Decertification rejected in deceptive credit card marketing case

Greenwood v. Compucredit Corporation, 2010 WL 4807095 (N.D. Cal.)

Plaintiffs sued for violations of the federal Credit Repair Organization Act (CROA) and California's Unfair Competition Law (UCL). Defendants moved to decertify the class, and the court denied the motion.

Plaintiffs alleged that Compucredit deceptively marketed a subprime credit card, the Aspire Visa (some interesting reviews here), to consumers with low or weak credit scores as a way to "rebuild your credit," "rebuild poor credit," and "improve your credit rating." The ads stated that there was "no deposit required," and that consumers would immediately receive $300 in available credit, but in fact, the issuer required a twenty dollar purchase payment to activate the card and immediately assessed numerous fees. These fees, which were hidden in fine print among other information, reduced the available funds by more than half.

The court certified the class because, among other things, the common issues in the UCL claim predominated over individualized issues, because under Tobacco II UCL claims for misrepresentation do not require that absent class members individually demonstrate reliance.

Defendants argued lack of standing, relying on Avritt v. Reliastar Life Ins. Co., 615 F.3d 1023 (8th Cir. 2010), to argue that absent class members must establish injury in fact by demonstrating reliance on the alleged misrepresentations. In Avritt, class plaintiffs alleged fraud under the California UCL due to misrepresentations in marketing an annuity product. The annuities were marketed by a sales force that included thousands of independent agents, who were not required to follow a particular sales script. The Eighth Circuit first disapproved of Tobacco II's holding that absent class members did not need to show individual reliance, because "a named plaintiff cannot represent a class of persons who lack the ability to bring suit themselves." Also, there was no predominance: because sales happened in many different ways, individual issues of reliance were key.

The court here found Avritt unpersuasive. Federal courts don’t require that each member of a class submit evidence of personal standing. Instead, the representative class members must have standing, and then the requirements of Rule 23 determine whether class treatment is appropriate. Unlike in Avritt, the class members here had by definition been exposed to defendants’ advertising, since the class was defined as California residents who were mailed a solicitation for an Aspire Visa. The marketing here was substantially more uniform than that in Avritt; though defendants argued that the marketing materials changed over time, they all allegedly contained the same or almost the same combination of deceptive features.

The court’s conclusions were “bolstered by the principle that in UCL claims for false advertising, a material misrepresentation results in a presumption, or at least an inference, of individualized reliance.” Such a presumption reinforces the conclusions that class members suffered Article III injury and that individualized issues of reliance do not overcome the predominance of common issues. Responses to interrogatories indicating various levels of information about the fees didn’t disprove predominance or reliance either, because they mostly showed that class members learned about the fees through telephone calls, not through the initial allegedly deceptive mailers, and that frequently the calls didn’t fully inform class members, who were often surprised by additional fees. “The interrogatories overall indicate that Plaintiffs consistently lacked key information about the fees, terms and conditions, and relied on the representation that the card would help improve their credit scores.” Motion for decertification rejected.