Willful violations of the Fair Credit Reporting Act (FCRA) can be punished with statutory damages of between $100 and $1,000, and potentially punitive damages, even where no actual damages are shown. 15 U.S.C. §1681n(a). This provision has been an important component to recent clusters of FCRA class action cases where large classes of plaintiffs suffered no actual damages, but were able to threaten massive exposure because of the prospect of up to $1,000 in statutory damages per class member, plus potentially punitive damages.

Because the FCRA provides no guidance regarding how to determine the amount of statutory damages, a district court in Alabama recently held that the statutory damage provision is unconstitutionally vague and violates due process, and entered summary judgment for the defendants. Grimes v. Rave Motion Pictures Birmingham, L.L.C., 552 F. Supp. 2d 1302 (S.D. Ala. 2008).

Grimes was a credit card truncation case in which plaintiffs sought to recover statutory damages from defendants, which were retail vendors that allegedly violated the FCRA (as amended by FACTA) by including both the last five digits of the plaintiffs’ credit card number, and the credit card’s expiration date, upon sales receipts provided to the plaintiffs. See 15 U.S.C. §1681c(g)(1). None of the plaintiffs claimed to have suffered any actual damages as a result of the alleged violation, but instead sought to collect the $100 to $1,000 in statutory damages, and punitive damages, authorized by the FCRA.

The court concluded that the statutory damage provision of the FCRA was unconstitutionally vague because the statute provides no guidance to a judge or jury as to whether to award $100 or $1,000 (or something in between) for a violation:

The words “not less than $ 100 and not more than $ 1,000” constitute an almost perfect illustration of the concept “void for vagueness.” There is no way short of legislation to remove the vagueness and ambiguity in these words. They make it impossible to conduct a fair trial.

Grimes, 552 F. Supp. 2d at 1306. The court went on to hold that the FCRA’s punitive damage provision also violates due process because it left open the possibility of imposing punitive damages even when no actual damages were suffered, holding that “to impose punitive damages without the suffering of any harm is inherently disproportionate.” Id. at 1308.

Although credit card truncation cases of the type at issue in Grimes have been significantly limited by the recently-enacted Credit and Debit Card Receipt Clarification Act of 2007, Grimes’ holding remains important for two reasons. First, credit card truncation cases survive the Clarification Act if the alleged violation took place after the June 3, 2008 effective date of the Act. Second, Grimes’ holding would apply to any FCRA case in which a significant class of plaintiffs suffer no actual damages, not just credit card truncation cases. Thus, any defendant in a “no damages” FCRA class action case should whether Grimes may be helpful.

Grimes’ holding is on appeal.