Williams v. At & T Wireless Services, Inc.

• Decision Date: 23 February 1998
• Docket Number: No. C97-1389Z.,C97-1389Z.
• Citation: 5 F.Supp.2d 1142
• Court: U.S. District Court — Western District of Washington
• Parties: Mark P. WILLIAMS, Plaintiff, v. AT & T WIRELESS SERVICES, INC., et al., Defendants.

5 F.Supp.2d 1142

Mark P. WILLIAMS, Plaintiff, v. AT & T WIRELESS SERVICES, INC., et al., Defendants.

No. C97-1389Z.

United States District Court, W.D. Washington.

February 23, 1998.

Christopher E. Green, Seattle, WA, O. Randolph Bragg, Horwitz, Horwitz & Associates, Chicago, IL, for Plaintiff.

Michael E. Kipling, John Christopher Jordan, Stokes Lawrence, PS, Seattle, WA, for defendant AT & T.

Lucy Isaki, Bogle & Gates, Seattle, WA, for defendant The Future Shop.

ORDER

ZILLY, District Judge.

THIS MATTER comes before the Court on defendant AT & T Wireless Services's motion for summary judgment (docket no. 19); defendant Future Shop's motion for summary judgment (docket no. 25); and plaintiff Mark Williams' motion for class certification (docket no. 16). The Court, having considered the motions and all papers filed in support of and in opposition to the motions, hereby GRANTS the motions for summary judgment and STRIKES the motion for class certification as MOOT.

Background

On October 23, 1996, plaintiff Mark Williams applied at a Future Shop store for activation as a subscriber on AT & T Wireless Services' cellular telephone network. In response to a Future Shop employee's questions, Williams gave his name, social security number and other identifying information to the clerk. The clerk entered the information into a computer and submitted it to AT & T. AT & T then ran a credit check resulting in the generation of a consumer credit report on Williams by a credit reporting agency. As a result of the credit report, AT & T decided that it would approve Mr. Williams for service on the condition that he provide a $700 security deposit. Future Shop never saw the credit report, but was informed of AT & T's decision and passed that information on to Williams. No formal letter of notice was provided to Williams in connection with the October 23, 1996 report.

On October 25, 1996, Williams contacted AT & T and inquired "why he had been declined for credit." Complaint at ¶ 18. In response to his inquiry, the AT & T representative obtained Williams' credit report by computer. Williams declined to activate service and terminated the transaction.

Williams seeks to bring a class action, claiming that his credit report was obtained by the defendants under false pretenses and for an improper purpose, and defendants failed to notify him in writing of adverse action as required under federal and state law. Although plaintiff initially argued that the defendants violated numerous sections of the FCRA and ECOA, the plaintiff stated in his response brief that his claims are limited to (1) a violation of 15 U.S.C. § 1681q (FCRA) because the credit report was obtained without a permissible purpose, and (2) a violation of 15 U.S.C. § 1691(d) because defendants failed to give Williams notice of the adverse action. Discussion

I. The Equal Credit Opportunity Act (ECOA)

The ECOA prohibits creditors from discriminating against any applicant on the basis of race, color, religion, national origin, sex, marital status or age. 15 U.S.C. § 1691(a). In addition to anti-discrimination provisions, the ECOA requires creditors to notify an applicant for credit of "adverse action" within thirty days. 15 U.S.C. § 1691(d). The applicable statute provides that "[e]ach applicant against whom adverse action is taken shall be entitled to a statement of reasons for such action from the creditor." 15 U.S.C. § 1691(d)(2). The statement must be in writing. Id. The term "adverse action" is defined as "a denial or revocation of credit, a change in the terms of an existing credit arrangement, or a refusal to grant credit in substantially the amount or on substantially the terms requested." 15 U.S.C. § 1691(e).

Defendants argue that because the transaction at issue did not involve "credit," the ECOA does not apply. The regulations interpreting the ECOA provide that a "credit transaction" means "every aspect of an applicant's dealings with a creditor regarding an application for credit or an existing extension of credit ...." 12 C.F.R. § 202.2(m). Section 1691a(d) of the ECOA defines "credit" as "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 payments therefor." Regulation B, which addresses equal credit opportunity, similarly provides that "[c]redit means the right granted by a creditor to an applicant to defer payment of a debt, incur debt and defer its payment, or purchase property or services and defer payment therefor." 12 C.F.R. § 202.2(j). The Official Staff Commentary on Regulation B's definition of credit provides:

Regulation B covers a wider range of credit transactions than Regulation Z (Truth in Lending). For purposes of Regulation B a transaction is credit if there is a right to defer payment of a debt — regardless of whether the credit is for personal or commercial purposes, the number of installments required for repayment, or whether the transaction is subject to a finance charge.

Official Staff Interpretation of § 202.2(j) of Regulation B, 12 C.F.R. Pt. 202, Supp. I.

There is no authority addressing whether an application for cellular phone service is a "credit" transaction under the ECOA. Cases dealing with other types of transactions have made clear, however, that a transaction does not involve "credit" under the ECOA unless there is a deferral of payment. See, e.g., Dunn v. American Express Co., 529 F.Supp. 633, 634 (D.Colo.1982) (application for a teller card did not involve a credit transaction because "there [was] simply no evidence that anything that she applied for would have given her the right to defer the payment of any debt."); Butler v. Capitol Federal Savings, 904 F.Supp. 1230, 1234 (D.Kan.1995) (plaintiff's application to open a savings account is not a credit transaction because it is not a right to defer payment of a debt). Although some courts have stated that there must be a deferral of "debt" in order to have a "credit transaction" under the ECOA, the Sixth Circuit recently noted that the existence of "debt" is not required. In Barney v. Holzer Clinic, Ltd., 110 F.3d 1207, 1211-12 (6th Cir.1997), the Sixth Circuit recognized that there are three types of credit included in the ECOA's definition of "credit": (1) the right "to defer payment of a debt," (2) the right to "incur debt and defer its payment," and (3) the "right to purchase property or services and defer payment therefor." Only the first two alternatives specify "debt" as a necessary element. The third alternative does not. It requires only the deferral of "payment," not the existence of "debt." Id.

The Court concludes that the consumer's application to purchase cellular telephone service is a "credit" transaction governed by the ECOA because the transaction involves the purchase of services and deferral of payment for those services. The defendants emphasize that AT & T bills for cellular services on a monthly basis, and that subscribers cannot defer payment of amounts owed. They argue that the regularity and frequency of billing means that payment is substantially contemporaneous with the use of service and hence there is no deferral of payment. It is true that once the subscriber is billed for services he has used, he cannot defer payment. The transaction at issue here, however, involves the application process for becoming an AT & T subscriber. Williams had to apply to become an AT & T subscriber, and his right to purchase cellular services and defer payment therefor depended upon his ability to pay for those services as reflected in his credit report. See AT & T's Opening Brief at 6 (Williams "applied for activation as a subscriber...."); Future Shop's Opening Brief at 1 ("Complaint arises out of Plaintiff's aborted attempt to purchase cellular service."). When Williams applied for AT & T subscribership, he sought the right to use AT & T cellular service and pay for it later. AT & T denied him unconditional subscribership, seeking instead to ensure payment by requiring a security deposit. The regulations treat these types of transactions as credit transactions and specifically provide that security deposit requirements in connection with the purchase of other services, such as utilities, are covered by Regulation B.

The purchase of cellular services is most similar to the purchase of utility services, such as gas, electric or water service. In each case, the consumer incurs debt as he uses the services and is billed for the services on a periodic basis. As in this case, utility bills are usually due and payable upon receipt and cannot be deferred. As the regulations show, the purchase of utility services and a utility company's requirement of a security deposit are "credit" transactions subject to the ECOA, except as limited by certain "limiting exceptions" in the regulations.

Although AT & T Wireless does not qualify as a public utility within the meaning of the ECOA,¹ the treatment of public utilities in the ECOA and its regulations is instructive on the question of whether the ECOA's definition of "credit" would encompass the type of transaction at issue here. The Official Staff Interpretation of the definition of "public utilities credit" in Regulation B provides:

1. Definition. This definition applies only to credit for the purchase of a utility service, such as electricity, gas, or telephone service. Credit provided or offered by a public utility for some other purpose — such as financing the purchase of a gas dryer, telephone equipment, or other durable goods, or for insulation or other home improvements — is not excepted.

2. Security deposits. A utility company is a creditor when it supplies utility service and bills the user after the service has been provided. Thus, any credit term (such as a requirement for a security deposit) is subject to the regulation.

Pursuant to Regulation B, public utilities extending credit are...