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The Facts about FACTA: the Latest Consumer Class Action

By Jennifer L. Brockett, Sam N. Dawood, Martin L. Fineman
02.15.07
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Spring is in the air. Like bees to honey, plaintiffs' class action firms are drawn to a new law, easy to plead and potentially easy to prove. The Fair and Accurate Credit Transaction Act (FACTA), was enacted in 2003, but became fully-effective only in December 2006. FACTA is aimed at protecting consumer privacy and preventing identity theft, and includes several provisions to meet this goal:

  • Requiring proper destruction of consumer information (such as name, address, social security number);
  • Requiring proper destruction of data compiled from consumer information;
  • Requiring reasonable measures to prevent unauthorized access of trash containing consumer information (such as by shredding, burning or pulverizing such information prior to disposal); and
  • Prohibiting the printing of the expiration date and prohibiting the printing of more than the last five digits of a credit or debit card on any receipt provided to the cardholder at the point of sale.

Failure to comply with FACTA may subject a violator to actual damages caused by identity theft, or statutory damages of up to $1000 per violation. In other words, if a noncompliant credit card machine generates 1000 receipts before the error is caught, the violator may be subject to statutory penalties of up to $1,000,000.

Plaintiff's class action lawyers have done the math, and filed a rash of FACTA lawsuits based upon noncompliant credit card receipts. On just one Friday in one federal courthouse, the Central District of California, a single law firm filed FACTA claims against nine restaurant chains and one retailer.

The battleground in FACTA cases will be the availability and size of statutory damages awards. Statutory damages are not always available and, when available, may range from $100 to $1000 per violation. The key to defending against a FACTA claim is to avoid statutory damages and limit the damages to the lower end of the spectrum. However, as FACTA has only been in full effect since December 2006, there are no settled jury instructions and no published court decisions on the issue.

Davis Wright Tremaine is both counseling clients on how to avoid FACTA claims and defending FACTA claims in court.

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