There hasn’t been much litigation in recent years over what constitutes a “firm offer.” And that’s probably, at least in part, because federal courts have allowed lenders to defeat consumer lawsuits by pointing to terms within the offers indicating that they intend to honor the offered credit. But that didn’t stop a California appellate court in Sosa v. CashCall, Inc., No. G056974, 2020 Cal. App. LEXIS 409 (Cal. Ct. App. May 13, 2020) from requiring lenders to provide more information—about the loans actually given out in a given campaign—to defeat a consumer lawsuit.
Here’s what happened at the lower court: Through a typical firm offer process, two lenders (CashCall, Inc. and LoanMe, Inc.) mailed Plaintiff, among several hundred thousand other prescreened individuals, pretty standard loan offers. A typical offer stated that the consumer had pre-qualified for a specific loan amount and included a toll-free number, the proposed loan terms and conditions, and prescreen and opt-out notices.
The Plaintiff sued the lenders, claiming that the mailings violated California’s version of the FCRA—the California Consumer Reporting Agencies Act (CCRAA)—which requires the same thing of furnishers with respect to firm offers, but has a higher per-violation civil penalty for willful noncompliance.
During discovery, the Plaintiff filed a motion to compel the lenders to respond to requests asking how many of the consumers who were mailed offers were actually given loans. The lower court denied that motion, finding that the request was not relevant to whether the lenders extended a firm offer of credit to the Plaintiff. It then dismissed the case, finding that the Plaintiff could not rely on “blind speculation” that the lenders did not intend to honor the offers they sent to her.
The appellate court (or at least two of the three judges) did not agree. The majority held that the lenders should have answered how many loans were actually given out of the hundreds of thousands of consumers who were mailed offers, since that question “was highly relevant” to “whether the lenders intended to honor the proposed loan terms if consumers such as [the Plaintiff] accepted the mailed offers.”
As the dissenting judge pointed out, though, the majority essentially flipped the burden—instead of requiring the consumer to produce evidence that the furnishers did not intend to honor the loan, the majority put the onus on furnishers to provide evidence regarding whether any of the loan offers were actually honored. This goes against several federal courts that have allowed lenders to rely solely on the terms of the mailed offer to show they intended to honor the offered credit.
Given that the majority decision here allows a consumer lawsuit to proceed through potentially costly discovery based on blind speculation that the furnisher did not intend to honor the terms of the loan, furnishers should watch this decision carefully.