FCRA Credit & Debit Card Receipt Class
Actions Spread to Chicago and Indiana – Do Your Credit & Debit Card
Receipts Comply?
The latest consumer class action fad, class actions alleging violations of the FCRA regarding information printed on credit and debit card receipts, has now spread to Chicago and Indiana. The plaintiff class action bar has been filing class action cases, initially on the West Coast, under Section 1681c (g) of the Fair Credit Reporting Act (15 U.S.C. §1681c (g)) against major retailers and restaurants alleging that defendants are failing to comply with the FCRA’s requirement that businesses may only print the last five digits of a card number and may not print the card expiration date on an electronically printed receipt given to a consumer.
Section 1681c (g) of the FCRA became effective as to all transactions covered by the statute on December 4, 2006. The plaintiff class action bar wasted little time and multiple class action cases have already been filed in federal courts in California and other states against companies such as Victoria’s Secret, The Limited, Bath & Body Works, Harry & David, Estyle, Gaucho Grill, IKEA, Costco, In-N-Out Burger, El Pollo Loco and California Pizza Kitchen, alleging violations of Section 1681c(g). This “fad” has now spread to Chicago and Indiana. Irst case was filed in the Northern District of Indiana in early April 2007. On April 18, 2007 a prominent Chicago plaintiff class action firm filed the first two FCRA credit card receipt class actions filed in the United States District Court for the Northern District of Illinois. The “feeding frenzy” has apparently begun here as over 40 cases have now been filed in Chicago and Northern Indiana.
FCRA Prohibits
Printing More Than The Last 5 Digits of Card Number and Prohibits Printing
Expiration Date on Electronically Printed Receipts Issued to Consumers
In an effort to combat identity theft, as part of the Fair and Accurate Credit Transactions Act (“FACTA”), Congress amended the FCRA to add Section 1681c (g) which requires businesses to truncate credit and debit card numbers and suppress printing of card expiration dates on electronically printed receipts issued to consumers. Specifically Section 1681c (g)(1) provides:
(1) In general. Except as otherwise provided in this subsection, no person that accepts credit cards for the transaction of business shall print more than the last 5 digits of the card number or the expiration date upon any receipt provided to the cardholder at the point of sale or transaction.
15 U.S.C. §1681c (g)(1). Subsection (g)(2) provides that this provision applies only to receipts that are electronically printed and it does not apply to transactions where the sole means of recording the account number is by handwriting or an imprint of the card.
FCRA Provision
Effective as to All Transactions Involving Electronically Printed Receipts as
of December 4, 2006.
While the FACTA amendments became effective December 4, 2003, Congress provided a delay in the effective date of Section 1681c (g) to allow businesses to prepare for compliance. Section 1681c (g) provides that it is not effective until December 4, 2006 for cash registers first put into use before January 1, 2005. However, as to cash registers which were put into use after January 1, 2005, it was effective as of the date the cash register was first put into use.
FCRA Provides for
Statutory Damages of $100 to $1,000 Per Violation for Willful Violation of
Section 1681c (g).
Under Section 1681o of the FCRA a plaintiff may bring an action for a violation of the FCRA and recover actual damages for a negligent violation of the Act. 15 U.S.C. §1681o. The FCRA also provides that a plaintiff may recover statutory damages of between $100 and $1,000 per violation under Section 1681n (15 U.S.C. §1681n), if plaintiff proves the defendant willfully violated the FCRA. The named plaintiffs in the Chicago cases filed thus far are seeking statutory damages alleging that defendants willfully violated the FCRA. One District Court in California has already rejected an argument that the FCRA does not create a private right of action allowing an individual plaintiff to bring a claim against a defendant. See: Eskandari v. IKEA U.S., Inc., No. 06 CV 1248, 2007 U.S. Dist Lexis 23007 (C.D. CA March 12, 2007).
Should a class be certified, the potential exposure to a defendant is huge. Assuming statutory damages of $100 per violation, every 1,000 receipts issued in violation of Section 1681c (g) creates a potential exposure of $100,000. If the maximum statutory damages of $1,000 per violation is awarded, then the potential exposure is $1,000,000. There is no cap on damages awarded under the FCRA.
Supreme Court Issues Decision Defining Willfulness Standard
Under FCRA
On June 4, 2007, the United States Supreme Court issued its decision in Safeco Ins. Co. v, Burr, No. 06-84, 551 U.S. ___, 2007 U.S. Lexis 6963 (June 4, 2007), construing a provision of the Fair Credit Reporting Act (“FCRA”) which provides a plaintiff with statutory damages of between $100 and $1,000 per violation where the defendant “willfully fails to comply with any requirement imposed” under the FCRA. 15 U.S.C. §1681n.
This cases involved another favorite cause of action of the plaintiff class action bar, namely that defendants impermissibly access credit reports in connection with prescreened solicitations as the solicitations allegedly fail to make a firm offer of credit or insurance.[1] The Supreme Court accepted these cases to review the decisions of the Ninth Circuit Court of Appeals holding that willfulness could be established by a showing of “reckless disregard” of the requirements of the FCRA. Other Circuit Courts of Appeal, including the Seventh Circuit, have adopted a more conservative interpretation holding that the defendant had to have knowledge of the violation and the intent to violate it.
The Court held that a defendant willfully violates the FCRA where the defendant knowingly or recklessly violates the Act. The Court rejected the argument of the petitioner insurance companies that liability under Section 1681n occurs only when there is a knowing violation, holding that in the context of civil liability it has generally construed willfulness to include not only knowing violations but also reckless violations of a statute. However, the Court did reverse the Ninth Circuit’s decision and made several statements in its decision which may offer solace to prescreening class action defendants.
As to
the definition of what constitutes recklessness, the Court held that: “[A]
company subject to FCRA does not act in reckless
disregard of it unless the action is not only a violation under a reasonable
reading of the statute’s terms, but shows that the company ran a risk of
violating the law substantially greater than the risk associated with a reading
that was merely careless.” Id. at *41. The Court declined to provide further
specification as when a defendant’s actions cross the line between negligence
and recklessness stating: “Here, there is no need to pinpoint the
negligence/reckless line, for Safeco’s reading of the statute, albeit
erroneous, was not objectively unreasonable.”
Id.
Credit Card Companies Have Also Created
Obligations and Can Impose Fines or Prohibit Use of Their Cards
Credit card companies such as VISA and Master Card have also created obligations on the part of merchants accepting their cards to truncate card numbers and suppress expiration dates in their agreements with merchants. According to one merchant internet blog the fines which VISA or Master Card may impose on merchants who violate this regulation are as follows: 1st Violation - $5,000; 2nd Violation - $10,000; 3rd Violation - $25,000; 4th Violation - $50,000 and Willful or Egregious Violation - $500,000/month. Thus in addition to facing a FCRA class action and state and federal regulatory actions, a business may also be fined and potentially shut off by credit card companies for failing to comply with the truncation and suppression regulations.
Ice Miller Can Assist You
Whether it is assisting you in conducting an internal audit of your consumer transactions system, advising you how to minimize risk, or defending you in a FCRA class action, Ice Miller has the experience to effectively address all your needs in the areas of FCRA and privacy litigation.
This publication is intended for general information
purposes only and does not and is not intended to constitute legal
advice. The reader must consult with legal counsel to determine how laws
or decisions discussed herein apply to the reader's specific circumstances.