New Law Cuts Lawsuits Against Merchants Over Credit Card Receipts

June 12, 2008

President Bush has signed into law federal legislation designed to curb lawsuits against retailers and restaurants for printing customers’ credit card expiration dates on customer receipts.

The legislation — the Credit and Debit Receipt Clarification Act — amends existing federal law designed to protect consumers from identity theft by clarifying the responsibility of merchants under the Fair and Accurate Credit Transactions Act.

Under the FACTA, merchants were told they could no longer print more than the last five digits of a credit or debit card number “or” the card’s expiration date on receipts after Dec. 4, 2006.

But retailers have been hit with more than 500 class acts lawsuits contending that FACTA required them to take both steps, and seeking fines as high as $1,000 per incident, according to the U.S. Chamber of Commerce.

The new law is being hailed by businesses including the National Retail Federation and its National Council of Chain Restaurants.

“Hundreds of merchants have inadvertently run afoul of the law due to the confusing manner in which this provision was written,” says NCCR Vice President Scott Vinson. “Most businesses made good faith efforts to comply with the law by truncating credit card numbers but were unaware of Congress’ apparent intent that expiration dates be omitted.”

According to NCCR, many merchants interpreted the FACTA law as meaning they could either truncate the card number or leave off the expiration date, but that they were not required to do both. Most truncated the card number but some continued printing the expiration date, reasoning that the expiration date was of no value without the full card number.

The clarifying legislation signed by President Bush states that a company is not in willful violation of the act if it shortens a consumer’s credit card number printed on a receipt to four digits but does not remove the expiration date. It says a business that prints an expiration date on a receipt over the past 18 months cannot be found in violation of the Fair Credit Reporting Act (FCRA) as long as the merchant printed no more than the last five digits of customers’ credit or debit card numbers on receipts and complied with other FCRA requirements.

“Including expiration dates on receipts has done nothing to put consumers at risk, but opportunistic attorneys have nonetheless seized on this ambiguity in the law to file lawsuits that threaten innocent businesses with hundreds of millions of dollars in penalties, ” said Vinson. “This legislation will put a stop to that effort to shake down America’s merchants.”

According to the Federal Trade Commission, 3.2 million adults reported they were victimized by misuse of one or more their credit cards or credit card numbers in 2005.

Since FACTA does not allow individuals to sue, attorneys have brought the lawsuits under state laws citing FACTA, which includes a statutory damages clause.

Class action suits related to credit card receipts now pending in U.S. District Court in Maryland target Wegmans Food Market Inc. and Weis Markets Inc.

The House and Senate approved the Credit and Debit Receipt Clarification Act without opposition in May. The bill was sponsored as H.R. 4008 in the House by Financial Services Committee member Rep. Tim Mahoney, D-Fla., and as S. 2978 in the Senate by Banking, Housing, and Urban Affairs Committee member Sen. Charles Schumer, D-N.Y.

“This bill makes the previously passed legislation much more sound, and leaves Americans more secure,” said Sen. Fred Thompson, R-Tenn., one of the co-sponsors.

The U.S. Chamber had urged lawmakers to support the measure, arguing that it “preserves a consumer’s right to sue in the event of actual harm or account fraud and does not eliminate a business’ obligation to properly truncate the account number or to eliminate the expiration date from its receipts.”

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