In the

United States Court of Appeals

For the Seventh Circuit ____________

No. 06-2477

THOMAS MURRAY,

Plaintiff-Appellant,

v.

NEW CINGULAR WIRELESS SERVICES, INC.,

Defendant-Appellee.

____________

Appeal from the United States District Court for the

Northern District of Illinois, Eastern Division.

No. 04 C 7666—Ruben Castillo, Judge.

____________

No. 06-4368

DARRELL BRUCE,

Plaintiff-Appellant,

v.

KEYBANK N.A.,

Defendant-Appellee.

____________

Appeal from the United States District Court for the

Northern District of Indiana, Hammond Division.

No. 2:05cv330—Rudy Lozano, Judge.

____________
2 Nos. 06-2477, 06-4368 & 07-2370

No. 07-2370

ILENE L. PRICE, et al.,

Plaintiffs-Appellants,

v.

CAPITAL ONE BANK (USA), N.A.,

Defendant-Appellee.

____________

Appeal from the United States District Court

for the Eastern District of Wisconsin.

No. 05-C-947—C.N. Clevert, Judge.

____________

ARGUED NOVEMBER 28, 2007—DECIDED APRIL 16, 2008

____________

Before EASTERBROOK, Chief Judge, and FLAUM and

WOOD, Circuit Judges.

EASTERBROOK, Chief Judge. We have grouped for decision three appeals under the Fair Credit Reporting Act

presenting issues that have arisen in numerous suits

throughout the circuit. Each of the appeals presents at

least two issues, several of which recur in multiple appeals.

We therefore organize the opinion around these issues

rather than the facts of the cases, which we use to illustrate the problems.

1. Must an offer of credit be valuable to all or most recipients?

A company usually may access a consumer’s credit

information only if the consumer initiates the transaction.

The statute makes an exception, however: Firms may

obtain lists of names and addresses that credit bureaus

generate from their databases according to the stated
Nos. 06-2477, 06-4368 & 07-2370 3

criteria. For example, a bank might ask for a list of everyone in Illinois who purchased a home, with a mortgage

loan, during the last three years and is current on payment.

That list may be used to make an offer of refinancing, or

of a loan against the equity in the residence. The statute allows this only if the person requesting the information uses it to make “a firm offer of credit or insurance”.

15 U.S.C. §1681b(c)(1)(B)(i).

Suppose someone wants to use credit information to

promote merchandise. One way to do this might be to

make an offer of the product (say, a television set or a

suite of furniture) together with a token line of credit (say,

$100 toward $10,000 worth of furniture). We held in Cole

v. U.S. Capital, Inc., 389 F.3d 719 (7th Cir. 2004), that this

gimmick does not work—that the offer must have value

if viewed as one of credit alone. “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. From the consumer’s perspective, an offer of credit without value is the equivalent of

an advertisement or solicitation [for the product rather

than the loan].” Id. at 726–27.

Ever since Cole plaintiffs have contended that this

approach must be applied, not only to distinguish between offers of merchandise and offers of credit, but also

to decide whether even a simple offer of credit is valuable

enough to justify the use of consumers’ credit files. Two

of the cases before us present arguments of this kind.

Darrell Bruce contends that KeyBank did not make a “firm

offer of credit” because its offer of home-equity financing

did not include all material terms, and without knowing
4 Nos. 06-2477, 06-4368 & 07-2370

every term (such as whether interest was to be simple or

compound) the consumer could not assess the offer’s

value. Ilene Price and other plaintiffs contend that Capital

One Bank did not make a “firm offer of credit” because the

flyer offering them Visa cards did not state the minimum

line of credit each would receive, and without this knowledge the offer’s worth was uncertain. Both Bruce and

Price rely heavily on Cole.

As we have said, these are just the latest attempts to

apply Cole to pure offers of credit. None has succeeded.

See, e.g., Forrest v. Universal Saving Bank, F.A., 507 F.3d

540 (7th Cir. 2007); Perry v. First National Bank, 459 F.3d 816

(7th Cir. 2006). Some of our decisions have analyzed the

offer to see whether it would be attractive to a substantial fraction of recipients. But the principal reason why

none of these claims has prevailed, and why none of

them can prevail, is that §1681b(c)(1)(B)(i) calls for a firm

offer of credit but not a valuable firm offer of credit. A

firm offer of credit suffices. Cole did not doubt this. The

problem in Cole was how to disentangle an offer of merchandise from an offer of credit when they are made jointly

(in Cole, the merchant was selling cars and offered to

extend credit for a small fraction of the price). We asked

whether the offer of credit would be valuable standing

alone in order to see whether the non-consensual check

of a person’s credit history had been used to make an

offer of merchandise, something the statute does not allow.

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

2006), remarked that “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
Nos. 06-2477, 06-4368 & 07-2370 5

legitimate credit product’.” 434 F.3d at 955–56 (emphasis

in Cole; internal citation omitted). What was an observation in Murray is now a holding. Cole is beside the point

for pure offers of credit. When credit histories are used to

offer credit (or insurance) and nothing but, the right

question is whether the offer is “firm” rather than whether

it is “valuable.” That the interest rate is said to be “too

high” or the line of credit “too low” or the rule for compounding interest unstated is not relevant to the question posed by §1681b(c)(1)(B)(i).

2. Does a promise of “free” merchandise mean that an offer is

not one “of credit"? Thomas Murray contends that a telephone company violated FCRA by obtaining from a

credit bureau a list of persons to receive a circular that

touts a “free phone.” This phone is available only to

someone who signs up for a year or more of service, but

as Murray sees things the lure of a phone makes it hard

for the consumer to understand that the point of the offer

is the service. True, phone service is neither “credit” nor

“insurance,” but the circular offers phone service on

credit, because the service is provided before payment is

due. Deferred payment is “credit” as the statute uses that

word. 15 U.S.C. §1681a(r)(5), incorporating §1691a(d). A

“free” phone is anything but free, as it can’t be had apart

from the service plan; payments for service include the

cost of the phone, which is amortized over the length of

the contract. So payment for the phone is deferred no less

than payment for the phone service; the entire offer

therefore is one of credit, whether or not a given consumer gets the point.

Now it is true that the credit can’t be used to buy someone else’s product. Verizon does not extend credit to users

of AT&T’s service, or the reverse. Nor will Ford lend
6 Nos. 06-2477, 06-4368 & 07-2370

money to buy an Audi. This does not detract from the

fact that an offer of a Ford with deferred payment is an

offer of credit. The offer need not be fully portable to be

“credit” within the statutory definition: “The term ‘credit’

means the right granted by a creditor to a debtor to

defer payment of debt or to incur debts and defer its

payment or to purchase property or services and defer

payment therefor.” 15 U.S.C. §1691a(d).

3. Must the initial flyer contain all material terms?

KeyBank’s offer of home-equity credit stated that the

interest rate would be “based on” the prime rate according to the Wall Street Journal at the time the loan

was made and could vary “by district, product and credit

qualification.” It did not mention terms such as the

loan’s duration and did not specify all fees. Capital One

Bank’s offer of a Visa card did not state the minimum

amount of credit that each card would have. Plaintiffs

say that these omissions negate the existence of a “firm

offer of credit.” To the extent this argument rests on

Cole and the proposition that an offer with omitted

terms lacks value, it is wrong for the reason given already.

To the extent that these arguments reflect a belief that

there can be no offer of any kind without all material

items, it is wrong because “firm offer” is a defined phrase.

The term “firm offer of credit or insurance” means

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:
Nos. 06-2477, 06-4368 & 07-2370 7

(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—

(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.
8 Nos. 06-2477, 06-4368 & 07-2370

15 U.S.C. §1681a(l). The question posed by this definition

is whether the offer will be honored (if the verification

checks out), not whether all terms appear in an initial

mailing. Anyone who has read a disclosure statement

under the Real Estate Settlement Practices Act knows

that the number of terms for a home-equity loan is formidable, and even the list under the Truth in Lending

Act (which would apply to the credit card) is nothing to

sneeze at. Neither §1681a(l) nor anything else in FCRA

says that the initial communication to a consumer must

contain all of the important terms that must be agreed on

before credit is extended. Trying to disclose everything

in the first contact would make the document turgid

and, paradoxically, uninformative, because it would

be harder to read and grasp. Consumers would lose

some of the benefit of competition among lenders—which

is facilitated by the sort of offers these plaintiffs received.

4. Does a power to vary the deal’s terms make the offer not

“firm"? KeyBank’s letter informed readers that the rate

of interest would vary by “product and credit qualification” and that closing costs could run between $1,000 and

$2,000. Tiny type added: “Actual rates, fees and terms

are based on those offered as of the date of application

and are subject to change without notice.” It is possible

to read these caveats to make the offer illusory. Then there

might be nothing on the table that a consumer could

accept, and the statutory definition of a “firm offer” would

not be satisfied.

We say that it is possible to read the caveats this way,

but that reading is not inevitable. Caveats such as the one

in this letter may reflect nothing more than the statutory

privilege to verify a consumer’s qualifications and raise

the rate of interest (or required security) if it turns out
Nos. 06-2477, 06-4368 & 07-2370 9

that the consumer is less credit-worthy than it appeared

from the preliminary screening. Or perhaps the reference

means that routine terms such as late fees (are they $25

or only $15?) may change between when a brochure is

printed and the time any given consumer signs on the

dotted line, and that the terms will be those generally

applicable when the contract comes into force. That

would not make an offer less than firm, as the statute

defines that phrase.

So has KeyBank reserved a right to walk away by naming

onerous terms any time it does not want to lend money to

a particular customer, or has it just made clear the power

to charge more if, after verification, the consumer is not

as good a credit risk as things seemed initially? It would

be possible to inquire, through discovery, how KeyBank

has used the powers reserved in its letter. Bruce did not

seek discovery on this issue, however. His position, in

the district court and here, is that the letter’s language is

all that matters. Because the letter is ambiguous, that

position is untenable. Plaintiff has the burden of persuasion, so his decision to forego discovery means that the

language in KeyBank’s letter cannot be used to defeat

the existence of a “firm offer of credit”.

Capital One Bank’s letter does not contain as bald a

reservation of a power to set terms later, but the omission

of a minimum line of credit and maximum interest

rate comes to the same thing. Here too the lender is doing

no more than the statute permits. It isn’t possible to give

definitive credit limits and rates without knowing the

consumer’s full credit history and other particulars, such

as income. Only very simple screening precedes these

offers. Anyone who passes the screen is assured of credit,

but people who on a follow-up check have higher-than-
10 Nos. 06-2477, 06-4368 & 07-2370

minimum credit scores will get better rates and higher

limits, while those who have (since the screening) fallen

below the minimum will have to pay higher interest rates

for less credit. Capital One Bank could not reveal all of

the details in the space allowed by an initial offer—and

the full algorithm that relates credit information to

credit terms may be a trade secret. The statute does not

require the revelation of these details as part of a “firm

offer”; but unless the algorithm in all its complexity is to

be laid out, any honest offer will leave some matters for

future determination. Accord, Sullivan v. Greenwood Credit

Union, 2008 U.S. App. LEXIS 5774 (1st Cir. Mar. 19, 2008).

5. Is six-point type “conspicuous"? Anyone who uses consumer credit information in a transaction that was not

initiated by the consumer must “provide with each written solicitation made to the consumer” a statement that

(A) information contained in the consumer’s

consumer report was used in connection with the

transaction;

(B) the consumer received the offer of credit or

insurance because the consumer satisfied the

criteria for credit worthiness or insurability under

which the consumer was selected for the offer;

(C) if applicable, the credit or insurance may not

be extended if, after the consumer responds to the

offer, the consumer does not meet the criteria used

to select the consumer for the offer or any applicable criteria bearing on credit worthiness or insurability or does not furnish any required collateral;

(D) the consumer has a right to prohibit information contained in the consumer’s file with any

consumer reporting agency from being used in
Nos. 06-2477, 06-4368 & 07-2370 11

connection with any credit or insurance transaction

that is not initiated by the consumer; and

(E) the consumer may exercise the right referred to

in subparagraph (D) by notifying a notification

system established under section 1681b(e) of this

title.

15 U.S.C. §1681m(d). This statement must be “clear and

conspicuous”. The word “clear” presumably means “in

easy to understand language.” But what is “conspicuous”?

The statute does not offer a definition—which means,

alas, that the demand for “conspicuous” notice is not

“clear.”

The Federal Trade Commission issued in 2005 a regulation defining “conspicuous” to mean at least 8-point type

for the full notice, plus a short notice in 12-point type

on the brochure’s first page. 16 C.F.R. §642.3. The Commission can’t adopt substantive rules for private litigation; this regulation concerns only its enforcement activities. See 15 U.S.C. §1681s(a)(1), (e). Still, it offers a useful

guidepost that was unavailable to Cingular, which sent

its offer to Murray. (We call the defendant “Cingular” even

though it now operates under the name AT&T. Counsel

assured us that the entity “New Cingular Wireless Services,

Inc.” still exists.) Cingular used 6-point type. The first

word is all capitals. But 6-point type is tiny. A printer’s

point is 0.01384 of an inch, so 6-point type is about 1

/12 inch

tall, and a glyph in 6-point type has 1⁄4 the area of the

same glyph in 12-point type. This is what Cingular’s

disclosure, at the bottom of a page dominated by a

color picture of a Nokia cell phone and large-type (14 to

24 point) promotional language, looked like:

DISCLOSURE: We’d like you to know about the terms of this pre-approved offer. You were selected

to receive this special offer because you satisfied certain criteria for creditworthiness, which we have

previously established. We used information obtained from a consumer-reporting agency. We may

choose to withdraw this offer if we determine you do not meet the criteria used to select you for the
12 Nos. 06-2477, 06-4368 & 07-2370

offer or any other applicable criteria bearing on creditworthiness. You have the right to prohibit

information contained in your credit files with this or any consumer-reporting agency from being

used with any credit transaction that is not initiated by you by notifying Equifax, Inc., c/o Equifax

Options, P.O. Box 740123, Atlanta, GA 30374-0123, or by calling 1 (888) 567-8688.

Cingular concedes that this disclosure flunks not only

the FTC’s approach but also the standard we devised in

Cole, which held that a statement much smaller than the

principal type on the page cannot be “conspicuous.” 389

F.3d at 731. But the brochure was mailed before Cole

issued, and Cingular did not have its benefit.

Six-point type in black ink is not “conspicuous” when

the bulk of the page contains much larger type. Whether

6-point type in color might suffice is a question we

need not address, since Cingular used color only for the

picture and its promotional text.

6. Is the use of 6-point type a “willful” violation of FCRA?

Cingular’s violation of the statute entitles Murray to

actual damages, but he has not tried to prove any. Instead

he seeks statutory damages, which may range from $100

to $1,000 per violation whether or not the consumer

was injured. 15 U.S.C. §1681n(a). But statutory damages

are available only for willful violations of the Act, and

the Supreme Court held in Safeco Insurance Co. v. Burr,

127 S. Ct. 2201 (2007), that this means recklessness—

something more than negligence but less than knowledge of the law’s requirements.

“Recklessness” is a protean term, one that might flunk

the statutory requirement of clarity if included in a disclosure statement. But it is the Supreme Court’s understanding of the statute. The Court did not stop with the

word “reckless.” It added that

a company subject to FCRA does not act in reckless disregard of it unless the action is not only a

violation under a reasonable reading of the stat-
Nos. 06-2477, 06-4368 & 07-2370 13

ute’s terms, but shows that the company ran a risk

of violating the law substantially greater than the

risk associated with a reading that was merely

careless.

127 S. Ct. at 2215. This standard, the Court stated, is

objective.

Cingular’s reading of the Act was mistaken, but if the

error was careless it did not create a risk substantially

above the risk usually associated with careless readings.

Because the statute does not define “conspicuous”, and

the FTC had not issued its guidance, where was a company to turn? Appellate decisions are a logical place, but

they did not help much. When Cingular mailed its brochure, two courts of appeals had interpreted that term.

Stevenson v. TRW Inc., 987 F.2d 288 (5th Cir. 1993), read it

the way we later did in Cole. But Guimond v. Credit Bureau

Inc., 1992 U.S. App. LEXIS 2640 (4th Cir. Feb. 25, 1992),

concluded that a disclosure in “small but clear and readable type” is “conspicuous” as far as FCRA is concerned.

Although Guimond is non-precedential, the fourth circuit

(like other federal appellate courts) uses that designation

only for decisions that follow well-understood rules

that need no elaboration. That Guimond thought obvious

in 1992 a position that Stevenson held obviously wrong in

1993 shows something of the problem facing Cingular.

If federal appellate decisions under FCRA don’t solve

this problem (at least had not solved it before Cingular

acted), the most natural alternative is state law. And the

logical place to turn is the Uniform Commercial Code,

which uses the phrase “clear and conspicuous” in several

sections. It is hard to avoid thinking that whoever

drafted §1681m(d) must have assumed that “clear and

conspicuous” is a term of art in commercial law and
14 Nos. 06-2477, 06-4368 & 07-2370

therefore needs no federal definition. Unfortunately,

that assumption is wrong, because, although the UCC

supplies a definition, it is internally contradictory.

“Conspicuous”, with reference to a term, means

so written, displayed, or presented that a reasonable person against which it is to operate ought to

have noticed it. Whether a term is “conspicuous”

or not is a decision for the court. Conspicuous

terms include the following:

(A) a heading in capitals equal to or greater in

size than the surrounding text, or in contrasting type, font, or color to the surrounding

text of the same or lesser size; and

(B) language in the body of a record or display

in larger type than the surrounding text, or in

contrasting type, font, or color to the surrounding text of the same size, or set off from surrounding text of the same size by symbols or

other marks that call attention to the language.

UCC §1-201(b)(10) (2001 revised ed.). Every state has a

statute modeled on this language. Cingular found

§1–201(b)(10)(A) and concluded that capitalizing the

word “DISCLOSURE” brought the paragraph within the

definition, because the immediately preceding paragraph

also was in 6-point type. But the main part of §1–201(b)(10),

which defines “conspicuous” as something that the person affected “ought to have noticed”, implies that some

type can be so small that a capitalized heading “equal to

or greater in size than the surrounding text” will not be

enough. It is of course possible to read (A) and (B) as

safe harbors, working even if the affected person assuredly

would not have noticed the statement; then 1-point type
Nos. 06-2477, 06-4368 & 07-2370 15

in light grey would do, even though it would be invisible

to normal readers, provided only that it followed a throwaway paragraph in 1-point light-grey type. That would

be an implausible reading of §1–201(b)(10).

We do not think it reckless, however, for Cingular to

have read §1–201(b)(10)(A) as authorizing its approach,

when the actual paragraph was in 6-point type that is

readable despite its small size. The problem is not that

people can’t read black sans-serif type at that size, but

that the eye is not drawn to it. Even if it was careless to

conclude from §1–201(b)(10)(A) that capitalizing the first

word was enough, Cingular did not take a risk “substantially greater” than is associated with ordinary carelessness. It would be reckless today to use the same notice,

given Cole and such assistance as 16 C.F.R. §642.3 provides, but it was not reckless to act as Cingular did in 2003.

To sum up:

In Murray, the offer of a free phone in connection with a

service plan is an offer of credit. Although the disclosure

required by 15 U.S.C. §1681m(d) was not conspicuous,

Cingular did not wilfully violate FCRA because it was not

reckless. The district court did not anticipate Safeco’s

adoption of a recklessness standard but came to the

same ultimate conclusion on each issue, 432 F. Supp. 2d

788 (N.D. Ill. 2006), and its judgment is affirmed.

In Bruce, the circular made a “firm offer of credit” despite

the omission of some material terms and the reservation

of a power to change terms. The district court erroneously held otherwise, see 2006 U.S. Dist. LEXIS 91371

(N.D. Ind. Dec. 15, 2006), but went on to conclude that

the violation was not willful because KeyBank did not

know that it was violating the Act. That approach, too,
16 Nos. 06-2477, 06-4368 & 07-2370

is erroneous in light of Safeco (which was released after

the district court’s opinion). Neither of the district court’s

missteps calls for a remand. Because we hold that there

was no violation, the judgment is affirmed.

In Price, the district court held that the omission of a

minimum line of credit is compatible with a “firm offer

of credit” and entered judgment for Capital One Bank.

2007 U.S. Dist. LEXIS 37796 (E.D. Wis. May 22, 2007).

We agree with this conclusion and affirm.

USCA-02-C-0072—4-16-08