The Fair and Accurate Credit Transactions Act (“FACTA”), passed by Congress in 2003, amended the Fair Credit Reporting Act to add provisions designed to help protect consumers from identity theft and to generally enhance consumer protection. Among FACTA’s new provisions was a so-called “truncation provision” requiring that machine-printed consumer copies of receipts for credit or debit card transactions display no more than the last five digits of the card number and not display the card’s expiration date.1 The purpose of the truncation provision is to minimize the amount of personal identifying information on cards’ receipts, which can be lost or thrown away and retrieved by identity thieves. As of Dec. 4, 2006, all businesses that issue electronically printed credit or debit card receipts had to be in compliance.

FACTA Class Action Lawsuits

Since December 2006, plaintiffs’ attorneys have filed hundreds of nationwide class action lawsuits in federal court against a broad cross section of companies in the retail, restaurant, car rental, services and other businesses alleging violations of the truncation provision. The suits are based largely on the display of expiration dates on receipts provided to consumers in violation of the provision. Many defendant businesses have cited as a reason for their alleged noncompliance the ambiguity of the provision’s text, arguing that the truncation provision can be interpreted to require either shortening the account number or deleting the expiration date. However, courts have not, so far, been receptive to dismissing these claims and have interpreted FACTA‘s truncation requirements as prohibiting both the display of more than the last five digits of the card number and the card‘s expiration date.2

Most plaintiffs have not been alleging negligence or claiming actual damages. Rather, they allege in their complaints that the noncompliance was knowing and willful. FACTA allows prevailing plaintiffs to recover statutory penalties ranging from $100 to $1,000 per credit card receipt (plus attorney’s fees, costs and punitive damages) for willful noncompliance with the statute, regardless of whether any actual damages were incurred or whether an individual‘s identity was stolen. In view of the high volume of credit and debit card transactions many merchants and other businesses process on a daily basis, damages based on claims of willful violation of the truncation provision can quickly accumulate.

Corrective Legislation

To put an end to such lawsuits, legislation has been proposed that would clarify the requirements of FACTA. H.R. 4008, cited as the “Credit and Debit Card Receipt Clarification Act of 2007” (the “Amendment”), provides that any person who printed an expiration date on an electronically issued consumer receipt between Dec. 4, 2004, and enactment of the Amendment, but otherwise complied with FACTA by printing no more than five digits of the account number on the receipt, will not be considered to have been in willful noncompliance with FACTA. The Amendment would apply to all lawsuits, other than those that have become final, and would eliminate retroactively any liability for statutory damages for those companies. Lawyers and lobbyists representing a diverse and broad coalition of defendant companies have undertaken efforts to advance this legislative remedy and appear to have made significant progress on the legislative front.

Required Action

The proposed legislation is narrowly targeted to halt abusive lawsuits and does NOT repeal the requirement that merchants or other businesses both properly truncate the credit card account number and redact expiration dates from electronically printed receipts. If not already in effect, businesses must immediately ensure that all machines and registers are in compliance with the truncation requirements.