As most know by now, the Fair and Accurate Credit Transactions Act (FACTA) prohibits the printing of more than the last five digits of a customer’s credit or debit card number as well as displaying the expiration date of the card on the receipt. The law as originally passsed was extremely confusing because it stated that it was illegal to print more than five digits OR the expiration date. Many retailers – justifiably so – interpeted that provision to mean if they did not print more than 5 digits they could print the expiration date on a receipt. Unfortunately, when Congress said “or,” it really meant “and” and so an epidemic of federal class action lawsuits were filed based on a hyper-technical violation occasioned by ambiguity in the law. It got so bad that FACTA was amended by the Credit and Debit Card Receipt Clarification Act of 2007 which clarified that receipts could not display more than 5 digits nor the expiration date.
A recent case involving Tommy Hilfiger raised yet another nuanced question under FACTA – namely, whether a plaintiff can sue on a class action basis for display of a partial expiration date on a receipt? In that case, the merchant allegedly printed the expiration month, but not the year, on plaintiff’s credit card. The question for the Court was whether that partial display was a willful violation because in order to be entitled to statutory damages (up to $1,000 per receipt) a plaintiff must evidence a willful violation. (A negligent violation is actionable but in that instance plaintiff must show actual damages – something that is often (always???) lacking in these cases.)
The Court first considered whether the partial printing was a violation of FACTA in the first place because the law was silent on the question. FACTA specifically delineates the number (and which ones, at that) of digits that may be printed (the last 5), but it does not speak in such specifics to the expiration date. The Court concluded that a partial printing was a violation because the “most natural reading of the phrase ‘expiration date’ is that it refers to the information or data contained in the expiration date field on the fact of the card.”
Next, plaintiff had to prove that the violation was willful in order to be entitled to statutory damages. This it could not do. As this case demonstrates, willfullness is not satisfied merely upon a showing that the defendant’s interpretation was erroneous; rather, its interpretation must be “objectively unreasonable.” The Court observed that defendant’s interpretation had some foundation in the text of FACTA (not to mention the fact that the district court agreed with it). Since the merchant’s interpretation was reasonable (albeit wrong), there was no willful violation and therefore no statutory damages could be awarded. The court affirmed the trial court’s dismissal.
This is the right result. So many times, courts let these cases go forward despite the fact that the defendant’s interpretation was not objectively unreasonable as a matter of law. While the FACTA law has laudable intentions (curb identity theft and credit card fraud), it is extremely vague and has ensared many a well-intentioned retailer over the last several years. If cases like these are allowed to proceed beyond the pleading stage, defendants are often forced to capitulate to coercive settlements because their potential exposure (not to mention the costs and inconveniences of litigation) are ridiculously high. Fortunately, courts have recently curtailed some of the unwarranted extensions of the law finding that it does not apply to electronic confirmations of Internet transactions (among other things) and this decision is yet another in the defense arsenal.
Decision is accessible here: http://caselaw.findlaw.com/us-3rd-circuit/1592099.html