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FAIR AND ACCURATE CREDIT TRANSACTIONS ACT (FACTA)

By:  David J. Ben-Dov

           If your company accepts credit and debit cards as a form of payment from your customers, you should be aware of the need to comply with the requirements of the federal Fair and Accurate Credit Transactions Act, 15 U.S.C. § 1681c(g) (“FACTA”).

            FACTA requires that businesses providing electronically printed credit and debit card receipts to their customers must shorten, or truncate, the account information contained in those receipts.  In particular, FACTA requires that your company include no more than the last five digits of the card number, and the card’s expiration date must be deleted in its entirety.

            For example, a receipt that complies with FACTA may include the following:

ACCT: ***********12345
EXP: ********

            Congress enacted FACTA with the intent of protecting businesses and their customers from credit card crime and the growing problem of identity theft, and has set deadlines for businesses to comply. 

            Cash registers, or other devices that electronically print receipts, that were installed before January 1, 2005, had until December 4, 2006, to become compliant with FACTA; and those devices installed after January 1, 2005, were supposed to comply with FACTA upon installation.

            Failing to comply with FACTA can be very costly.  Any person who violates FACTA is liable for either “actual damages” sustained by the consumer, or statutory damages ranging from $100 to $1,000.  The statute provides that:

[a]ny person who willfully fails to comply with any requirement imposed under this subchapter with respect to any consumer is liable to that consumer in an amount equal to the sum of not less than $100 and not more than $1,000.

15 U.S.C. § 1681n(a)(1)(A).  The penalties may further include punitive damages, and, if your business is found liable for a violation of FACTA, the prevailing consumer may also be awarded attorneys’ fees and court costs.

            Recently, on June 3, 2008, the Credit and Card Receipt Clarification Act of 2007 (the “Clarification Act”), was signed into law, and may impact a company’s liability under FACTA.  The intent of the Clarification Act is to clarify the meaning of “willful noncompliance.”  Specifically, for any business that truncated the cardholder’s account number, but printed an expiration date on any receipt provided to a consumer cardholder at a point of sale or transaction during the period December 4, 2004, through December 3, 2008, the business will not be considered in willful noncompliance with FACTA, by reason of the printing of the expiration date on the receipt.

            Although FACTA was enacted by Congress to prevent criminals from obtaining access to consumers’ private financial and credit information in order to reduce identity theft and credit card fraud, hundreds of class action lawsuits have been filed based upon merchants’ failure to comply with its requirements.  Courts have therefore been charged with dealing with a myriad of issues that have arisen in connection with FACTA, which has resulted in divergent interpretations of FACTA throughout the many jurisdictions of the federal court system.

           At Deutsch, Levy & Engel, Chartered, we are prepared to provide counsel regarding all aspects of FACTA, including compliance and litigation.  Please contact DLE attorneys Phillip J. Zisook (zisook@dlec.com) or David J. Ben-Dov (ben-dov@dlec.com), at (312) 346-1460 with all FACTA related questions.