When Congress and President Bush agreed to changes in the Fair Credit Reporting Act (“FCRA”) in late 2003, most critical commentary focused on the provisions related to federal preemption and identity theft. As a result, new rules regarding credit and debit card receipts received relatively little attention. Recently, however, these rules have been used as the basis for a number of class action lawsuits against retail stores and restaurants that accept credit and debit card payments. This memorandum is intended to provide our retail clients and friends with a brief overview of the law’s requirements, as well as a look at one issue that is likely to be important in the litigation.
The New Rules
As amended, the FCRA now specifies that no company that accepts credit cards or debit cards shall print more than the last five digits of the card number or the expiration date on any electronically printed receipt provided to the cardholder at the point of sale.
These changes became law in late 2003, but to give retailers time to comply, they did not go into effect until recently. For cash registers or other devices that print receipts that were first put into use on or after Jan. 1, 2005, the new requirements became effective as soon as the machines were put into service. But for older devices that were in use before 2005, the new rules did not become effective until Dec. 4, 2006.
In recent weeks, plaintiffs have filed scores of lawsuits alleging that retailers have violated the FCRA by printing more than the final five digits and/or expiration dates on credit or debit card receipts. In California alone, more than 70 complaints have been filed in federal court since the limitations on receipts became fully effective in December 2006. Likewise, a number of class action complaints have recently been filed in the Western District of Pennsylvania, alleging essentially the same cause of action.
These complaints allege that after the new rules went into effect, any retailer who failed to provide properly truncated receipts to customers “willfully” violated the FCRA by doing so. Because the FCRA has a “two-tier” damages structure, the issue of whether or not the alleged violations were “willful” will be a key one in these lawsuits. The FCRA provides that plaintiffs who can prove negligent violations of the law may recover only their actual damages. This means that if the plaintiffs in these credit card receipt cases cannot prove more than a negligent violation, they will likely recover little or nothing, because few class members will be able to show that an improperly printed credit card receipt caused them actual harm.
But the FCRA also states that plaintiffs who can prove “willful” violations will recover between $100 and $1,000 per violation, plus possible punitive damages and attorneys’ fees. Not surprisingly, the plaintiffs in these recent class action cases are seeking a minimum of $100 for each allegedly improper receipt, plus punitive damages and attorneys’ fees for what they allege to be willful violations of the FCRA.
The key issue of whether a retailer “willfully” violated the FCRA by failing to properly truncate a credit card receipt will obviously depend on how broadly the term “willfully” is interpreted under the FCRA. That very question is now before the Supreme Court in the case of GEICO Gen. Ins. Co. v. Edo, 127 S.Ct. 36 (2006). The GEICO case should resolve a split between the Third and Ninth Circuits, which have both ruled that “reckless indifference” to the law (possibly including reliance on incorrect legal advice about the law’s demands) can be a “willful” violation under the FCRA and the Sixth and Eighth Circuits, both of which have held that a party must knowingly break the law to “willfully” violate it.
Given the lack of precedent, some retailers in these credit card receipt cases may have interpreted the law to require either truncation of the card identification number or removal of the expiration date. If that interpretation is ultimately rejected by a court, the question of whether those retailers willfully violated the FCRA could depend, in part, on how the Supreme Court decides the GEICO case.
If the Supreme Court accepts the Sixth and Eighth Circuits’ requirement that a violation must be known to be “willful,” retailers will be better able to defend these cases than they will if the Supreme Court follows the Third and Ninth Circuits, and holds that “reckless disregard” for the law can lead to statutory damages under the FCRA.
No matter what the Supreme Court decides in the GEICO case, retailers should check their cash registers to ensure that they are providing properly truncated receipts to customers, and should be aware of the growing wave of class action lawsuits filed against retailers whose receipts have recently contained a full card number or an expiration date.