Lawsuits targeting credit card receipt violations

Thursday, August 16, 2007 at 1:55am

A wave of class action lawsuits against businesses printing more than five digits of consumer credit cards on receipts is starting to affect Nashville businesses.

The Sportsgrille, a restaurant in the Nashville downtown Hilton, as well as the Opry Mills location of the Sun & Ski chain of stores were recently sued for not complying with federal and state regulations created to protect consumers from identity theft and credit and debit card fraud.

The Fair and Accurate Transaction Act (FACTA), enacted in 2003, and the Tennessee Consumer Protection Act (TCPA), enacted in 2005, both require that any entity accepting credit or debit cards in business transactions print no more than the last five digits of consumer card numbers on receipts, including both customer and merchant receipts. Both acts also prohibit printing card expiration dates.

Businesses across the country were required to comply with FACTA by Dec. 4, 2006, and Tennessee companies were given until Jan. 1, 2007, to conform to the TCPA.

But there are apparently still plenty of companies printing more than five digits, or expiration dates, on receipts — and private attorneys and organizations of plaintiffs have been quick to respond with class action lawsuits against businesses.

John Golwen, a Memphis-based partner in Bass Berry and Sims litigation, described the suits as a “trend” making its way across the country. Plaintiffs’ firms based in cities including New York and San Diego are filing class action suits against businesses — primarily restaurants — that are not in compliance with FACTA and corresponding state acts.

“They’re suing a lot of restaurant chains around the country, and some of these suits have just been showing up in Tennessee in the last few weeks,” Golwen said.

The most recent suit was filed against Hilton Hotels Corp., doing business as The Sportsgrille. Sue Ellen Barnard of Williamson County is the plaintiff named in the class action.

A suit against Sun & Ski Sports, also known as Retail Concepts Inc., was filed on behalf of plaintiff Teresa J. Todd of Dickson County. The chain of stores has a shop on Opry Mills Drive, where the claims in the suit allegedly took place, but the complaint applies to all Sun & Ski Sports locations.

The local attorney involved in both the Hilton and the Sun & Ski Sports cases is Charles Barrett of Barrett & Associates in Nashville. Barrett did not return calls for comment Wednesday.

Other Tennessee businesses named in suits include Back Yard Burgers Inc., Abuelo’s Mexican Food Embassy, a Verizon store in Jackson, a Lenny’s Sub Shop location and Gould’s Salon Inc., according to court records.

Maggie Throckmorton, public information officer for the Department of Commerce and Insurance, said the state has currently received complaints about 22 businesses that are allegedly in violation of FACTA and the TCPA. Those entities have been sent certified letters from the department’s Division of Consumer Affairs. Consumer specialists will be dispatched to businesses if the problem isn’t corrected within a certain amount of time.

“Most of the entities that we’ve contacted have responded,” Throckmorton said.

To date, Tennessee legal actions involving FACTA and the TCPA have come from private attorneys rather than the state government. Sharon Flair, spokesperson for the Tennessee Attorney General’s office, said Wednesday the state has yet to file suit against businesses out of compliance with the act.

Most businesses in Tennessee should already be aware of the changes, Throckmorton said, as the Division of Consumer Affairs has also addressed the issue with a February press release and a mass mailing to state businesses, Throckmorton said.

Ronnie Hart, president and chief executive officer of the Tennessee Restaurant Association, a chapter of the National Restaurant Association, said organizations like his — as well as the companies handling credit card processing — have also worked to keep businesses in the loop.

“We’ve been keeping our membership informed of this for some time. Hopefully all of our folks have had the change completed, or are in the process of having the change completed,” Hart said.

Hart’s organization includes 2,300 member properties across the state, one-third of which are in Middle Tennessee.

But according to Hart, there are still some businesses who may not have heard about the changes, or who may find it too expensive to update their credit card processing equipment. Updates can cost up to several thousand dollars for a single restaurant, Hart estimated, and possibly more for large and complex systems used by chains.

“I have to admit, we had time to work on it,” Hart said. “I think most people are trying to get this fixed. It’s not a cheap thing to do.”

Hart said restaurants may be the most common targets of the suits because of the volume of customers served. Larger restaurants, whether corporate or independent, can get 70 to 80 percent of their business from credit cards.

“It’s unfortunate that we have people in this country who are looking for things like this to sue somebody over,” Hart said. “Nobody’s out any money on this, unless they can prove that fraud has taken place.”

In Tennessee, the viability of such cases could change significantly, depending on the outcome of a case currently pending before the Tennessee Supreme Court. The case, Walker vs. Sunrise Pontiac, concerns whether the violations should be considered individual causes of action, rather than class actions.

Throckmorton said consumers who encounter businesses that printed more than five digits of credit card numbers on receipts may call the Department of Commerce. The number to call is 741-4737.

Filed under: City Business
By: knilob on 12/31/69 at 6:00

Good for the people suing! In this day and age, nothing will get done unless there is some sort of publicity/media coverage behind it. Upgrading credit card processors to be in compliance is just a cost of doing business. The companies can always stop taking credit cards if they think it's too expensive.As an aside, I always make sure to scratch my information out whenever I notice my full credit card number on a receipt. I'm guessing I need to start filing complaints with the Department of Commerce as well.

By: shrub on 12/31/69 at 6:00

I don't agree with filing "frivolous" lawsuits, however in this case, something needs to be done to get these businesses' attention. It's a federal law and they need to comply with it.

By: vchester on 12/31/69 at 6:00

In addition to the problem in the above article, I would like to give some advice about the use of debit cards. 1) Use them as credit only unless you absolutely cannot, 2) Be aware that your debit card has a wealth of info on the mag stripe and a knowledgeable person with the right equipment can read it, 3) When a merchant takes your debit card for a purchase, their readers will store this data including your PIN on their machines, 4) Disputing purchases made with debit cards is harder than credit, mainly because the merchant knows that credit transactions can be disputed, and debit transactions are more like a cash payment, 5) Online debit transactions from your bank may have less tracking info than if used as a credit transaction.Keep in mind that, depending on the amount of the purchase, a debit is cheaper for the merchant to process than a credit and they are going for low-cost to them. Insist on a credit transaction!

By: knilob on 12/31/69 at 6:00

Very good points, Vchester. I always insist on using my debit card as credit for all the reasons you listed. The merchants try many ways to force you into a debit transaction. I've even seen some machines with the credit button removed from the menu. It's sad what some people will to save a few pennies.

By: monitorman on 12/31/69 at 6:00

My favorite neighborhood bar has been printing the whole number as long as I've been going there. It's annoying having to black out the number on my receipts.However, I never would've dreamed it could cost so much just to reprogram one card reader.Who the heck designs these things, engineers or marketing scum?