I’ve mentioned the Fair and Accurate Credit Transaction Act of 2003 (FACTA) several times in this column. You’ll recall that FACTA made significant amendments to the Fair Credit Reporting Act (FCRA), many in ways one may not have expected. The FCRA has always been a challenge from a compliance perspective. Many of us whose practice revolves to some extent around it refer to the FCRA as the “gift that keeps on giving.” FACTA made that all the more the case — note that new Red Flags and Affiliate Sharing Rules are two results of FACTA.
One small amendment that came from FACTA that is having a big impact is a provision that requires merchants (like dealers) who use machine-printed credit card transaction receipts to truncate — or shorten — the cardholder’s account number on the receipt. The law now prohibits merchants from providing such receipts with more than the last five digits of the cardholder’s account number, and further prohibits the merchant from including the expiration date of the card on the receipt.
Like I said, the FCRA is the gift that keeps on giving. In this case, it was not entirely clear for some merchants that the new amendment was an outright prohibition on printing the expiration date. At least that’s what a majority of courts that have addressed the issue are saying. Check your credit card receipt printers, because this is causing big dollar problems for merchants who still print that date on their receipts.
By now, most electronic card machines have been modified to truncate the account number. But if my restaurant experience last night is any indication, a number of merchants are still handing out receipts that include the card’s expiration date. You should know that plaintiffs attorneys have filed class actions all across the country seeking up to $1,000 per credit card receipt for this mistake. They don’t need to prove that anyone was injured by the violation; they just need to prove that it happened and that it was willful. If they do, they win up to $1,000 per receipt, plus attorneys’ fees. They can also obtain punitive damages if the court feels like it. How many receipts do you generate in a day, week, month? It doesn’t take long to say, “Bye-bye business.”
This could become easy money for the plaintiff’s bar, and they know it. I counted seven reported class-action cases in 2007, and three so far in 2008. Not one has been a dealer, but you’re as susceptible as McDonalds as far as this is concerned. Fortunately, at least some of the judges hearing these cases may think that making money like this is just a little sleazy, and have found creative ways to not allow the class action to go forward. For example, one court cited the potential for attorney abuse in filing highly technical suits where no one has alleged that they’ve been harmed. Other courts have decided that Congress didn’t intend to put merchants out of business on a technicality — a real possibility when you count up the number of receipts some merchants generate in a relatively short time.
But some courts are going ahead with class actions, and they can’t stop the individual lawsuits in any event. So, it’s an issue. You also need to worry about the Federal Trade Commission. In its opinion, the FCRA clearly prohibits machine-printed receipts that contain the expiration date, and they would be prone to coming after a few bigger names to make a point. If you’re showing a little too much leg on your receipts and they tell you so, they can whack you with fines of up to $11,000 per receipt from then on.
So, like the title of this month’s column asks, “What’s on your receipt?” If it’s showing more than the last five digits of your customer’s credit card number, as well as the expiration date, your bank account may be fair game to my brethren on the dark side. And that’s one gift you don’t want to give.
Michael Benoit is a partner in the Washington, D.C., office of Hudson Cook LLP. He is a frequent speaker and writer on a variety of consumer credit topics. He can be reached at [email protected]. Nothing in this article is intended to be legal advice and should not be taken as such. All legal questions should be addressed to competent counsel.