On December 8, 2008, in Smith v. Zazzle.com Inc., No. 08-22371-CIV-KING, 2008 U.S. Dist. LEXIS 101050 (S.D. Fla. Dec. 9, 2008) Judge James Lawrence King of the Southern District of Florida held FACTA’s credit card number truncation requirement inapplicable to receipts displayed on-screen or printed by online customers. Judge King dismissed the case on this basis. The order contradicts one last year in the same district, Grabein v. 1-800 Flowers Inc., No. 07–22235 (S.D. Fla. Jan. 29, 2008) (reported here), but is consistent with three other Southern District of Florida cases: Grabein v. Jupiterimages Corp., No. 07-22288 (S.D. Fla. July 7, 2008), Haslam v. Federated Dep’t Stores Inc., No. 07-61871 (S.D. Fla. May 16, 2008) and Edwin King v. Movietickets.com, No. 07-22119 (S.D. Fla. Feb. 13, 2008).
FTC Suspends Enforcement of Red Flag Rules For Six Months
The Federal Trade Commission (“FTC”) recently announced that it will not enforce the new Red Flag Rules until May 1, 2009, giving financial institutions and creditors an additional six months to comply by developing and implementing a written identity theft prevention program. In an Enforcement Policy Statement released on October 22, 2008, the FTC acknowledged the uncertainty felt by many entities and some industries regarding whether they would be considered “covered entities” and thus subject to the rules. This announcement though does not affect companies subject to the enforcement authority of federal agencies other than the FTC.
Affiliate Marketing Rule Alert: Compliance Deadline is October 1, 2008
Section 214 of Fair and Accurate Credit Transactions Act (“FACTA”) was enacted to amend the Fair Credit Reporting Act (the “Act”) to give consumers the right to restrict certain entities from using certain information received from their affiliates to make solicitations to that consumer unless the consumer has been provided (1) “clear and conspicuous” notice that the consumer’s information will be shared for such purposes, and (2) an opportunity to opt out of having such information shared for such purposes.
On November 7, 2007, the Federal Deposit Insurance Corporation, the Federal Reserve Board, the Office of the Comptroller of the Currency, the Office of Thrift Supervision and the National Credit Union Administration issued a joint final rule (along with the Federal Trade Commission (FTC) and the Securities and Exchange Commission(SEC), which separately adopted and proposed, respectively, similar regulations) under the amended Act (the “Affiliate Marketing Rule” or “Final Rule,” codified at 12 C.F.R. Parts 41, 222, 334, 571 and 717) governing the use of specific consumer information obtained by covered entities from their affiliates for certain marketing purposes.
The Affiliate Marketing Rule became effective on January 1, 2008, and compliance by covered entities is required by October 1, 2008.
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Red Flag Alert — Compliance Deadline is November 1, 2008
According to regulations published by the Federal Trade Commission and the federal banking agencies, covered companies that hold any customer accounts must implement identity theft prevention programs that identify and detect “Red Flags” signaling possible identity theft. Companies establishing such programs must create policies and procedures not only to recognize and detect Red Flags, but also to respond to Red Flags by preventing or mitigating potential identity theft. Furthermore, companies must develop reasonable policies and procedures to verify the identity of a customer opening an account, and must also periodically update their identity theft programs. The rules went into effect on January 1, 2008, and businesses must comply by November 1, 2008.
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Expiration Date Imminent for Many FACTA Class Actions
New amendments to the Fair and Accurate Transactions Act (“FACTA”) (itself an amendment to the Fair Credit Reporting Act (“FCRA”)) bar consumers from alleging willful violation and seeking statutory damages based on the printing of credit card expiration dates on receipts where the account number is otherwise properly truncated in accordance with FACTA. This development means the end is near for scores of class action lawsuits filed last year.
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Seller Beware: Florida district court rules that FACTA applies to electronic receipts and receipts printed in stores
The Southern District of Florida has held that the Fair Credit Reporting Act (FACTA), applies to both electronic receipts from online purchases and receipts printed in stores. In Grabein v. 1-800-Flowers.com, Inc., 07-22235-CIV, 2008 WL 343179 (S.D. Fla. Jan. 29, 2008), Plaintiff filed a class action lawsuit after he used a credit card to purchase flowers through Defendant’s website and received a receipt that contained both Plaintiff’s truncated credit card number and the card’s expiration date. Plaintiff alleged that printing both pieces of information violated FACTA, which provides:
No person that accepts credit cards or debit cards for the transaction of business shall print more than the last five digits of the card number or the expiration date upon any receipt provided to the cardholder at the point of the sale or transaction. 15 U.S.C. § 1681c(g).
First FACTA Disposal Rule FTC Settlement Leaves American United Down in the Dumps
On December 18, the FTC announced a settlement in its 15th case (and its first in 13 months) addressing the data security practices of companies handling sensitive consumer information. American United Mortgage Company agreed to pay a $50,000 penalty for failing to implement reasonable safeguards to protect customer information and failing to provide customers with privacy notices.
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When Reckless Means Willful – High Court Issues Landmark Decision Under the Fair Credit Reporting Act
Since December 4, 2006, consumers have filed dozens of class actions against retailers and other businesses across the country alleging “willful” violations of the Fair and Accurate Credit Transactions Act (“FACTA”) amendments to the Fair Credit Reporting Act (“FCRA”), prohibiting the printing of more than five digits, or the expiration date, of a credit card on receipts provided to the customer. Defendants in those cases have been waiting anxiously for the Supreme Court to rule in Safeco Insurance Co. of America, et al. v. Burr, et al., 551 U.S. _____ (2007), a factually inapposite matter in which the Court granted certiorari to determine whether “reckless disregard” suffices for willfulness under the statute. In a decision that raises as many questions as it answers, the Supreme Court held on June 4, 2007 that “reckless” failure to comply with FCRA can be considered willful. The Court’s opinion begs the question whether it was objectively reasonable for retailers to continue the printing of expiration dates on customer receipts after FACTA took full effect.
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