm of

legislative history.” Id. Here, the plain meaning of “this

section” is “section 1681m,” and we will not abandon this

reading to avoid a single instance of surplusage.

Additionally, there is a reasonable explanation for why

Congress included a specific exemption from the private

remedies provision in 5 U.S.C. § 1681s-2(c). This provision

of the FACTA amendment replaced provisions that al-

ready included an exemption from the private remedies

provision. Specifically, it replaced 5 U.S.C. § 1681s-2(c),

which provided that “Sections 1681n and 1681o of this title

do not apply to any failure to comply with subsection (a) of

this section, except as provided in section 1681s(c)(1)(B) of

this title,” and § 1681s-2(d), which provided that “Sub-

section (a) of this section shall be enforced exclusively under

section 1681s of this title by the Federal agencies and

officials and the State officials identified in that section.”

Both before and after FACTA amended 5 U.S.C. § 1681s-

2(c), it included an exemption from private actions for

failure to comply with 5 U.S.C. § 1681s-2(a). FACTA added

two new exemptions, for violations of § 1681s-2(e) and

§ 1681m(e). Both of these provisions establish a duty on the

part of the Federal banking agencies, the National Credit

Union Administration, and the Commission to establish

certain guidelines and prescribe regulations. It was logical

for Congress to include the exemption for violations of

§ 1681s-2(e) in § 1681s-2(c), since both are in the same

section, and it was logical for Congress to also include the

exemption for violations of § 1681m(e), which is related to

§ 1681s-2(e).

10 No. 05-3867

So far as we are aware, every district court consider-

ing this issue—save one—has found that 15 U.S.C.

§ 1681m(h)(8) bars private enforcement of § 1681m in its

entirety. See, e.g., Bruce v. Grieger’s Motor Sales, Inc., 422

F. Supp. 2d 988, 990-93 (N.D. Ind. 2006); Putkowski v.

Irwin Home Equity Corp., 423 F. Supp. 2d 1053, 1060-62

(N.D. Cal. 2006); Stavroff v. Gurley Leep Dodge, Inc.,413

F. Supp. 2d 962, 963-67 (N.D. Ind. 2006); Murray v. Cross

Country Bank, 399 F. Supp. 2d 843, 845 (N.D. Ill. 2005);

Murray v. Household Bank (SB), N.A., 386 F. Supp. 2d 993,

996-99 (N.D. Ill. 2005); Bonner v. Home123 Corp., No.

2:05-CV-146 PS, 2006 WL 1518974, at *3-6 (N.D. Ind. May

25, 2006); Cavin v. Home Loan Center, Inc., No. 05 C 4987,

2006 WL 1313191, at *7 (N.D. Ill. May 10, 2006); Harris

v. Fletcher Chrysler Prods., Inc., No. 1:05-cv-1140-LJM-VSS,

2006 WL 279030, at *1-3 (S.D. Ind. Feb. 2, 2006);

Killingsworth v. Household Bank (SB), N.A., No. 05C5729,

2006 WL 250704, at *3-4 (N.D. Ill. Jan. 31, 2006); Villagran

v. Freeway Ford, Ltd., No. Civ. A. H-05-2687, 2006 WL

964731, at *1 (S.D. Tex. Jan. 19, 2006); Tremble v. Town &

Country Credit Corp., No. 05 C 2625, 2006 WL 163140, at

*1-3 (N.D. Ill. Jan. 18, 2006); Hernandez v. Citifinancial

Servs., Inc., No. 05 C 2263, 2005 WL 3430858, at *2-6 (N.D.

Ill. Dec. 9, 2005); McCane v. America’s Credit Jewelers, Inc.,

No. Civ.A. 05 C 5089, 2005 WL 3299371, at *1-7 (N.D. Ill.

Dec. 1, 2005); Pietras v. Curfin Oldsmobile, Inc., No. Civ.A.

05 C 4624, 2005 WL 2897386, at *2-5 (N.D. Ill. Nov. 1,

2005).

Perry has directed our attention to the one case in which

a district court decided that “this section” in 15 U.S.C.

§ 1681m(h)(8) only bars private rights of action to enforce

§ 1681m(h). In Barnette v. Brook Road, Inc., No. 3:05CV590,

2006 WL 1195913 (E.D. Va. May 3, 2006), the court found

significant that section 312(f) of the FACTA amendments

provides that “[n]othing in this section, the amendments

made by this section, or any other provision of this Act shall

be construed to affect any liability under section 616 or 617

No. 05-3867 11

of the Fair Credit Reporting Act (15 U.S.C. [§§] 1681n,

1681o) that existed on the day before the date of enactment

of this Act.” Barnette, 2006 WL 1195913, at *4. 15 U.S.C.

§§ 1681n and 1681o contain the provisions establishing a

private right of action to enforce the FCRA. According to the

Barnette court, Ҥ 312(f) dictates that private individuals

may still enforce the requirements of § 1681m that ante-

dated FACTA.” Barnette, 2006 WL 1195913 at *4.

We respectfully disagree with the Barnette court’s analy-

sis. While section 312(f) of FACTA provides that the

amendments shall not “affect any liability” under 15 U.S.C.

§§ 1681n and 1681o, it says nothing about who has the right

to bring suit to hold responsible parties liable under

§§ 1681n and 1681o. Our reading of § 1681m(h)(8) has no

effect on First National’s potential liability for violations of

§ 1681m. First National can still be held liable for any

violation, but only by the federal agencies and officials

identified in 15 U.S.C. § 1681s. See 15 U.S.C. § 1681m(h)(8).

In sum, we affirm the district court’s decision to dismiss

Perry’s claim. The unambiguous language of § 1681m(h)(8)

demonstrates that Congress intended to preempt private

causes of action to enforce § 1681m. Because “[o]ur inquiry

must cease if the statutory language is unambiguous and

‘the statutory scheme is coherent and consistent,’ ” we will

not consider Perry’s arguments regarding the legislative

history of FACTA. Ioffe v. Skokie Motor Sales, Inc., 414 F.3d

708, 711 (7th Cir. 2005) (quoting Robinson v. Shell Oil Co.,

519 U.S. 337, 340 (1997) (quoting United States v. Ron Pair

Enters., Inc., 489 U.S. 235, 240 (1989))). We note, however,

that the legislative history of FACTA is silent on the

question of whether Congress intended to preclude private

rights of action to enforce the entirety of § 1681m. “An

inference drawn from congressional silence certainly cannot

be credited when it is contrary to all other textual and

contextual evidence of congressional intent.” United States

v. Rivera, 153 F.3d 809, 812 (7th Cir. 1998) (quoting Burns

12 No. 05-3867

v. United States, 501 U.S. 129, 136 (1991)) (internal quota-

tion marks omitted). Finally, we find that the district court

did not err by striking the report and testimony of Dr.

Shanahan, which were offered by Perry solely to support his

claim under § 1681m(d).

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 Na-

tional’s credit solicitation was not a firm offer of credit

and thus that First National was prohibited by 15 U.S.C.

§ 1681b(c)(1)(B)(i) from obtaining her credit information

to make the solicitation. The district court denied the

motion to amend, finding that the credit solicitation was

a firm offer and that it would be futile for Perry to amend

her complaint. According to the district court, Perry’s

allegations were distinguishable from those made by the

plaintiff in Cole v. U.S. Capital, 389 F.3d 719 (7th Cir.

2004), in which we reversed a grant of summary judg-

ment for defendants on a similar FCRA claim. The dis-

trict court reasoned that although First National’s credit

solicitation offered a small minimum amount of credit,

Perry failed to allege that the credit card’s interest rate was

unclear, that approval was not guaranteed, or that there

were any usage limitations on the credit line.

Under 15 U.S.C. § 1681b(c), a credit or insurance provider

can obtain a consumer’s credit information from a credit

agency without the consumer’s permission only if the

provider is making a “firm offer of credit” to the consumer.

15 U.S.C. § 1681b(c)(1)(B)(i). “Firm offer of credit” is defined

by statute as “any offer of credit or insurance to a consumer

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

No. 05-3867 13

offer, except that the offer may be further conditioned on

one or more of” several conditions that are not relevant to

this appeal. 15 U.S.C. § 1681a(l).

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 Na-

tional’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 guaran-

14 No. 05-3867

teed; 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 appel-

lant’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]auranteed approval is neither express nor implied,”

which “create[d] a question whether the offer of credit

w[ould] 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.

The credit solicitation at issue in this case does not

present the same problems as the solicitation in Cole. First,

it is clear from the face of First National’s solicitation that

recipients are preapproved. The solicitation states, “Your

good standing has been found creditworthy by Legacy Visa

and that qualifies you for a new Visa account.” Perry does

not argue that she or any class member was denied credit

upon responding to the solicitation. Second, the interest

rate for the credit card is stated in the terms and conditions

brochure sent with the credit solicitation, and is set at 18.9

percent.

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.

No. 05-3867 15

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 15 U.S.C. § 1681b(c)(1)(B)(i).2

2

In reaching this conclusion, we have considered our dissenting

colleague’s unease that First National’s credit offer will be

accepted only by those consumers who do not fully understand the

offer’s terms or by those who cannot obtain credit on more

(continued...)

16 No. 05-3867

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 solicitation,

the percentage that received credit cards, and the amount

of money First National earns in interest as compared to

the amount in earns in fees from credit cards like the one

offered to Perry. Perry has not demonstrated that this

evidence is relevant to our inquiry. As Perry admits, most

consumers who receive credit solicitations do not apply for

the offered credit card, regardless of how attractive the

terms of the offer are. Also, Perry does not suggest that

many consumers applied for First National’s credit cards

and were rejected. Finally, Perry does not explain why the

district court should have let it obtain information on the

amount of money First National earns in interest versus in

fees. For instance, what ratio of interest charges versus fees

would demonstrate that a credit offer was not a “firm offer”?

The fact that First National may earn a significant portion

of its revenues from fees charged for credit cards like those

offered to Perry does not make its credit solicitation a

2

(...continued)

favorable terms, such as individuals with very poor credit

histories or who are emerging from bankruptcy. However, as the

dissent acknowledges, the FCRA is designed to protect the privacy

of consumers’ credit histories, not to prevent consumers from

making unwise financial choices even when they are provided

with all the material terms necessary to make informed decisions.

Additionally, we are concerned that accepting our colleague’s

position may have the unintended consequence of precluding

consumers with past financial problems from obtaining credit at

all, and thus make it even more difficult for them to receive loans

and mortgages. We are understanding of the plight of consumers

who must choose between having no credit and having credit on

less than favorable terms, but we also recognize that a company

like First National will not offer credit to consumers on terms that

will not allow it to earn a return.

No. 05-3867 17

sham—the focus of our inquiry is whether the credit

solicitation offers value to the consumer, and in this case we

have determined that it does.

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 Na-

tional 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, recipi-

ents 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

18 No. 05-3867

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.

Id.

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 that First National is using its

privileged access to financial data simply to extract one

creative fee on top of another from consumers who are

either naive, desperate, or both.

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 revolv-

ing 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

No. 05-3867 19

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 consum-

ers’ 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 prod-

uct,” 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. (cita-

tions omitted). For these reasons, I cannot join the majority

opinion.

20 No. 05-3867

A true Copy:

Teste:

________________________________

Clerk of the United States Court of

Appeals for the Seventh Circuit

USCA-02-C-0072—8-25-06