Stergiopoulos v. First Midwest Bancorp, 04-2710.

• Citation: 427 F.3d 1043
• Decision Date: 25 October 2005
• Docket Number: No. 04-2710.,04-2710.
• Parties: GEORGE STERGIOPOULOS & IVELISSE CASTRO, Plaintiffs-Appellants, v. FIRST MIDWEST BANCORP, INC., Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

427 F.3d 1043

GEORGE STERGIOPOULOS & IVELISSE CASTRO, Plaintiffs-Appellants, v. FIRST MIDWEST BANCORP, INC., Defendant-Appellee.

No. 04-2710.

United States Court of Appeals, Seventh Circuit.

Argued April 6, 2005.

Decided October 25, 2005.

Lance A. Raphael, Consumer Advocacy Center, Chicago, IL, Seth R. Lesser (argued), New York, NY, for Plaintiffs-Appellants.

Craig A. Varga (argued), Varga, Berger, Ledsky, Hayes & Casey, Chicago, IL, for Defendant-Appellee.

Before BAUER, RIPPLE, and WOOD, Circuit Judges.

WOOD, Circuit Judge.

A few years ago, Ivelisse Castro and George Stergiopoulos each decided to buy a new car. Castro wanted a Toyota 4Runner, while Stergiopoulos fancied a Chevrolet Camaro. When each of them sought financing, their respective car dealers shopped the potential loans (or, as they were called, Retail Installment Contracts (RICs)) to third-party lenders. One of the third-party lenders to consider both loans was the defendant, First Midwest Bancorp, Inc. In deciding whether to purchase the plaintiffs' RICs, First Midwest requested the plaintiffs' credit reports. First Midwest apparently did not care for what it saw there, because it refused to take on either Castro's or Stergiopoulos's RIC.

This is a common scenario. Dealers routinely attempt to assign tentative financing arrangements to lenders, and those lenders often rely on a consumer's credit report to determine whether the deal is worth taking. The question before us is whether, despite its routine nature, this practice is legal. Stergiopoulos and Castro contend that it is not. In their complaint, styled as a class action though no class was ever certified, they assert that First Midwest has been violating the Fair Credit Reporting Act (FCRA or Act), 15 U.S.C. § 1681 et seq., by requesting consumers' credit reports without the consumers' knowledge or explicit consent. First Midwest filed a motion for summary judgment before the district court, arguing that the FCRA authorized its actions. The district court so found and granted judgment for First Midwest. We affirm.

I

First Midwest has an arrangement with various car dealers whereby the dealers offer First Midwest the chance to purchase tentative loan agreements or RICs that the dealers have arranged with potential car buyers. If First Midwest decides not to purchase a particular RIC, the dealer may provide the financing itself or it can attempt to renegotiate the RIC with the buyer, hoping that First Midwest will find the new terms more appealing. The initial contract between buyer and dealer generally spells out this process, leaving out the details that are the focus of this appeal. Most importantly, the documents signed by the buyers do not state specifically that the dealers could shop their contracts to any number of potential third-party lenders. In particular, the contracts that Stergiopoulos and Castro signed made no mention of First Midwest.

Stergiopoulos's "Purchase Contract" with Rizza Buick, the Camaro dealer, had this to say about the financing arrangement:

DEALER ARRANGED FINANCING. In the event of a time sale, RIZZA SHALL NOT BE OBLIGATED TO SELL UNTIL AND UNLESS a finance source approves this order and agrees to purchase a retail installment contract between Customer and Rizza based on this order. As part of obtaining financing, Customer agrees to provide Rizza with a true, correct and complete credit application and to cooperate fully in obtaining financing including the providing of any supporting documentation. This agreement may be canceled by Rizza if Rizza determines that it cannot obtain third party approval and may be canceled by either party if no financing is obtained for Customer on the agreed terms within 15 business days of the date of this agreement.

His signed financing application with GMAC said only "I authorize an investigation of my credit and employment history and the release of information about my credit experience with GMAC."

Castro signed an installment contract at Union Nissan, Inc., for her vehicle; that agreement stated that payments should be made to Great Lakes Credit Union as assignee. She also signed an application for credit with Nissan Motor Acceptance Corp. (NMAC), which included the following statement:

You are authorized to check my credit and employment history and to answer questions about your credit experience with me. In connection with your your [sic] application for credit, a consumer report may be requested. On your request we will advise you if the report was actually ordered and if so, the name and address of the agency that furnished the report. Subsequent consumer reports may be ordered.

Neither Castro's nor Stergiopoulos's credit application mentioned that, in addition to NMAC and GMAC, respectively, third-party lenders unknown to the plaintiffs might also order copies of their reports. Nonetheless, it was clear that the transaction contemplated sale of the paper to another entity. It is also undisputed that the dealers selected First Midwest in these two cases, and the customers had nothing to do with that choice.

II

The FCRA expressly states that its purpose is to ensure "that consumer reporting agencies adopt reasonable procedures for meeting the needs of commerce for consumer credit, personnel, insurance, and other information in a manner which is fair and equitable to the consumer, with regard to the confidentiality, accuracy, relevancy, and proper utilization of such information." 15 U.S.C. § 1681(b). In an attempt to achieve this balance between consumer privacy and the needs of a modern, credit-driven economy, the Act "limit[s] the furnishing of consumer reports" to certain statutorily enumerated purposes. 15 U.S.C. § 1681e(a). If an entity requests a report for a purpose not listed in the Act, an injured consumer can recover the "actual damages" caused by negligent noncompliance, see 15 U.S.C. § 1681o(a)(1), or both actual and punitive damages caused by willful noncompliance, see 15 U.S.C. § 1681n.

The plaintiffs contend that nothing in the Act authorized First Midwest to request their reports and that First Midwest's requests weakened their credit ratings. First Midwest disputes that its actions harmed the plaintiffs and argues that, in any event, the Act allowed the requests. First Midwest relied on § 1681b(a)(3)(A) and (E):

(a) Subject to subsection (c) of this section, any consumer reporting agency may furnish a consumer report under the following circumstances and no other:

. . .

(3) To a person which it has reason to believe —

(A) intends to use the information in connection with a credit transaction involving the consumer on whom the information is to be furnished and involving the extension of credit to, or review of collection of an account of, the consumer; or

. . .

(E)...