• Congress Clarifies FACTA Credit Card Truncation Statute and Effectively Eliminates Some Claims
  • July 29, 2008 | Author: Julie Simone Sneed
  • Law Firm: Fowler White Boggs P.A. - Tampa Office
  • On June 3, 2008, Congress enacted a law that clarified the Fair and Accurate Transactions Act (“FACTA”) and in some cases effectively eliminated plaintiffs’ causes of action under the statute. Congress initially amended the Fair Credit Reporting Act (“FCRA”), 15 U.S.C. § 1681 et seq. (2000), and enacted FACTA, 15 U.S.C. §1681c(g), in an effort to prevent identity theft. The enactment of FACTA resulted in a proliferation of lawsuits against businesses despite the fact that the consumer plaintiffs had not suffered monetary harm as a result of the alleged violations. Congress has now acted to amend FACTA to prevent the filing of these lawsuits that are likely to “raise prices to consumers without corresponding consumer protection benefit.” See 15 U.S.C. § 1601n notes.

    Pursuant to FACTA, businesses that accept credit or debit cards for business transactions must limit the information they include on customers’ receipts. 15 U.S.C. §1681c(g). The receipts can neither contain the expiration date nor more than the last five digits of the card number. Id. Before FACTA was amended, if the credit or debit card receipts contained the prohibited information, businesses could be subject to civil liability for “willful noncompliance” with FACTA notwithstanding the lack of actual harm. See 15 U.S.C. § 1681n.

    The enactment of FACTA resulted in a substantial increase in private civil lawsuits against companies for alleged “willful noncompliance” despite the fact that customers’ card numbers had been truncated and no actual harm resulted from the inclusion of the expiration date on the customers’ receipts. See 15 U.S.C. § 1601n notes. Because of the substantial proliferation of lawsuits for alleged “willful noncompliance” with FACTA, Congress clarified FACTA and enacted the Credit and Debit Card Receipt Clarification Act of 2007 on June 3, 2008. See 15 U.S.C. § 1681n(d). The clarification provides that businesses that printed an expiration date on a consumer’s receipt between December 4, 2001 and June 3, 2008, but otherwise complied with the FACTA requirements (including, properly truncating the credit card numbers) “shall not be in willful noncompliance with section 1681c(g).” Id.

    The amended statute applies “to any action, other than an action which has become final” that is brought for a violation of the Fair Credit Reporting Act.

    Courts have taken notice of the amendment. For example, recently, in Ehrheart v. Verizon Wireless, Case No. 2:07-cv-1165 (W.D. Pa. June 13, 2008), a federal district court vacated a preliminary class action settlement based on the FACTA amendment. The putative class action plaintiffs alleged that Verizon violated FACTA by printing the expiration date on consumers’ receipts. The parties agreed that plaintiffs did not suffer actual monetary damages. Id. The court granted Verizon’s motion to vacate the settlement, finding that “[p]laintiffs’ causes of action have been statutorily eliminated.” Id. Because the court had not approved a final settlement of the class, the court vacated its order preliminarily approving a class action.