The Fair and Accurate Credit Transactions Act (FACTA), a federal statute that became effective six years ago, continues to fuel class action lawsuits against merchants. Under the statute, merchants are responsible for truncating the credit card number and expiration date on customer copies of electronically generated credit card receipts so that no more than the last five digits of the credit card number are visible. The expiration date must be removed in its entirety. The statute states that "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 sale or transaction."

Violations can be costly. If they are found to be "willful," merchants are exposed to liability of between $100 and $1,000 per violation, plus attorney fees and costs. Since a violation occurs each time a non-compliant receipt is issued—and many merchants issue dozens, if not hundreds, of receipts per day—potential liability can reach many millions of dollars for retailers found to have "willfully" violated the statute.

To date, the courts have rejected most defense arguments seeking to dismiss FACTA class action complaints at the pleading stage. Among other things, courts have held that a simple allegation that the retailer "knew or should have known" of FACTA's requirements, along with allegations that the retailer was informed of the statute's requirements, is sufficient to plead a "willful" violation of the statute and survive a motion to dismiss.

As a result, the cases are proceeding beyond the pleading stage to discovery and class certification issues, with most courts demonstrating a willingness to certify these cases and allow them to proceed on behalf of a "class" of all customers who were issued non-compliant receipts. In addition, if there is any evidence that the merchant might have or should have known about FACTA's requirements, the courts are denying motions for summary judgment and allowing the cases to proceed toward trial. Not surprisingly, many merchants who are accused of violating the statute are forced to settle, rather than risk uncertainty and continued exposure to liability and legal fees.

Although litigation in this area has slowed somewhat over the years since the statute was enacted, some merchants and their credit card processing companies may still not know about FACTA's requirements. Merchants, especially smaller ones, may rely on credit card equipment companies to program and update their credit card equipment. As a result, some merchants may assume the machines they are using are "compliant" with relevant laws when, unfortunately, they are not.

Therefore, as you head into the new year, it is a good idea to perform an audit to ensure that your electronically printed customer credit and debit card receipts contain no more than the last five digits of your customers' credit card numbers and that the credit card receipts do not include the credit card expiration date. Such an assessment may be particularly important for merchants whose machines have recently been "updated" and for those who have recently switched to a new credit card processing company. Checking customer copies of receipts yourself is a good place to start. Legal counsel can also be very helpful in determining whether or not your company's credit card receipts are compliant.