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Court actions demonstrate peril of pre-approved credit offers

November 17, 2010
By Dennis O’Keefe, CATA General Counsel

The U.S. District Court for the Northern District of Illinois continues to lean on dealers and finance companies that solicit consumers with auto loans after accessing their credit reports. The Court certified one recent case and refused to dismiss a second before class certification was granted.   

In a letter of pre-approval—contingent on the recipient being at least 18 years old, earning at least $1,500 a month and facing no pending bankruptcies—a recipient who did not satisfy the monthly income requirement and who has filed a previous bankruptcy sued River Oaks Hyundai, Inc. and Capital One Auto Finance, Inc. for violating the Fair Credit Reporting Act by accessing her credit report without her consent or a proper purpose.


In November 2006, the District Court granted the Petitioner’s Motion for Class Certification, finding that class issues predominated over individual issues because whether a "proposed credit offers qualifies as a ‘firm offer of credit’ under the Fair Credit Reporting Act depends on the terms of the offer, not the idiosyncratic circumstances of the recipients." The Court also rejected the Defendants’ argument that because a class action would result in excessive damages, it was not a superior method of adjudication.   

In a second case, Krey v. Jennings Chevrolet, Inc., the Court denied the dealer’s motion to dismiss the case, basing its denial on three findings. First, the Court ruled that it was unclear whether the Defendant would honor the offer because the solicitation broadly stated that "This letter does not guarantee credit approval." Second, the offer had a limited value because it could be used only to purchase an automobile from the one dealership. Finally, the notice lacked material terms, including interest rate, method of computing interest, and length of repayment. In this regard, the sample transaction included in the notice was of little or no use because it failed to indicate that the Plaintiff would be entitled to the same terms. 


Both of these cases continue. Preliminary actions of the District Court, however, makes class action certification a real concern for the dealer and/or the finance companies involved.