The Fair and Accurate Transaction Credit Act, or "FACTA", is a federal law which, among other things, was enacted in response to the rise of identity theft-related crimes. One provision of FACTA makes it illegal to print on a receipt more than the last 5 digits of a credit card number or the card’s expiration date. Since this law went into effect more than 16 months ago, FACTA litigation has become a hotbed for class action litigation (over 300 class actions have been filed). According to an article in The National Law Journal, by Tresa Baldas, many of the companies being subjected to class action litigation have been accused of printing on receipts too much credit card information, thus increasing the likelihood of identity theft.
A federal judge in Florida recently ruled that FACTA is applicable to online retailers as well as in-store receipts. According to the article by Ms. Baldas, lawyers are warning business owners that the margin of error for violation of FACTA is zero. The reason being, a plaintiff suing a company under FACTA need only prove a "willful, technical violation" of the Law, and not actual harm! Statutory damages range from $100 to $1000 per violation, and if you add up every non-compliant receipt, the amount of fines and penalties could be so overwhelming that it could bring a company down financially.
For plaintiffs suing under FACTA, class certification of the lawsuit by the courts is the biggest obstacle they are confronted with. The article states that defense lawyers for the companies being sued are arguing the "Annihilation Defense" (e.g. certification of a class could annihilate the business). The Ninth Circuit Court of Appeals in San Francisco has currently put a hold on all class action litigation under FACTA until the outcome of a case pending has been resolved (Soualian v. International Coffee & Tea). Other courts have struck down the annihilation defense, citing with plaintiffs attorneys that businesses have had more than enough time to comply with the requirements of the law. Defense lawyers are also cautiously optimistic about the decrease in class action litigation as compliance with the law grows.
What can all business owners learn from the current rise in FACTA class action litigation? Create, maintain, store, and destroy your customer information is a safe and secure manner. Examples of these are: use of encryption software, limiting access to customer information by your employees, corporate safeguards and procedures policies, and destroy all information once it is no longer needed (e.g. pulverizing, burning, etc.). Failure to implement a sound corporate records safeguard program could subject your business to class action damages and close down your operations forever. Large corporations being sued for violations of FACTA are financially better suited to weather the storm of liability that could be levied down upon them by the courts, but a small to medium-sized business will not be so fortunate.
To read the article in The National Law Journal click here: Landslide of Lawsuits over Data on Receipts