United States: Companies Face Potentially Ruinous Damages From FACTA Lawsuits

Lawsuits have been filed against more than 100 companies in 2007 for violating a key provision of the Fair and Accurate Credit Transactions Act of 2003 (FACTA). These suits, which seek relief on behalf of classes of consumers, expose defendants to the risk of potentially ruinous statutory penalties.

FACTA, which was enacted in December 2003, amended a variety of provisions of the Fair Credit Reporting Act (FCRA). The key provision for purposes of these lawsuits is 15 U.S.C.A. § 1681c(g), which mandates that machine-printed consumer copies of receipts for credit or debit card transactions display no more than the last 5 digits of the card number and not display the card’s expiration date. The law became effective on December 4, 2004, as to new machines. Existing credit card machines had until December 4, 2006, to become compliant. The statute allows prevailing plaintiffs to be awarded actual damages or, in the case of defendants who willfully fail to comply with the law, statutory penalties under 15 USCA § 1681n of between $100 and $1,000 per affected consumer.

Since the law became fully effective on December 4, 2006, the courts have seen an explosion of cases against retailers alleging willful violations of the act. These cases typically seek relief on behalf of nationwide classes of individuals who received electronically printed credit or debit card receipts that contained more than the last five digits of the account number and/or the expiration date of the card. Plaintiffs originally filed most of these suits in the Ninth Circuit – in particular, the Central District of California – which until recently had a less stringent standard for a showing of willful behavior under 15 USCA § 1681n than other circuits.

In the spring of 2007, two events changed the landscape of FACTA litigation. First, on June 4, the U.S. Supreme Court issued a ruling that, while agreeing with the Ninth Circuit’s interpretation of the term "willfully" as used in 15 U.S.C. § 1681n as including a "reckless disregard of the law," sharply disagreed with the Ninth Circuit’s standard for determining recklessness.1 Instead, the Court held that an action is not in reckless disregard of FCRA unless it "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."2 According to the Court, an action could not be deemed willful where statutory text was unclear and companies operated without "the benefit of guidance from the courts of appeals or the [FTC]." This "objectively unreasonable" standard significantly raises the bar for plaintiffs trying to prove willfulness and greatly aids companies that have acted in a legal grey-zone.

At around the same time as the Supreme Court decision, the second event that altered the FACTA litigation landscape occurred: courts in the Ninth Circuit began denying class certification. Rather, the courts concluded that class treatment was not the superior way of proceeding given the potentially "annihilating" statutory damages exposure where plaintiffs suffered no actual injury. One case, for example, sought relief on behalf of a class of 3.4 million people. Statutory damages in that case would range between $340 million and $3.4 billion; the defendant company had a net worth of $314 million. Under such circumstances, the courts reasoned, the superiority requirement of Rule 23 had not been met.

It has not taken the plaintiffs’ bar long to regroup. Now that the same "willfulness" standard applies in every district, and because the Ninth Circuit was not as obliging in granting class certifications, plaintiffs have made the Northern District of Illinois their new venue of choice. This is because some cases in the Seventh Circuit and the Northern District of Illinois have rejected the argument that disproportionately large statutory penalties should act as a barrier to class certification. Indeed, Seventh Circuit case law instead suggests that unconstitutionally excessive damages may be reduced after a class has been certified and a judgment obtained. See, e.g. Murray v. GMAC Mortgage Corp., 434 F.3d 948 (7th Cir. 2006). It remains to be seen whether the reasoning of Murray will prevail in the long run; it has been rejected by courts in the Second, Ninth, and Tenth Circuits, among others, and may be inconsistent with the Rule 23(b)(3), which is inherently discretionary and expressly permits the denial of certification where a class action is not "superior to other available methods for the fair and efficient adjudication of the controversy." In the meanwhile, plaintiffs have begun filing suits in the Northern District of Illinois, seemingly in the hopes of avoiding the kinds of decisions issued in the California courts. As of early August, dozens of new FACTA cases have been filed in the Northern District of Illinois, and we anticipate that more complaints will be filed.

Mayer Brown has defended, and continues to defend, companies involved in FACTA litigation in California, Illinois, and elsewhere. While the requirements of FACTA may seem deceptively simple, the reality is that hundreds of companies have found themselves defending lawsuits that seek potentially ruinous statutory damages. Companies with retail operations must take care to ensure that printed credit and debit card receipts are in compliance with the law. If those receipts were not in compliance by December 4, 2006, they should prepare for FACTA litigation.


1 Safeco Ins. Co. of America v. Burr, 127 S. Ct 220 (2007).

2 Id. at 2215.

Copyright © 2007, Mayer Brown LLP and/or Mayer Brown International LLP. This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

Mayer Brown is a combination of two limited liability partnerships: one named Mayer Brown LLP, established in Illinois, USA; and one named Mayer Brown International LLP, incorporated in England.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions