United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT May 6, 2004
Charles R. Fulbruge III
Clerk
No. 03-30811
RICHARD D. KENNEDY; SALLY S. KENNEDY,
Plaintiffs - Appellants,
versus
CHASE MANHATTAN BANK USA, NA;
EXPERIAN INFORMATION SOLUTIONS, INC.;
TRANSUNION, LLC; BANK OF AMERICA, NA (USA),
Defendants - Appellees.
--------------------
Appeal from the United States District Court
for the Eastern District of Louisiana
--------------------
Before DAVIS, BENAVIDES, and PRADO, Circuit Judges.
PRADO, Circuit Judge:
This appeal arises from a lawsuit brought by Richard D.
Kennedy and his wife, Sally S. Kennedy, under the Fair Credit
Reporting Act (the Act) against Chase Manhattan Bank USA, NA
(Chase Manhattan); Bank of America, NA (USA) (BOA); Experian
Information Solutions, Inc. (Experian); and Transunion LLC
(Transunion). In their complaint, the Kennedys asserted that the
banks violated the Act by obtaining their credit information
under false pretenses and by failing to adopt reasonable
procedures for complying with the Act. The Kennedys further
alleged that Experian and Transunion (collectively, the consumer
1
reporting agencies) failed to adopt reasonable procedures for
complying with the Act.
In response to the Kennedys’ complaint, the banks and the
consumer credit reporting agencies moved to dismiss the Kennedys’
claims for failure to state a claim. After considering the
motions, the district court determined the Kennedys’ allegations
were not actionable under the Act and dismissed the Kennedys’
claims. The Kennedys’ challenge that determination in this
appeal.
Factual Background
The Kennedys’ complaint sets out the background of their
lawsuit. In their complaint, the Kennedys, pro se, asserted that
they received pre-qualified offers for credit card accounts from
Chase Manhattan and BOA, that based on the representations made
by the banks the Kennedys believed they were pre-approved for
credit, and that they accepted the offers by returning the
applications. The banks, however, obtained consumer credit
reports from Experian and Transunion and notified the Kennedys
that, based upon the information in these reports, the banks
would not open credit card accounts for the Kennedys.
The pre-approved offers are attached as exhibits to the
complaint. Each offer provides, in part, that the offered credit
may not be extended if, after the consumer responds to the offer,
the bank determines the consumer does not meet the criteria used
2
to select the consumer for the offer or any “applicable criteria
bearing on creditworthiness.”
Throughout their lawsuit, the Kennedys maintained the banks
violated the Act by failing to honor firm offers of credit. The
Kennedys contended the banks violated section 1681q of the Act by
obtaining information under the Act under false pretenses, and/or
violated section 1681e by not maintaining reasonable procedures
and certifications necessary to comply with the Act. The
Kennedys argued that the credit reporting agencies violated
section 1681e by “not adopting reasonable procedures for meeting
the needs of commerce for consumer credit in a manner which is
fair and equitable to the consumer with regard to confidentiality
and proper utilization of such information in accordance with the
requirements of the Fair Credit Reporting Act.” The Kennedys
asserted that: the defendants’ actions constituted unfair and
deceptive trade practices; the credit offers contained low
introductory rates and balance transfer rates that would have
saved them money; their credit history was damaged by having a
declined credit investigation on their credit records; and they
suffered humiliation, mental pain, and anxiety due to the
defendants’ willful and wanton disregard for their rights. The
Kennedys sought actual and punitive damages, as well as costs and
attorney’s fees.
Chase Manhattan moved to dismiss the complaint for improper
joinder because it had not extended an offer of credit to Richard
3
Kennedy (that offer was extended by BOA). Chase Manhattan also
filed a motion to dismiss for failure to state a claim and/or for
summary judgment. Chase Manhattan argued that sections 1681b(c)
and 1681e did not apply to it because it was not a consumer
reporting agency; it had not violated section 1681a by obtaining
information under false pretenses because Sally Kennedy granted
permission to review her credit history; and its actions did not
constitute unfair and deceptive trade practices because it had a
legal right to decline to extend credit to consumers not meeting
its criteria.
The Kennedys opposed the motion to dismiss for improper
joinder, arguing that they had community property and that when
one member was denied credit or had his or her credit history
damaged, it affected the other. They also opposed Chase
Manhattan’s motion to dismiss or for summary judgment, arguing
that the Act applied not only to credit reporting agencies, but
also to the users of this information. The Kennedys asserted
that a creditor may obtain a credit report without the consumer’s
permission only when the creditor meets the conditions set forth
in section 1681b(c), which allows pre-screening consumers for
offers of credit. In particular, they contended a condition of
obtaining a credit report is that if the consumer meets the
criteria established by the creditor prior to the selection of
the consumer for the offer, the creditor must make a firm offer
of credit to the consumer. If the consumer accepts this offer,
4
the creditor may obtain a second credit report to verify that the
consumer continues to meet the selection criteria. They contend
the creditor is not allowed to apply a new set of criteria to the
second credit report in order to disqualify a consumer from the
credit offer after the consumer has accepted the offer.
Sally Kennedy averred that her credit history did not change
between the time that she was selected for the offer of credit
and the time that she accepted it, although this assertion is not
set forth in the complaint. She asserted that Chase Manhattan
did not indicate that any further conditions were made on the
offer. She contended that the offer of credit evidenced the fact
that she satisfied Chase Manhattan’s credit criteria and that
Chase Manhattan violated the Act by not extending this credit to
her after it obtained her credit report without her knowledge.
She argued that this constituted obtaining the credit report
under false pretenses and that informing the consumer of pre-
approval, but not honoring this offer, constituted an unfair
trade practice.
Chase Manhattan responded that the Act was amended in 1997
to allow creditors to extend conditional firm offers to
consumers. Chase Manhattan asserted that pursuant to
section 1681b(c), consumer reporting agencies are permitted to
furnish only limited information to creditors during the pre-
screening process and that after the consumer responds to the
credit offer the creditor is permitted to access the creditor’s
5
credit report to determine whether the consumer satisfies its
previously-determined criteria for credit worthiness. Chase
Manhattan contended that after reviewing Sally Kennedy’s complete
credit history it determined that she did not satisfy its
criteria for credit worthiness.
The district court granted Chase Manhattan’s motion to
dismiss and held the motion for improper joinder moot. The court
determined that section 1681b(c) applied not only to credit
reporting agencies but also to the entities requesting credit
information. The court agreed with the bank’s assertion that it
had the legal right to decline credit to consumers who fail to
satisfy its credit criteria, that the credit application informed
Sally Kennedy of this possibility, and that Sally Kennedy’s
signature on the application evidenced her agreement to those
terms. The court held that a “firm offer” under the Act means a
firm offer “if you meet certain criteria” and that
dissatisfaction with the pre-screening process did not state a
cause of action under the Act. The court also held that the
state law claims were preempted by the Act.
BOA, Transunion, and Experian also filed motions to dismiss.
The district court granted all three motions, citing the reasons
set forth in its order granting Chase Manhattan’s motion to
dismiss. The Kennedys then moved for rehearing on the banks’
motions, but the district court denied the motion for rehearing.
The district court then entered judgment in favor of all
6
defendants. The Kennedys timely appealed. In their appeal, the
Kennedys maintain their complaint states a cause of action and
that the district court erred by dismissing their claims.
Standard of Review
This Court reviews de novo the grant of a motion to dismiss
for failure to state a claim.1 In considering a motion to
dismiss, the district court must take the facts as alleged in the
complaint as true, and may not dismiss the complaint "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."2 If
the district court considers information outside of the
pleadings, the court must treat the motion as a motion for
summary judgment.3 Although the court may not go outside the
complaint, the court may consider documents attached to the
complaint.4
In this instant case, many of the parties’ arguments relate
to information not in or attached to the complaint. The district
court, however, relied on the complaint and the attachments, and
1
See Brown v. Nationsbank Corp., 188 F.3d 579, 585 (5th Cir.
1999).
2
See id. at 585-86 (quoting Conley v. Gibson, 355 U.S. 41,
45-46 (1957)).
3
See Scanlan v. Tex. A&M Univ., 343 F.3d 533, 536, 539 (5th
Cir. 2003).
4
See Collins v. Morgan Stanley Dean Witter, 224 F.3d 496,
498-99 (5th Cir. 2000); see also Scanlan, 343 F.3d at 536.
7
it expressly granted the motions to dismiss. Therefore, this
Court will not consider evidence outside the pleadings.5
Firm Offer of Credit
In their first issue, the Kennedys maintain the district
court used an incorrect definition for “firm offer of credit.”
According to the Kennedys, the Act permits a bank to obtain a
consumer credit report for the purpose of extending a firm offer
of credit, but may decline credit for only three reasons: (1)
because of information contained in the consumer’s credit
application, (2) because of verification of the information used
to select the consumer for the offer, and/or (3) because the
consumer fails to provide collateral. The Kennedys insist the
banks used other criteria to decline them credit.
Section 1681b of the Act permits a consumer reporting agency
to furnish a creditor with a consumer report in connection with a
credit transaction not initiated by the consumer if “the
transaction consists of a firm offer of credit.”6 The Act
defines firm offer of credit as:
any offer of credit . . . 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.7
5
See Ware v. Associated Milk Producers, Inc., 614 F.2d 413,
414-15 (5th Cir. 1980).
6
15 U.S.C. § 1681b(c)(1)(B)(i).
7
15 U.S.C. § 1681a(l).
8
Notably, under the 1997 amendments to the Act,8 a firm offer of
credit 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 . . ., to
meet specific criteria bearing on credit worthiness
. . ., as applicable, that are established--
(A) before selection of the consumer for the
offer; and
(B) for the purpose of determining whether to
extend credit . . . 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
other information bearing on the credit worthiness
. . . of the consumer; or
(B) of the information in the consumer's
application for the credit . . ., to determine
that the consumer meets the specific criteria
bearing on credit worthiness . . . .
(3) The consumer furnishing any collateral that is a
requirement for the extension of the credit . . . that
was--
(A) established before selection of the consumer
for the offer of credit . . .; and
(B) disclosed to the consumer in the offer of
credit . . . .9
8
See Carol A. Ahern & Jeffrey P. Taft, The Consumer Credit
Reporting Reform Act of 1996: An Attempt to Make the Fair Creidt
Reporting Act More Fair, 51 CONSUMER FIN. L.Q. 304, 305-07 (1997)
(discussing amendments to the Act resulting from Consumer Credit
Reporting Reform Act of 1996); see also Anne P. Fortney, Privacy,
Consumer Credit Reporting, and Fair Lending Developments, 51
CONSUMER FIN. L.Q. 41, 42-43 (1997) (summarizing provisions of
Consumer Credit Reporting Reform Act of 1996).
9
15 U.S.C. § 1681a(l) (omissions apply to firm offers of
insurance).
9
Thus, a creditor must honor a firm offer of credit only if, based
on information in the consumer report, the application, or other
information bearing on credit worthiness, the consumer meets the
criteria initially used to select that consumer for the offer.
The creditor must establish the criteria for the firm offer of
credit prior to extending the offer,10 and must maintain a record
of the criteria.11
Consumer reporting agencies, however, are only permitted to
furnish limited information for a credit transaction not
initiated by the consumer.12 By permitting a creditor to obtain
limited information, the Act allows creditors, like banks, to
pre-screen potential customers.13 In the pre-screening process,
credit reporting agencies compile lists of customers who meet
specific criteria provided by the creditor, and then provide the
lists to a creditor, who uses the lists to solicit customers with
10
See 15 U.S.C. § 1681a(l)(1)(A).
11
See 15 U.S.C. § 1681m(d)(3).
12
The consumer reporting agency may furnish a consumer
report that includes: (1) the name and address of a consumer, (2)
an identifier that is not unique to the consumer and that is used
by the person solely for the purpose of verifying the identity of
the consumer, and (3) other information pertaining to a consumer
that does not identify the relationship or experience of the
consumer with respect to a particular creditor or other entity.
See 15 U.S.C. § 1681b(c)(2).
13
See In re Trans Union Corp. Privacy Litigation, 211 F.R.D.
328, 335 (N.D. Ill. 2002) (describing pre-screening as “the sale
of target marketing lists provided the lists are used for making
firm offers of credit . . . to the consumers on the list”).
10
firm offers for credit in the form of pre-approved offers of
credit.14 To access more detailed information to determine
whether the consumer meets a creditor’s specific criteria bearing
on credit worthiness, a creditor must obtain a consumer’s
authorization.15 Thus, acceptance of a pre-approved offer of
credit typically requires the consumer’s agreement to permit the
creditor to access the consumer’s credit information. If a
consumer responds to a pre-approved offer of credit, and
authorizes the creditor to access the consumer’s credit report,
the creditor may then access the consumer’s credit report to
determine whether the consumer satisfies its previously-
established for credit worthiness. As a result, the Act permits
a creditor to make a “conditional” firm offer of credit; that is,
an offer that is conditioned on the consumer meeting the
creditor’s previously-established criteria for extending credit.
Although the Kennedys maintain the district court used an
incorrect definition for firm offer of credit, the district court
correctly determined that a firm offer of credit under the Act
“really means a ‘firm offer if you meet certain criteria.’”16 As
14
See 16 C.F.R., pt. 600, app. § 604(2) (Federal Trade
Commission’s interpretations of the Act).
15
See 15 U.S.C. § 1681b(c)(1)(A).
16
Order Granting Chase Manhattan’s Motion to Dismiss, at
p.4; accord Tucker v. New Rogers Pontiac, Inc., No. 03 C 862,
2003 WL 220078297 (N.D. Ill. Sept. 9, 2003), at *3 (the Act
provides that a creditor may extend a firm offer of credit and
later revoke it, based on creditor's pre-determined criteria,
11
a result, the district court did not err by determining the
Kennedys’ complaint failed to state a claim.
The Kennedys’ complaint fails to state a claim under the Act
because Chase Manhattan’s Pre-Approved Acceptance Certificate and
BOA’s Pre-selected Acceptance Certificate (collectively, the pre-
approved certificates) clearly establish that the respective
offers constitute firm offers of credit under the Act.
Considered together, the complaint and the attached exhibits show
(1) the banks offered Sally and/or Richard Kennedy a pre-approved
credit card account based on information from a consumer credit
report, (2) Sally and/or Richard Kennedy received the offer
because the consumer(s) satisfied the specific criteria used by
the banks to make the offers, and (3) the credit card accounts
were conditioned on the consumer(s) satisfying specific criteria
bearing on credit worthiness.
The Kennedys also complain on appeal that the banks violated
sections 1681a(l) and 1681b(c) because the banks declined to
extend them credit after extending them firm offers of credit.
The Act, however, allows a creditor to use information in a
consumer report to verify a consumer’s credit worthiness, and to
withdraw a firm offer of credit if the consumer does not meet the
which it need not disclose to the consumer); Sampson v. Western
Sierra Acceptance Corp., No. 03 C 1396, 2003 WL 21785612 (N.D.
Ill. Aug. 1, 2003, at *2 (firm offer of credit defined in terms
of creditor's intention to honor an offer of credit in accordance
with creditor's undisclosed, predetermined criteria).
12
creditor’s previously-established criteria for extending
credit.17 Here, the Kennedys authorized the banks to obtain a
consumer report for the purposes of issuing a credit card
account. Moreover, the banks notified the Kennedys in the pre-
approved certificates that they had the right to prohibit the use
of their credit information in connection with any transaction
that they did not initiate. Although the Kennedys insist the
banks were prohibited from withdrawing their offers of credit,
the Act allowed the banks to withdraw the offers if the Kennedys
were not credit-worthy based on the consumer reports. Because
the complaint alleged the banks engaged in permissible acts, the
complaint failed to state a claim upon which relief could be
granted.
17
See 15 U.S.C. § 1681a(l)(2).
13
The Complaint’s Specific Allegations
In their complaint, the Kennedys specifically complained
that the banks violated section 1681q of the Act by obtaining
their credit information under false pretenses. Section 1681q
provides a cause of action for obtaining credit information under
false pretenses.18 To prove this claim, the Kennedys were
required to show the banks had an impermissible purpose in
obtaining the credit report; that is, the banks lacked a
permissible purpose.19 “Permissible purposes" for obtaining
consumer reports are set out in section 1681b of the Act. That
section provides, in relevant part, that a consumer credit report
may be furnished in connection with a credit transaction that is
not initiated by the consumer if the applicable transaction
consists of a firm offer of credit, or the consumer authorizes
the report.20 The Kennedys’ complaint and the attachments,
however, show the banks obtained the Kennedys’ credit reports for
a permissible purpose. The complaint alleged that: the Kennedys
18
See 15 U.S.C. § 1681q (“[a]ny person who knowingly and
willfully obtains information on a consumer from a consumer
reporting agency under false pretenses shall be fined under Title
18, imprisoned for not more than 2 years, or both”).
19
See Korotki v. Att’y Servs. Corp. Inc., 931 F. Supp. 1269,
1276 (D. Md. 1996); see also Edge v. Prof’l Claims Bureau, Inc.,
64 F. Supp. 2d 115, 177 (E.D.N.Y. 1999); Baker v. Bronx-
Westchester Investigations, Inc., 850 F. Supp. 260, 264,
(S.D.N.Y. 1994).
20
See 15 U.S.C. § 1681b(c)(1)(A), (B)(i).
14
received pre-qualified offers for credit card accounts, the
Kennedys accepted the offers by returning the applications, the
banks obtained credit reports, and the banks notified the
Kennedys that they would not open credit card accounts for them.
Indeed, the pre-approved certificates notified the Kennedys that
the offered credit might not be extended if, after the Kennedys
responded to the offers, the banks determined the Kennedys did
not meet the criteria used to select them for the offers and any
other applicable criteria bearing on credit worthiness.21 Thus,
the banks fully apprised the Kennedys that the banks would review
their credit history prior to determining whether the banks would
extend the offered credit. The Kennedys signed the pre-approved
certificates, agreed to the terms of the offers, and authorized
the banks to access their credit information. Thus, the
complaint and the pre-approved certificates show the banks did
not obtain the Kennedys’ credit information under false
pretenses. Instead, the banks pre-screened customers for firm
offers of credit, and then post-screened accepted offers to
determine eligibility based on credit worthiness. Consequently,
the complaint failed to state a claim under section 1681q.
21
Chase Manhattan’s notice provided: “The offered credit may
not be extended if, after you respond to this offer, we determine
that you do not meet the criteria used to select you for this
offer or any other applicable criteria bearing on credit
worthiness.” BOA’s notice provided: “The credit may not be
extended if, after you respond, we find that you do not meet the
criteria used to select you for this offer or any applicable
criteria bearing on credit worthiness.”
15
The Kennedys also alleged the banks violated section 1681e
by failing to maintain reasonable procedures and certifications
needed to comply with the Act. Section 1681e, however, imposes
duties upon “credit reporting agencies.” Because the banks are
not credit reporting agencies, the Kennedys’ allegation under
section 1681e failed to state a claim. As a result, the district
court properly dismissed the Kennedys’ claims against the banks.
Claims Against the Credit Reporting Agencies
In their complaint, the Kennedys alleged that the defendant
credit reporting agencies violated section 1681e by failing to
adopt reasonable procedures. The Kennedys, however, did not
allege any specific factual allegations regarding the credit
reporting agencies’ procedures or specify how the agencies
violated the Act. Notably, the complaint did not allege the
credit reporting agencies provided inaccurate credit
information.22 Because the complaint simply alleged a violation
of section 1681e without any supporting factual allegations, the
Kennedys’ claims against the credit reporting agencies were
nothing more than unsupported legal conclusions. Despite this
weakness, the complaint and the attachments show that the
22
Section 1681e(b) requires a consumer reporting agency to
follow reasonable procedures to assure maximum possible accuracy
of the information provided in the report. See 15 U.S.C.
1681e(b). This Court’s analysis of the Kennedys’ claims does not
address the accuracy requirement because the Kennedys did not
allege the credit reporting agencies provided inaccurate
information.
16
Kennedys can prove no set of facts that would entitle them to
relief.
A plaintiff bringing a claim that a reporting agency
violated the "reasonable procedures" requirement of section 1681e
must first show that the reporting agency released the report in
violation of section 1681b.23 The Kennedys’ complaint, however,
does not allege the credit reporting agencies released their
credit information in violation of section 1681b. Instead, the
complaint alleges the credit reporting agencies “violated Section
1681e by not adopting reasonable procedures for meeting the needs
of commerce for consumer credit in a manner which is fair and
equitable to the consumer with regard to confidentiality and
proper utilization of such information in accordance with the
requirements of the . . . Act.” In essence, the Kennedys alleged
the credit reporting agencies acted under section 1681b–the
provision that permits a consumer reporting agency to provide a
consumer report in connection with a firm offer of credit, but
not that the credit reporting agencies violated section 1681b.
In addition, the Kennedys cannot show the credit reporting
agencies released their credit reports in violation of section
1681b because the banks’ pre-approved certificates constituted
firm offers of credit, and because the Kennedys authorized the
release of their credit information. Instead, the complaint and
23
See Washington v. CSC Credit Servs. Inc., 199 F.3d 263,
267 (5th Cir. 2000).
17
the pre-approved certificates show the credit reporting agencies
were authorized to release the Kennedys’ credit information. The
pre-approved certificates show the Kennedys signed the banks’
firm offers of credit and expressly authorized the banks to
obtain their credit information from the credit reporting
agencies. As a result, the district court did not err by finding
the Kennedys failed to state a claim against the credit reporting
agencies.
Conclusion
The district court correctly determined that the Act permits
a creditor to pre-screen consumers for firm offers of credit, and
to withdraw an offer if a consumer fails to meet the creditor’s
previously-established criteria for credit worthiness. As a
result, the district court did not err in finding the Kennedys
failed to state a claim against the banks. In addition, the
district court correctly determined that a plaintiff who
complains under section 1681e after a consumer reporting agency
releases limited consumer information pursuant to a firm offer of
credit, or releases a consumer credit report upon the consumer’s
authorization, in the absence of an allegation of inaccurate
information, fails to state a claim. Because the district court
did not err in these determinations, the district court properly
dismissed the Kennedys’ claims. As a result, this Court AFFIRMS
the judgment of the district court.
18
AFFIRMED.
19