FACTA: Receipts, Digits, and Hefty Fines

Any business that issues electronically generated credit or debit card receipts to its consumers is subject to the “truncation” requirement of the “Fair and Accurate Credit Transactions Act” of 2003(FACTA). This stipulation bans receipts from displaying more than the last five digits of the cardholder’s account number. Violation of this rule can bring penalties of up to $1,000 per violation in addition to attorneys’ fees.

Business ranging from small mom-and-pop stores to the likes of Federal Express, Southwest Airlines and Adidas have experienced lawsuits filed against them for violating the “truncation” rule. In many instances merchants have opted to settle in order avoid facing the risk of trial and possibly stifling penalties.

FACTA’s Possible Penalties

If multiple claims are collected in a class action, the responsible merchant would potentially face a massive amount of damages. Consider an improperly programmed ATM which is dispensing receipts displaying six digits of the user’s account number. It’s possible that in one year 40,000 inadequately truncated receipts could amount to $40,000 in damages as well the additional cost of attorneys’ fees. If this error occurred over hundreds of identical ATMs, the responsible vendor would face cataclysmic damages.

While the Act clearly applies to paper receipts produced during face-to-face transactions, courts have disagreed over whether FACTA also applies where receipts are transmitted electronically to consumers.

FACTA Protection

With ongoing emphasis to thwart potential identity theft, regulations similar to FACTA will continue to pursue violating merchants with costly litigation. To guard against possible infraction, businesses should review all register and terminal supply software and service contracts to verify their vendors are complying with FACTA. Adoption of a written FACTA compliance policy while informing employees of their responsibility to the act is also necessary.