Sullivan v. Greenwood Credit Union

United States Court of Appeals
For the First Circuit

No. 07-2354

ANTHONY SULLIVAN, on behalf of himself
and all others similarly situated,

Plaintiff, Appellant,

v.

GREENWOOD CREDIT UNION, JOHN DOES 1-5,

Defendants, Appellees.

APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Joseph L. Tauro, U.S. District Judge]

Before

Lynch, Circuit Judge,
Tashima,* Senior Circuit Judge,
and Lipez, Circuit Judge.

Christopher Lefebvre with whom Claude Lefebvre &
Christopher Lefebvre, P.C., Scott C. Borison, and Legg Law Firm,
LLC were on brief for appellant.
Harvey Weiner with whom Jill M. Brannelly and Peabody &
Arnold LLP were on brief for appellee.

March 19, 2008

*
Of the Ninth Circuit, sitting by designation.
 LYNCH, Circuit Judge. This putative class action

challenges the legality, under the Fair Credit Reporting Act

("FCRA" or "the Act"), 15 U.S.C. § 1681 et seq., of an unsolicited

letter to a consumer about the offering of credit for a home loan.

Defendant Greenwood Credit Union sent the letter to plaintiff,

Anthony Sullivan, and others based on a list of individuals meeting

certain minimal credit requirements that Greenwood had purchased

from a credit reporting agency, a process called pre-screening.

This unsolicited letter to Sullivan and others triggered the

requirements of the FCRA, which permits the unconsented-to use of

credit information only for specific purposes, one of which is the

extending of a "firm offer of credit" as defined by the Act. If

Greenwood has willfully used credit information for an unpermitted

purpose, Greenwood would have to pay actual damages or a statutory

penalty between $100 and $1,000 per person. This case is about

plaintiff's efforts to collect that statutory penalty for a class

of consumers; there is no claim Sullivan was wrongfully denied

credit.

This case does not involve a claim that the letter was a

sham and merely a marketing device for a consumer purchase. There

is also no claim that Greenwood would have used the same criteria

by which it selected Sullivan to receive the letter to deny him

credit. Rather, the plaintiff's argument is that the letter was

based on such minimal criteria and the actual extension of credit

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was so contingent on other conditions that the letter could not be

a firm offer of credit.

After allowing some discovery, the district court granted

summary judgment to the defendant, finding that Greenwood's letter

to the proposed plaintiff class constituted a "firm offer of

credit" as that term is defined by the FCRA. Construction of the

FCRA's term "firm offer of credit" is a matter of first impression

for this circuit. We affirm.

I.

In 2006, Greenwood purchased from TransUnion Credit

Bureau a list of names and addresses of homeowners who met certain

financial criteria, including having at least $10,000 in revolving

debt and a credit score of 500 or greater.1 The plaintiff met

those criteria and was on this list. Greenwood obtained only a

consumer report containing contact information; it did not receive

any homeowner's full credit report nor any homeowner's particular

credit score.2

1
The Act defines a "credit score" as "a numerical value or
a categorization derived from a statistical tool or modeling system
used by a person who makes or arranges a loan to predict the
likelihood of certain credit behaviors, including default." 15
U.S.C. § 1681g(f)(2)(A). A higher credit score translates to
higher creditworthiness.
2
Although the contact information Greenwood received
contained no actual credit information, it nonetheless qualifies as
a "consumer report" for the purposes of the FCRA, thus triggering
the FCRA's requirements. 15 U.S.C. § 1681a(d).

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 Greenwood used this list to send unsolicited copies of a

form letter to each of the pre-qualified homeowners, including

Sullivan. The body of the letter stated, among other things, that:

Because of your excellent credit, you have
been pre-approved** for a home loan, up to
100% of the value of your home. . . .

. . . .

If you have not yet taken advantage of
some of the lowest rates in decades, you still
have time to secure a great program by
contacting one of our knowledgeable mortgage
originators today! This is your opportunity
for a no cost, no obligation telephone
consultation . . . !

** Limited time offer to customers who
qualify based on equity, income, debts, and
satisfactory credit. Rates and terms subject
to change without notice. Most loan programs
require both a satisfactory property appraisal
and title exam for final approval. . . . If at
time of offer you no longer meet initial
criteria, offer may be revoked.

In addition, the letter contained the following italicized notices

in a different typeface from the rest of the letter:

You can choose to stop receiving "prescreened"
offers of credit from this and other companies
by calling toll-free [telephone number]. See
PRESCREEN & OPT-OUT NOTICE on the other side
for more information about prescreened offers.

. . . .

PRESCREEN & OPT OUT NOTICE — This
"prescreened" offer of credit is based on
information in your credit report indicating
that you meet certain criteria. This offer is
not guaranteed if you do not meet our criteria
including providing acceptable property as

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 collateral. If you do not want to receive
prescreened offers of credit from this and
other companies, call TransUnion at . . . or
visit the website . . .; or write . . . .

The letter did not contain specific loan terms, such as an interest

rate or the duration of the loan.

Sullivan had never consented to the disclosure of any of

his credit information to Greenwood. Upon receiving the letter,

Sullivan made no attempt to respond to the letter or contact

Greenwood.

Instead, on August 8, 2006, Sullivan filed a putative

class action, on behalf of a class of the approximately two million

consumers who received the letter, in federal district court in

Massachusetts, alleging that Greenwood was in violation of the

FCRA. Sullivan argues that because he never consented to the

disclosure of his credit information to Greenwood, Greenwood could

only legally have obtained information that he met the pre-

screening criteria if it was for the purpose of granting a "firm

offer of credit." He contends that the letter he received is not

a "firm offer of credit" because it "is lacking crucial terms for

it to be an offer" and "is so vague and lacking in terms as not to

constitute an 'offer capable of acceptance'." He seeks statutory

damages of $1,000 per person in the class, punitive damages, and

attorneys' fees and expenses. See 15 U.S.C. § 1681n(a).

The district court allowed the plaintiff limited

discovery. The plaintiff moved for class certification and, after

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discovery concluded, the defendant moved for summary judgment. On

August 13, 2007, the district court granted summary judgment to the

defendant, holding that Greenwood's letter constituted a "firm

offer of credit" under the FCRA. It dismissed the class

certification motion as moot. This appeal followed.

II.

We review the district court's entry of summary judgment

de novo. Mellen v. Trs. of Boston Univ., 504 F.3d 21, 24 (1st Cir.

2007). There are no material disputes of fact; the issues are ones

of law.

A. The Role of the FCRA Within the Consumer Credit
Protection Act's Statutory Scheme

The Consumer Credit Protection Act, Chapter 41 of Title

15, U.S.C., initially enacted in 1968, is a comprehensive consumer

protection statute that accomplishes its purpose through a number

of subchapters, each of which regulates a different aspect of or

actor in the credit industry.3 The FCRA is only one of these

subchapters.

Subchapter I of the Consumer Credit Protection Act is the

Truth in Lending Act ("TILA"), 15 U.S.C. § 1601 et seq., which

3
"[T]he Consumer Credit Protection Act is a comprehensive
statute designed to protect consumers by requiring full disclosure
of financial terms in most credit transactions, making unlawful the
use of certain unethical practices in the garnishment of wages and
debt collection, regulating the transfer of funds by electronic
means, and prohibiting discrimination in credit transactions."
Brothers v. First Leasing, 724 F.2d 789, 791 (9th Cir. 1984).

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imposes disclosure requirements on creditors. Subchapter II places

restrictions on garnishment of compensation, 15 U.S.C. § 1671 et

seq. Subchapter II-A is the Credit Repair Organizations Act, 15

U.S.C. § 1679 et seq., which protects consumers from unfair trade

practices by credit repair organizations. Subchapter III is the

FCRA, 15 U.S.C. § 1681 et seq., which primarily regulates credit

reporting agencies but also places requirements on users of credit

information from these agencies. Subchapter IV is the Equal Credit

Opportunity Act, 15 U.S.C. § 1691 et seq., which prohibits

discrimination in the extension of credit. Subchapter V is the

Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq.

Subchapter VI is the Electronic Fund Transfer Act, 15 U.S.C. § 1693

et seq., which regulates the participants in electronic fund

transfer systems. We turn to certain of the subchapters.

1. The Fair Credit Reporting Act

Congress enacted the FCRA in 1970 as part of the Consumer

Credit Protection Act "to ensure fair and accurate credit

reporting, promote efficiency in the banking system, and protect

consumer privacy." Safeco Ins. Co. of Am. v. Burr, 127 S. Ct.

2201, 2205 (2007); see TRW Inc. v. Andrews, 534 U.S. 19, 23 (2001);

see also 15 U.S.C. § 1681. Congress adopted a variety of measures

designed to ensure that credit reporting agencies report only

appropriate information. Some measures are imposed on agencies

directly, others on users of credit information, such as Greenwood.

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As to users of credit information, the Act sets out a statutory

scheme which, among other things, allows the purchase of various

forms of information compiled in consumers' credit reports from

consumer credit reporting agencies for certain specified business

purposes. 15 U.S.C. § 1681b. One of these purposes is to extend

credit or insurance to a consumer. Id. § 1681b(a)(3)(A),

(a)(3)(C).

In 1996, Congress amended the FCRA to allow creditors or

insurers to purchase pre-screened lists of names and addresses of

consumers who met certain criteria without each consumer's consent

as long as they plan to extend to the consumer a "firm offer of

credit or insurance." Id. § 1681b(c)(1); Pub. L. No. 104-208,

§ 2404, 110 Stat. 3009, 3009-430 (1996). That provision is at

issue in this case. Once a creditor planning to extend firm offers

of credit provides a consumer reporting agency with a set of

financial criteria, the consumer reporting agency can provide the

creditor the contact information, and no more, for consumers who

meet those criteria. See 15 U.S.C. § 1681b(c). As a result, the

purported extender of credit, here Greenwood, does not receive any

consumer's full credit report. Greenwood cannot receive the full

credit report without the consumer's permission. Here, Greenwood

never received the full credit report.

In addition, the Act imposes disclosure requirements on

creditors who use pre-screened lists. Id. § 1681m. There is no

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claim Greenwood failed to comply with these disclosure

requirements.

The Act provides a private right of action and imposes

civil liability on users of credit information and consumer

reporting agencies for noncompliance with the requirements of the

Act, so long as the person acted willfully, id. § 1681n(a),

knowingly, id. § 1681n(b), or negligently, id. § 1681o. In the

case of a corporation that willfully fails to comply with any

requirement of the Act, a court has discretion to award actual

damages or statutory damages between $100 and $1,000 per consumer,

in addition to punitive damages and attorneys' fees. See id. §

1681n(a).

2. The Truth in Lending Act

This case is not brought under TILA and there is no claim

that Greenwood violated TILA. We discuss TILA to put into context

the limited purposes of the FCRA.

Congress focused on creditors, not credit reporting

agencies, when it enacted the TILA in 1968 to "assure a meaningful

disclosure of credit terms so that the consumer will be able to

compare more readily the various credit terms available to him and

avoid the uninformed use of credit," which would enhance "economic

stabilization . . . and the competition among the various financial

institutions." 15 U.S.C. § 1601(a); see also Koons Buick Pontiac

GMC, Inc. v. Nigh, 543 U.S. 50, 53-54 (2004). "The Act requires a

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creditor to disclose information relating to such things as finance

charges, annual percentage rates of interest, and borrowers'

rights, see [15 U.S.C.] §§ 1631-1632, 1635, 1637-1639, and it

prescribes civil liability for any creditor who fails to do so, see

[15 U.S.C.] § 1640." Koons, 543 U.S. at 54. TILA's remedial

scheme provides a right of action for both individual and class

plaintiffs. See 15 U.S.C. § 1640. If a creditor violates TILA's

requirements, a consumer is entitled to the sum of actual damages

and statutory damages. The sum varies based on whether the action

was maintained on a class or an individual basis and the type of

credit transaction involved. See id. Unlike the FCRA, there is no

scienter requirement for creditor liability. See id. § 1640(c).

Pertinent to our case, the TILA's requirement of

disclosure of specific credit terms kicks in at a point in the

credit transaction subsequent to a FCRA firm offer of credit. That

is, TILA applies "at the time an application is provided to the

consumer" for home equity loans, 12 C.F.R. § 226.5b(b), or "before

consummation of the transaction" for mortgages, id. § 226.17(b).

See Soroka v. JP Morgan Chase & Co., 500 F. Supp. 2d 217, 222

(S.D.N.Y. 2007). Before then, the firm offer of credit is governed

by the FCRA disclosure requirements. Here, Sullivan made no

further communication after the FCRA firm offer, so the TILA is not

implicated.

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B. Was Greenwood's Letter a "Firm Offer of Credit"?

Sullivan brings his action under the FCRA. He may

prevail only if he establishes that the letter he received was not

a "firm offer of credit" under the FCRA.

Each side relies on a canon of statutory interpretation

to support its argument. The plaintiff invokes the Supreme Court's

use of "the general rule that a common law term in a statute comes

with a common law meaning, absent anything pointing another way,"

in its recent Safeco decision. 127 S. Ct. at 2209. The Court used

this canon to interpret the term "willfully" in the FCRA, 15 U.S.C.

§ 1681(n)(a), when the statute did not otherwise define the term.

Id. Sullivan argues that the common law meaning of the term "firm

offer of credit" would require the disclosure of specific credit

terms to the plaintiff.

The defendant rightly points out, however, that the term

"firm offer of credit" is not subject to that canon because the

term is explicitly defined in the FCRA. The statutory definition

imposes no requirement that a "firm offer of credit" must provide

terms for credit such as interest rate and duration. Invoking the

canon of expressio unius est exclusio alterius, Greenwood argues

that if Congress had wanted to require that more specific credit

terms be included in a "firm offer of credit," it would have said

so.

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 Plaintiff replies that the statutory definition only

applies to the term "firm" and that we should resort to the common

law to define what is an "offer" of credit. He points out that the

statute states: "The term 'firm offer of credit or insurance' means

any offer of credit or insurance to a consumer that will be honored

. . . ." 15 U.S.C. § 1681a(l) (emphasis added). He concludes that

the term "offer" still has independent meaning, undefined by the

statute. We disagree.

We start with the language of the statute and its

grammar. Congress chose in its definition to put into quotes for

the term it was defining "firm offer of credit or insurance," and

not just "firm."

Next, we look to the more complete language iof the

statute, and conclude plaintiff's reading is inconsistent with the

rest of the statute. The Act defines a "firm offer of credit or

insurance" 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
offer, except that the offer may be further
conditioned on one or more of the following:

(1) The consumer being determined,
based on information in the consumer's
application for the credit or
insurance, to meet specific criteria
bearing on credit worthiness or
insurability, as applicable, that are
established--

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 (A) before selection of the
consumer for the offer; and
(B) for the purpose of determining
whether to extend credit or
insurance pursuant to the offer.

(2) 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
application 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.

(3) The consumer furnishing any
collateral that is a requirement for
the extension of the credit or
insurance that was--
(A) established before selection
of the consumer for the offer of
credit or insurance; and
(B) disclosed to the consumer in
the offer of credit or insurance.

15 U.S.C. § 1681a(l).

Under this language, an offer of credit meets the

statutory definition so long as the creditor will not deny credit

to the consumer if the consumer meets the creditor's pre-selection

criteria. The term "firm offer of credit" does not require the

offeror include additional terms other than the pre-selection

criteria. As one court has colloquially put it, "a firm offer of

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credit under the Act really means 'a firm offer if you meet certain

criteria.'" Kennedy v. Chase Manhattan Bank USA, NA, 369 F.3d 833,

841 (5th Cir. 2004).

The statutory scheme imposes disclosure requirements on

a "firm offer of credit" in a variety of ways. The creditor must

disclose that "information contained in the consumer’s consumer

report was used," 15 U.S.C. § 1681m(d)(1)(A). It requires

disclosure that the consumer received the offer because he

satisfied the criteria used to select the customer for the offer,

id. § 1681m(d)(1)(B), but does not purport to require the creditor

to include more criteria than used here. And the statute requires

disclosure that the offer can be conditioned on collateral or other

pre-determined criteria, id. § 1681m(d)(1)(c), that the consumer

has the right to opt out of pre-screened offers, id.

§ 1681m(d)(1)(d), and of how the consumer can exercise that right,

id. § 1681m(d)(1)(e).

Further, the statute contemplates that there will be

subsequent stages of communications beyond the "firm offer of

credit," if the consumer is interested, during which additional

terms will be offered. The statute expressly provides that "the

[firm] offer may be conditioned on one or more of the following

. . . ." In 15 U.S.C. § 1681a(l)(1), the statute refers to

information which the customer will later supply in an "application

for credit." It also refers to a later decision to "extend

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credit." Id. Thus, the statute is clear that the fact that the

initial letter to the consumer does not yet resolve those

additional conditions does not mean the letter fails to be a firm

offer of credit.

The Fifth Circuit's decision in Kennedy, 369 F.3d 833,

provides an example. Kennedy involved a situation in which two

consumers' joint application for a credit card was rejected after

they had received a letter from a bank stating that they were pre-

approved for a credit card account. Id. at 837. The court

nonetheless found that the letter met the statutory definition of

a "firm offer of credit," and that the rejection was proper because

the consumers could not meet the bank's additional pre-determined

creditworthiness criteria. Id. at 841-42. The plaintiff's

preferred definition is inconsistent with the Fifth Circuit's

approach. We have found no circuit precedent which reads the

statute as plaintiff does.

The plaintiff reads a Seventh Circuit case, Cole v. U.S.

Capital, 389 F.3d 719 (7th Cir. 2004), to support his

interpretation of "firm offer of credit." We disagree. In that

case, that court found a mailing not to constitute a firm offer of

credit when the mailing purportedly offered a $300 credit line

towards the purchase of an automobile but did not include specific

credit terms. The court held that "the offer was a sham made to

justify access to the consumer credit reports," and because it "was

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a guise for solicitation rather than a legitimate credit product,

the communication cannot be considered a firm offer of credit."

Id. at 728.

The problem before us is different from the problem in

Cole. As the Seventh Circuit clarified in a later case, "Cole's

objective was to separate bona fide offers of credit from

advertisements for products and services, determining from 'all the

material conditions that comprise the credit product in question

. . . [whether it] was a guise for solicitation rather than a

legitimate credit product.'" Murray v. GMAC Mortgage Corp., 434

F.3d 948, 955-56 (7th Cir. 2006) (quoting Cole, 389 F.3d at 728)

(alteration in original). The purpose of the Cole mailing was "to

identify potential auto buyers," id. at 955, and so the issue in

Cole was whether the mailing was a "firm offer of credit," as

opposed to a "firm offer of credit," see id. See also Dixon v.

Shamrock Fin. Corp., 482 F. Supp. 2d 172, 177 (D. Mass. 2007)

(noting that in Cole "the 'offer of credit' was in fact a sales

pitch for a car dealership"). The problem here is not whether this

is a bona fide offer of credit.

The problem here is also not a bait-and-switch problem.

In other statutes, such as the TILA, Congress mandated truth in the

descriptions of other credit terms. There is no claim here of

untruthful disclosures.

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 Plaintiff argues that Congress intended for individuals

whose private credit information is accessed in any form by a

creditor to be given something of value in the exchange. The

"value" of the offer made by Greenwood, plaintiff argues, is zero,

and so the congressional intent is thwarted. Even if that were the

intent, and it were permissible to substitute assumptions about

intent for the plain language of the statute, we disagree that the

value of the letter to the consumer is zero.

There was some value in the letter. Greenwood's letter

informed the plaintiff that, based on certain credit information,

he had been pre-selected as meeting certain eligibility

requirements for the extension of credit. The letter informed him

that if he were interested he could contact Greenwood and

determine, based on other information, whether he would meet

certain conditions. The letter did not guarantee him a loan, but

did guarantee that he would not be disqualified from a loan on the

basis of the pre-selection criteria. In turn, there was little

invasion of consumer privacy. Greenwood never received his full

credit report. It received only the plaintiff's contact

information and that he met certain pre-selection criteria. This

is a minimal invasion of privacy, offset by the value of the

information in the letter to the plaintiff.4

4
Because we conclude that Greenwood's offer was a firm
offer of credit and did not violate the FCRA, we do not reach the
issue of whether Greenwood acted "willfully," as that term is used

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 We affirm the entry of judgment for defendant.

in the Act, 15 U.S.C. § 1681n(a).

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