Business Law Update: Amendment to FACTA Passes

Attorneys: Guolee, Terrence F.

Amendment to FACTA Passes
Previously, we wrote on the risks to businesses throughout Illinois and the nation posed by a littleknown and often misunderstood provision of "FACTA," the Fair Credit Reporting Act, codified at 15 U.S.C. §1681 et seq. (Business Alert: Check Your Credit Card Receipts! New Wave of Litigation Under Fair and Accurate Credit Transactions Act, Terrence Guolee, Querrey & Harrow newsletter, October 2007.) FACTA, enacted into law in 2003, added new sections to the Fair Credit Reporting Act and required businesses to come into compliance by December 4, 2006.
FACTA now requires businesses to limit the information printed on credit card receipts, as follows:
Except as otherwise provided in this subsection, no person that accepts credit cards or debit 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 the sale or transaction."
15 U.S.C. §1681c(g)(1). Section 113 of FACTA was meant to require that both the credit card number and the expiration date be removed from receipts. However, vagueness in the law and a lack of clarification from the Federal Trade Commission led many businesses to only truncate the credit card number and leave the expiration date on the receipt.
Pursuant to Section 1681n, a person who "willfully" fails to comply with these requirements can be liable for:
Actual damages of not less than $100 or more than $1000
Punitive damages
Lawyer fees and costs
Conversely, Section 1681o provides that a person who "negligently" fails to comply can be liable for actual damages and legal fees.
Lawsuits filed under FACTA have primarily sought relief under the statutory "willful" section of the Act based on the failure to remove expiration date numbers. Most importantly, the claims assert no damages to the plaintiff consumers, but threaten thousands and, in many cases, millions of dollars in damages against businesses. Adding to the risk is that, largely, insurance carriers have refused to defend and indemnify businesses from the claims.
However, passage of H.R. 4008 should stem this wave of litigation. The U.S. House of Representatives and the Senate passed an amendment to FACTA on May 13 and 20, 2008, respectively, titled H.R. 4008, The Credit and Debit Card Receipt Clarification Act. The bill, signed into law by President Bush on June 3, 2008, was introduced by Rep. Tim Mahoney (FL-16), with local support of Congresswoman Melissa Bean (IL- 8), and amends FACTA to say that:

any person who printed an expiration date on any receipt provided to a consumer cardholder at a point of sale or transaction between December 4, 2004, and the date of the enactment of this subsection but otherwise complied with the requirements ... shall not be in willful noncompliance ... by reason of printing such expiration date on the receipt.
H.R. 4008 preserves a consumer's right to sue in the event that the credit card number is not truncated. That said, it is important to note that of the over 500 lawsuits now on file around the country, none made any allegation of consumer harm. We commend the House, Senate and President for closing this loophole in the law and protecting businesses and their employees from this potentially devastating wave of litigation.

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Terrence Guolee, a shareholder on our commercial liability litigation team, has successfully represented defendants and carriers in dozens of complex, multi-million dollar claims covering wide areas of facts and law, including FACTA claims and defense and coverage aspects of various statutory causes of action. In addition to defending FACTA claims in the courts, Terrence presented the case for passage of the amendment discussed above to many members of Congress, seeking a "legislative remedy" to the threat against his clients. If you have any questions regarding this article, please contact Terrence via 312-540-7544 or This email address is being protected from spambots. You need JavaScript enabled to view it..