Congress to the Rescue – FACTA Credit Card Receipt Class Actions Curtailed

Senate unanimously passes H.R. 4008 Credit and Debit Card Clarification Act of 2007. The Act wipes out liability for printing expiration dates on credit and debit card receipts. The Act goes to President for signature.

On May 20, 2008, the United States Senate unanimously passed H.R. 4008, the Credit and Debit Card Receipt Clarification Act of 2007 (the Act) by unanimous consent. H.R. 4008 was unanimously passed (407-0) by the House on May 13, 2008. H.R. 4008 was introduced by Rep. Tim Mahoney (D-FL) on October 30, 2007. The Act now goes to the President for signature. It is expected the President will sign it. Sen. Charles Schumer (D-NY) had introduced an identical bill in the Senate (S. 2978) on May 6, 2008, and introduced the motion for unanimous consent of H.R. 4008 on the floor of the Senate.

The Act offers relief to hundreds of businesses across the nation facing class action litigation for technical violations of the Fair and Accurate Credit Transactions Act (FACTA) amendments to the Fair Credit Reporting Act (FCRA). It represents a legislative fix to prevent plaintiff class action attorneys from cashing in on a technical violation of the FCRA.

In passing the FACTA amendments to the FCRA, 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 credit and debit card 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.

While the amendment enacted by Congress (Section 1681c (g)) prohibited a merchant from printing either more than the last five digits of the card number or the card expiration date, as reflected in the Act itself, most experts agree that simply printing the card expiration date does little to aid an identity thief from acquiring a card account.

The FCRA contains a statutory penalty provision of between $100 to $1,000 for each violation of the Act if the merchant is found to have willfully violated the FCRA. Thus, a merchant who electronically printed the card expiration date on 1,000 credit card receipts faced potential statutory penalties of between $100,000 and $1,000,000 for a technical violation most experts agree did little to aid identity thieves.

Smelling blood in the water, certain plaintiff class action attorneys seized on the opportunity to file class action lawsuits in federal and state courts across the country hoping to seize upon the severe statutory penalties provided under the FCRA. Businesses big and small were hit with class action lawsuits alleging they willfully violated Section 1681c (g) of the FCRA and seeking millions in damages on behalf of classes. Plaintiff class action attorneys across the country were soliciting for class representatives to bring cases. Hundreds of cases were filed in both state and federal courts, the majority of which alleged the defendant business properly did not print more than the last five digits of the card number but committed the technical violation of printing the card expiration date on the receipt.

The Act amends the FCRA to provide that merely printing the card expiration date does not constitute a willful violation of the FCRA and therefore the statutory penalties do not apply. A business whose only mistake was to print the card expiration date on the receipt would be spared from a potential huge damages award in a class action lawsuit.

While district courts in the Ninth Circuit (West coast) had been refusing to certify classes in these cases, district courts in the Seventh Circuit (IL, IN and WI) had been following a binding Seventh Circuit decision and had begun to certify classes in these cases. The potential exposure to businesses was huge. Facing potential huge class action judgments, several businesses already elected to enter into settlement agreements to resolve these cases.

The Act applies to any FACTA credit or debit card case which is pending where a judgment has not been entered yet. Thus, the fact that a lawsuit was filed before the effective date of the Act does not defeat the provisions of the Act

In commenting on the passage of the Act on the Senate floor, Senator Schuman stated, "[T}he bill is a win-win proposition for everyone. It stops destructive lawsuits against companies that made a harmless error in the past, but it also ensures that consumers can still sue in any case where they were actually harmed."

Ice Miller is defending clients in several FACTA credit card receipts class actions pending in federal courts in Illinois and Indiana.

Bart Murphy is a partner in Ice Miller's DuPage County, IL office (western suburbs of Chicago), and is a member of the Business Litigation Practice Group. His practice is focused on complex litigation matters including class action defense. He has defended clients in 5 FACTA credit card receipt class actions.

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.