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Schwartz v. Washington Mutual

April 29, 2007


The opinion of the court was delivered by: Dora L. Irizarry, U.S. District Judge


Plaintiff Mordechai Schwartz ("plaintiff") filed this suit against defendant Washington Mutual, Inc. ("defendant"), also known as Washington Mutual Bank, alleging a violation of the Fair Credit Reporting Act ("FCRA"), 15 U.S.C. §§ 1681 et seq. Defendant now moves, pursuant to Fed. R. Civ. P. 12(b)(6), to dismiss plaintiff's complaint for failure to state a claim upon which relief can be granted. For the following reasons, defendant's motion isgranted.


The facts alleged in the amended complaint are as follows. At some point between March 2004 and March 2006, plaintiff received a correspondence from defendant stating that plaintiff was "pre-screened" to receive a Visa Platinum Card. Amended Compl. ¶ 6. A copy of the correspondence is annexed to the amended complaint as Exhibit A. Plaintiff did not initiate any transaction with defendant and did not authorize defendant to access the credit report for the purpose of determining whether plaintiff met the eligibility requirements for a Visa Platinum Card. Amended Compl. ¶ 20-21.

Under "Terms and Conditions" the correspondence stated that defendant conducted a preliminary review of plaintiff's credit history and determined that plaintiff met defendant's requirements. Amended Compl. Exhibit A. The correspondence went on to explain that if plaintiff accepts defendant's "offer" he will receive a credit line of "up to $30,000 or at least $500 at the rates below." Id. Plaintiff was guaranteed to receive the credit if he met "all the other requirements when you respond to our offer." Id. The correspondence states, in bold lettering that "[t]his offer is not guaranteed if you do not meet our criteria." Id. The correspondence states the annual percentage rates ("APR") and fees associated with the line of credit. Id. However, the correspondence reserves defendant's right to "change the APRs, fees and other terms of your account at any time in accordance with applicable law and the Account Agreement, which we will send you when your account is opened." Id. There is no allegation in the amended complaint that defendant would not have provided plaintiff a line of credit with identical terms to those in the offer had plaintiff responded to the correspondence and met the predetermined criteria.


Legal Standard

The court's role in deciding a motion to dismiss made pursuant to Fed. R. Civ. P. 12(b)(6) is to assess the legal feasibility of the plaintiff's claims. E.g., Cooper v. Parsky, 140 F.3d 433, 440 (2d Cir. 1998); Geisler v. Petrocelli, 616 F.2d 636, 639 (2d Cir. 1980). The court must accept as true all well-pleaded factual allegations and draw all reasonable inferences in the plaintiff's favor. Dangler v. New York City Off Track Betting Corp., 193 F.3d 130, 138 (2d Cir. 1999). A motion to dismiss under 12(b)(6) must be denied "unless it appears beyond a doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45--46, 78 S.Ct. 99, 2 L.Ed. 2d 80 (1957). However, "[c]onclusory allegations or legal conclusions masquerading as factual conclusions will not suffice to prevent a motion to dismiss."

James Wm. Moore et al., Moore's Federal Practice § 12.34[1][b] (3d ed.1997); see also Hirsch v. Arthur Andersen & Co., 72 F.3d 1085, 1092 (2d Cir. 1995).

In deciding the motion, the court may consider documents upon which the plaintiff relied when drafting the complaint, such as "documents attached to the complaint as an exhibit or incorporated in it by reference, . . . matters of which judicial notice may be taken, or . . . documents either in plaintiff['s] possession or of which plaintiff[] had knowledge and relied on in bringing suit." Chambers v. Time Warner, Inc., 282 F.3d 147, 153 (2d Cir. 2002) (quoting Brass v. Am. Film Techs. Inc., 987 F.2d 142, 150 (2d Cir. 1993)); Broder v. Cablevision Systems Corp., 418 F.3d 187, 197 (2d Cir. 2005) (finding that, on a motion to dismiss, the court need not accept plaintiff's description of the terms of the agreement, but may look to the agreement itself). Therefore, along with the complaint, the court will consider the correspondence containing the offer, which not only was an integral part of the amended complaint, but was also annexed to it.

Fair Credit Reporting Act

The FCRA primarily was enacted to protect a consumer's right to privacy in the information maintained by consumer reporting agencies. 15 U.S.C. § 1681(a)(4) ("[t]here is a need to insure that consumer reporting agencies exercise their grave responsibilities with fairness, impartiality, and a respect for the consumer's right to privacy."). To accomplish these goals, the FCRA puts certain restrictions on the ability of creditors to obtain a consumer's credit report. 15 U.S.C. § 1681b(a). Under the FCRA, a credit report may only be obtained with the written consent of the consumer or, if the consumer has not consented, for certain "permissible purposes." Id; Cole v. U.S. Capital, 389 F.3d 719, 725 (7th Cir. 2005). One permissible purpose is to extend a "firm offer of credit" to the consumer. 15 U.S.C. § 1681a(l); Cole, 389 F.3d at 725. The FCRA defines "firm offer of credit" as "any offer of credit or insurance to a consumer that will be honored if the consumer is determined, based on information in a report to the consumer, to meet the specific criteria used to select the consumer for the offer." 15 U.S.C. § 1681a(l). The offer may be conditioned on (1) preselected criteria bearing on credit worthiness; (2) verification that the consumer continues to meet such criteria; and (3) the consumer furnishing preselected and disclosed collateral. 15 U.S.C. § 1681a(l)(1-3). The criteria used to determine credit worthiness must be "established . . . before selection of the consumer for the offer." 15 U.S.C. § 1681a(l)(1).

Defendant's correspondence meets the statutory requirements of being a "firm offer." The offer is conditioned on preselected criteria, and the correspondence clearly states that the offer will only be honored if the plaintiff continues to meet that criteria.*fn1 There is no allegation in the compliant that defendant did not use preselected criteria or did not intend to honor the offer if the criteria were met. The FCRA does not require that the defendant disclose what criteria were used in the preselecting process. See Tucker v. New Rogers Pontiac, Inc., 03 CV 862, 2003 WL 22078297, *3 (N.D.Ill. Sept. 9, 2003) ("[s]section 1681a(l) provides that a creditor may extend such an offer and later revoke it, based on the creditor's own predetermined criteria, which it need not disclose to the consumer.").

Plaintiff contends that, because defendant can manipulate the terms of the agreement after the offer is accepted, defendant's offer is not "firm." The FCRA makes no mention as to whether an offer is still considered "firm" if the creditor can change the terms after the offer is accepted. However, defendant's ability to change the terms of the credit agreement after the offer is accepted does not mean that the offer itself did not meet the statutory requirements of a "firm offer." Had plaintiff responded to the correspondence, and met the additional predetermined criteria, plaintiff would have received a line of credit on the exact terms offered. At a later date (after the offer was accepted), defendant reserved the right to change the terms of the agreement, but doing so is not a violation of FCRA. This is not case like Hernandez v. Chase Bank USA, N.A., 429 F. Supp. 2d 983 (N.D. Ill. 2006) where the terms of the offer did not rely on verification and analysis of preselected criteria as permitted by FCRA, but rather were contingent upon and went "beyond verification of preselected criteria." Id. at 988. In Hernandez, the correspondence suggested that the exact nature of the loan was subject to more than simply verification and analysis of preselected criteria, which is allowed by the FCRA. Instead, the nature of the loan was dependant on criteria which were subject to change. Id. Here, the criteria for acceptance remained constant. Additionally, this is ...

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