Third Circuit Holds FACTA Prohibits Expiration Dates on Receipts, But Finds Violation Not Willful
John G. Haley | Bloomberg Law
The U.S. Court of Appeals for the Third Circuit held that the Fair and Accurate Credit Transactions Act (“FACTA”) 15 U.S.C. § 1681 et seq., prohibits merchants from printing any part of a credit or debit card’s expiration date on a receipt. The court also found, however, that because the language of the statute was unclear, doing was reasonable and was not a willful violation of the law. The court affirmed dismissal of a customer’s suit against the retailer, as the plaintiff did not claim actual damages and the law requires proof of a willful violation to claim statutory or punitive damages.
Plaintiff Filed Suit after Receiving Receipt with Card Expiration Date
Plaintiff Randy Long made a purchase at a Tommy Hilfiger store in Pennsylvania. He was given a receipt that redacted all but the last four digits of his credit number, and displayed the month, but not the year, of the credit card expiration date. Long sued Tommy Hilfiger, Inc., in federal district court, alleging that printing part of his card’s expiration date on his receipt was a willful violation of the FACTA. Long asserted a class action on behalf of all other customers similarly situated.
The FACT Act provides:
(g) Truncation of credit card and debit card numbers
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.
The FACTA creates civil liability for violations of the law. If a plaintiff demonstrates a merchant’s violation of the law was negligent, the plaintiff may only recover actual damages. A “person who willfully fails to comply” with the law may be liable to a consumer for actual damages, statutory damages between $100 and $1,000, and punitive damages. 15 U.S.C. § 1681n.
Congress Created Safe Harbor for Violations of the Law
After the FACTA was enacted into law, because of the wording of the statute, “many merchants mistakenly believed that § 1681c(g) would be satisfied solely by truncating the card number and not the expiration date,” the court observed. Long at 5. “Hundreds of lawsuits” were filed against merchants who allegedly failed to remove the full expiration date from their receipts, claiming a willful violation of the law. Id. Members of Congress found the lawsuits to be a significant burden on businesses, without little benefit to consumers. In 2008, Congress enacted the Credit and Debit Card Receipt Clarification Act (“Clarification Act”), Pub. L. No. 110-241, to address this perceived problem.
In its description of the purpose of the law Congress wrote:
The purpose of this Act is to ensure that consumers suffering from any actual harm to their credit or identity are protected while simultaneously limiting abusive lawsuits that do not protect consumers but only result in increased cost to business and potentially increased prices to consumers.
The Clarification Act provided that any person who printed an expiration date on a receipt provided to a consumer between December 4, 2004, and the enactment of the law, but otherwise complied with the FACTA, would not be deemed to be in willful noncompliance with the law.
The district court granted Hilfiger’s motion to dismiss, concluding that (1) printing the month of expiration, alone, did not constitute the printing of an “expiration date” under the statute, and (2) even if Hilfiger did violate the law, Long could not recover because the alleged violation was not willful. Long appealed.
No Part of Expiration Date May Be Printed
The Circuit court examined the text of the FACTA to determine what Congress intended in its use of the phrase “expiration date.” The court considered the “overall object and policy of the statute, and avoid constructions that produce odd or absurd results or that are inconsistent with common sense.” Long at 6.
The court noted that “expiration date” is not defined in the statute. Hilfiger argued that it refers to a certain date, and therefore the month alone would not qualify. The court did not agree, finding that such an interpretation would permit printing different parts of the date by different merchants, which would not help to prevent identity theft, “a result certainly not intended by Congress.” Id. The court concluded that under FACTA, an expiration date is any information or data contained in the expiration date field on the face of a credit or debit card. Therefore, FACTA prohibits merchants from printing on a receipt any numbers in that field, the court held.
In the Clarification Act, Congress created a safe harbor for merchants who were sued for printing expiration dates, but it did not otherwise change the language, the court noted. The court therefore held that federal law prohibits printing a card expiration date, even with the year redacted, on a receipt, and that Long had stated a claim under the law.
Defendant’s Reading of FACTA Was Reasonable
Long did not claim he suffered any actual damages, and so could only recover statutory and punitive damages by showing Hilfiger’s violation of the law was willful. The Supreme Court addressed the willfulness requirement of the FACTA in Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47 (2007). The Supreme Court found willfulness occurs when “the action is not only a violation under a reasonable reading of the statute’s terms, but shows that the company ran a risk of violating the law substantially greater than the risk associated with a reading that was merely careless.” Long at 9 (quoting Safeco, 551 U.S. at 69)(emphasis original). Therefore, in order to be willful, a defendant’s interpretation of the law must not just be erroneous; it must be “objectively unreasonable.”Id.
The court noted that the term “expiration date” is not defined in the statute, and even though the Circuit court did not agree with Hilfiger’s interpretation, the district court did. Hilfiger’s interpretation had “some foundation in the text,” the court stated, and therefore Hilfiger’s belief that the law did not prohibit printing the month of an expiration date was not objectively unreasonable. Id. at 9. The court found further evidence of Hilfiger’s actual or subjective knowledge to be irrelevant. The court held that Long did not state a claim for willfulness under the FACTA, and affirmed the order of the district court dismissing the complaint.
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