                           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 deci-
sion 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 illus-
trate 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 every-
one 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 stat-
ute allows this only if the person requesting the informa-
tion 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 perspec-
tive, 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 be-
tween 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 knowl-
edge 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 substan-
tial 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 mer-
chandise 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 prod-
ucts 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 observa-
tion 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 com-
pounding interest unstated is not relevant to the ques-
tion 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 tele-
phone 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 con-
sumer gets the point.
  Now it is true that the credit can’t be used to buy some-
one 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 ac-
cording 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 of-
       fer.
   (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 con-
       sumer 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 con-
       sumer; or
       (B) of the information in the consumer’s appli-
       cation 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 con-
       sumer 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 formi-
dable, 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 qualifica-
tion” 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 persua-
sion, 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 con-
sumer credit information in a transaction that was not
initiated by the consumer must “provide with each writ-
ten 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 applica-
     ble criteria bearing on credit worthiness or insur-
     ability or does not furnish any required collateral;
     (D) the consumer has a right to prohibit informa-
     tion 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 regula-
tion 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 Com-
mission can’t adopt substantive rules for private litiga-
tion; this regulation concerns only its enforcement activi-
ties. 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 ¼ 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 know-
ledge of the law’s requirements.
  “Recklessness” is a protean term, one that might flunk
the statutory requirement of clarity if included in a dis-
closure statement. But it is the Supreme Court’s under-
standing of the statute. The Court did not stop with the
word “reckless.” It added that
     a company subject to FCRA does not act in reck-
     less 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 com-
pany to turn? Appellate decisions are a logical place, but
they did not help much. When Cingular mailed its bro-
chure, 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 read-
able 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 reason-
     able 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 contrast-
        ing 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 surround-
        ing text of the same size, or set off from sur-
        rounding 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 per-
son 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 throw-
away 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 “substan-
tially greater” than is associated with ordinary careless-
ness. It would be reckless today to use the same notice,
given Cole and such assistance as 16 C.F.R. §642.3 pro-
vides, 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 errone-
ously 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
