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InfoBytes
CONSUMER FINANCE HEADLINES & DEADLINES FOR OUR CLIENTS AND FRIENDS
Topics – Covered This Week (Click to View)
FEDERAL ISSUES
Senator Kerry Introduces National Housing Trust Bill. On December 19, 2007, Senator John Kerry (D – MA) introduced the National Affordable Housing Trust Fund Act (S. 2523) which, if enacted, would establish a trust fund governed by the Secretary of Housing and Urban Development to construct and improve established housing for low-income individuals. The legislation is similar to that passed by the House earlier this year (H.R. 2895 – reported in the October 12, 2007 issue of InfoBytes). House Financial Services Committee Chairman Barney Frank (D – MA), sponsor of the House bill, issued a press release expressing his hope legislation establishing an affordable housing fund will be passed in the coming year. Both the Senate and House bills now await action in the Senate Banking Committee. Hearings have not yet been scheduled. For more information on this bill, please see http://thomas.loc.gov/cgi-bin/bdquery/z?d110:s.02523:.
FDIC Releases FILs on FACTA, Flood Insurance, and the PATRIOT Act. On December 21, 2007, the Federal Deposit Insurance Corporation (FDIC) released three Financial Institution Letters (FILs) on regarding (i) proposed rules implementing the FACTA “direct dispute” provisions (FIL-115-2007), (ii) flood insurance risk management (FIL-114-2007), and (iii) final rules implementing section 312 of the USA PATRIOT Act regarding due diligence for foreign accounts (FIL-113-2007). The “direct dispute” provisions of the Fair and Accurate Credit Transactions Act (FACTA) were most recently covered in the December 14, 2007 issue of InfoBytes. The final rule implementing section 312 of the USA PATRIOT Act was covered in the August 10, 2007 issue of InfoBytes. The remaining letter, on risk management in connection with flood insurance, encourages banks to implement controls such as (i) monitoring notices from insurance carriers regarding policy lapses, (ii) commencing “force placement” procedures when coverage has lapsed, and (iii) verifying that policies’ coverage corresponds to the “risk zone” in the flood determination. For these and all other 2007 FILs, please see http://www.fdic.gov/news/news/financial/2007/index.html.
OCC Releases New Licensing Manual. On January 2, the Office of the Comptroller of the Currency (OCC) released a new edition of the “Charters” section of the Comptroller’s Licensing Manual. The new section incorporates recent guidance on topics such as simplified application requirements and capital assessment. For a copy of this booklet, please see http://www.occ.treas.gov/corpbook/group4/public/pdf/charters.pdf.
STATE ISSUES
Illinois AG Sues Mortgage Rescue Companies. On December 21, 2007, the Illinois Attorney General Lisa Madigan announced she had brought suit against three mortgage rescue companies under the Illinois Mortgage Rescue Fraud Act (reported in the April 10, 2006 issue of InfoBytes). In all three cases, Madigan alleges that the companies charge illegal “upfront” fees, and seeks an injunction against the continuation of such practices as well as penalties of $50,000 per individual violation. For more information, please see http://www.illinoisattorneygeneral.gov/pressroom/2007_12/20071221b.html.
COURTS
Court Holds That Massachusetts Claim of Conversion Requires Tangible Property. In a recent decision, a Massachusetts federal district court ruled that the tort of conversion in Massachusetts must involve tangible property. In so ruling, the court found that because the property interest at issue was cardholder information and data, the property was not tangible and the claim not appropriate. In re TJX Companies Retail Security Breach Lit., No. 07-10162 (D. Mass. Dec. 18, 2007). In this action, various banks and bank associations moved for leave to amend a consolidated class action complaint against Fifth Third Bank and TJX Companies to include the Massachusetts state law claim of conversion. The plaintiffs argue that they have a protectable property interest in the cardholder information and data, and that the failure to safeguard the data and by storing it, the defendants exceeded their authorized use and wrongfully exercised control over that property. The plaintiffs relied heavily on a recent case from New York, Thyroff v. Nationwide Mutual Insurance Co., 864 N.E. 2d 1272 (N.Y. 2007), in which the Court of Appeals of New York found a property interest to exist in personal information (including correspondence and other personal documents) that was stored on a business computer, and allowed a claim for conversion of electronic data to stand. The court in this case was unpursuaded; instead, it followed significant state common law precedent that required the property in a conversion claim to be tangible, and held that the property at issue in the case did not qualify. Consequently, the court denied the motion for leave to amend and transferred the case to the Massachusetts Superior Court. For more information, please contact .
Private Action for Failure to Truncate Credit Card Expiration Date Proceeds. A federal court in Illinois refused to dismiss a putative class action lawsuit alleging violations of the credit-card truncation requirements of the Fair and Accurate Credit Transactions Act (FACTA) amendment to the Fair Credit Reporting Act (FCRA). Follman v. Village Squire, Inc., No. 07-C-3767 (N.D. Ill., Dec. 18, 2007). The consumer alleged that the merchant printed a credit card receipt that contained the expiration date of his card, violating FCRA’s prohibition on the willful printing of “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 the sale or transaction.” 15 U.S.C. § 1681c(g). In its motion to dismiss, the merchant argued that: (i) FACTA does not confer a private right of action for willful noncompliance with the truncation requirement; (ii) the truncation requirement is too vague to make a willful violation possible; and (iii) the consumer’s demand for statutory damages of $100-$1000 per violation (i.e., per noncompliant receipt) – where no actual damages are alleged – violates due process. The court rejected each of defendant’s arguments. Specifically, the court found that FACTA clearly and unambiguously provides a private right of action to consumers – like the consumer – for willful violations of the truncation requirement. Likewise, the court found that the truncation requirement clearly and unambiguously prohibits merchants from printing more than the last five digits of a credit card number and prohibits them from printing the expiration date of the card. The court also found the merchant’s damages argument unpersuasive, as FACTA clearly allowed for statutory damages even in the absence of actual damages. Finally, the court held that any argument that classwide statutory relief would be grossly excessive was premature as class certification had yet to be argued. For a copy of this opinion, please contact .
District Court: Auto Dealers Need Not Provide ECOA or FCRA Adverse Action Notices. A federal district court held that automobile dealerships that sent a plaintiff’s credit applications to lenders were not “creditors” for the purpose of adverse action notification under the Equal Credit Opportunity Act (ECOA). Fultz v. Lasco Ford, Inc., No. 06-CV-11687, 2007 WL 3379684 (E.D. Mich. Nov. 13, 2007), reconsideration denied, 2007 WL 4547739 (Dec. 19, 2007). In this case, the plaintiff Fultz completed credit applications at two dealerships and the dealerships sent the applications to a variety of lenders. The lenders either rejected the applications or counter-offered with less favorable terms than what the plaintiff sought. The dealerships’ only participation in the credit process was in sending the applications to the lenders, and the dealerships did not provide notices of adverse action to Fultz. The plaintiff sued the dealerships, claiming ECOA and Fair Credit Reporting Act (FCRA) violations for negligent and willful failures to issue adverse action notices and to properly maintain records. The court held that, while the dealerships may have been “creditors” under the substantive anti-discrimination provisions of ECOA because they participated in the credit application process, they were not “creditors” for purposes of adverse action. Relying on the holding in Treadway v. Gateway Chevrolet Oldsmobile, Inc., 362 F.3d 971 (7th Cir. 2004), the court held that “neither Lasco Ford nor Joseph Pontiac took ‘adverse action’ on Fultz's credit applications, and therefore neither Lasco Ford nor Joseph Pontiac were required by the ECOA or FCRA to send Fultz a written adverse action notice.” For a copy of the opinion, please contact .
Court Holds Malicious Violation of State Libel Law Not Preempted by FCRA. On December 17, a federal district court in South Carolina refused to grant a telephone company summary judgment on a state law libel claim based upon preemption by the Fair Credit Reporting Act (FCRA), because it could not “definitively” determine if the inaccurate report to a credit bureau was malicious (which would overcome preemption under FCRA). Williams v. Equifax Credit Information Services, 2007 WL 4458914 (D.S.C. Dec. 17, 2007). In this case, the consumer alleged that a delinquent cellular telephone account wrongfully appeared on his credit report, and the telephone company failed to investigate or request the credit reporting agency to remove the item. The court held that an internal telephone company memorandum, produced during discovery, that arguably indicated that the consumer’s matter was transferred to the company’s fraud department, was sufficient evidence of a willful violation of FCRA to withstand summary judgment and pursue statutory damages under FCRA. But the court ruled in favor of the company on claims of FCRA actual damages, reasoning that it could not admit unsworn, unauthenticated letters from a third party provided by the consumer as evidence when considering summary judgment. Finally, when considering arguments by the telephone company that state law libel claims were preempted by FCRA, the court, citing Beattie v. NationsCredit Financial Services Corp., 69 Fed. Appx. 585, 590-91 (4th Cir. 2003), held that the claims were not preempted because the consumer might have been able to show malice under the FCRA. The court nevertheless granted the telephone company summary judgment on the libel claim because the consumer had not rebutted the company’s argument that there was not adequate evidence of a causal link between the alleged violation and any claim of damages. For a full copy of this decision, please contact .
Senator Kerry Introduces National Housing Trust Bill. On December 19, 2007, Senator John Kerry (D – MA) introduced the National Affordable Housing Trust Fund Act (S. 2523) which, if enacted, would establish a trust fund governed by the Secretary of Housing and Urban Development to construct and improve established housing for low-income individuals. The legislation is similar to that passed by the House earlier this year (H.R. 2895 – reported in the October 12, 2007 issue of InfoBytes). House Financial Services Committee Chairman Barney Frank (D – MA), sponsor of the House bill, issued a press release expressing his hope legislation establishing an affordable housing fund will be passed in the coming year. Both the Senate and House bills now await action in the Senate Banking Committee. Hearings have not yet been scheduled. For more information on this bill, please see http://thomas.loc.gov/cgi-bin/bdquery/z?d110:s.02523:.
FDIC Releases FILs on FACTA, Flood Insurance, and the PATRIOT Act. On December 21, 2007, the Federal Deposit Insurance Corporation (FDIC) released three Financial Institution Letters (FILs) on regarding (i) proposed rules implementing the FACTA “direct dispute” provisions (FIL-115-2007), (ii) flood insurance risk management (FIL-114-2007), and (iii) final rules implementing section 312 of the USA PATRIOT Act regarding due diligence for foreign accounts (FIL-113-2007). The “direct dispute” provisions of the Fair and Accurate Credit Transactions Act (FACTA) were most recently covered in the December 14, 2007 issue of InfoBytes. The final rule implementing section 312 of the USA PATRIOT Act was covered in the August 10, 2007 issue of InfoBytes. The remaining letter, on risk management in connection with flood insurance, encourages banks to implement controls such as (i) monitoring notices from insurance carriers regarding policy lapses, (ii) commencing “force placement” procedures when coverage has lapsed, and (iii) verifying that policies’ coverage corresponds to the “risk zone” in the flood determination. For these and all other 2007 FILs, please see http://www.fdic.gov/news/news/financial/2007/index.html.
FDIC Releases FILs on FACTA, Flood Insurance, and the PATRIOT Act. On December 21, 2007, the Federal Deposit Insurance Corporation (FDIC) released three Financial Institution Letters (FILs) on regarding (i) proposed rules implementing the FACTA “direct dispute” provisions (FIL-115-2007), (ii) flood insurance risk management (FIL-114-2007), and (iii) final rules implementing section 312 of the USA PATRIOT Act regarding due diligence for foreign accounts (FIL-113-2007). The “direct dispute” provisions of the Fair and Accurate Credit Transactions Act (FACTA) were most recently covered in the December 14, 2007 issue of InfoBytes. The final rule implementing section 312 of the USA PATRIOT Act was covered in the August 10, 2007 issue of InfoBytes. The remaining letter, on risk management in connection with flood insurance, encourages banks to implement controls such as (i) monitoring notices from insurance carriers regarding policy lapses, (ii) commencing “force placement” procedures when coverage has lapsed, and (iii) verifying that policies’ coverage corresponds to the “risk zone” in the flood determination. For these and all other 2007 FILs, please see http://www.fdic.gov/news/news/financial/2007/index.html.
OCC Releases New Licensing Manual. On January 2, the Office of the Comptroller of the Currency (OCC) released a new edition of the “Charters” section of the Comptroller’s Licensing Manual. The new section incorporates recent guidance on topics such as simplified application requirements and capital assessment. For a copy of this booklet, please see http://www.occ.treas.gov/corpbook/group4/public/pdf/charters.pdf.
Private Action for Failure to Truncate Credit Card Expiration Date Proceeds. A federal court in Illinois refused to dismiss a putative class action lawsuit alleging violations of the credit-card truncation requirements of the Fair and Accurate Credit Transactions Act (FACTA) amendment to the Fair Credit Reporting Act (FCRA). Follman v. Village Squire, Inc., No. 07-C-3767 (N.D. Ill., Dec. 18, 2007). The consumer alleged that the merchant printed a credit card receipt that contained the expiration date of his card, violating FCRA’s prohibition on the willful printing of “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 the sale or transaction.” 15 U.S.C. § 1681c(g). In its motion to dismiss, the merchant argued that: (i) FACTA does not confer a private right of action for willful noncompliance with the truncation requirement; (ii) the truncation requirement is too vague to make a willful violation possible; and (iii) the consumer’s demand for statutory damages of $100-$1000 per violation (i.e., per noncompliant receipt) – where no actual damages are alleged – violates due process. The court rejected each of defendant’s arguments. Specifically, the court found that FACTA clearly and unambiguously provides a private right of action to consumers – like the consumer – for willful violations of the truncation requirement. Likewise, the court found that the truncation requirement clearly and unambiguously prohibits merchants from printing more than the last five digits of a credit card number and prohibits them from printing the expiration date of the card. The court also found the merchant’s damages argument unpersuasive, as FACTA clearly allowed for statutory damages even in the absence of actual damages. Finally, the court held that any argument that classwide statutory relief would be grossly excessive was premature as class certification had yet to be argued. For a copy of this opinion, please contact .
District Court: Auto Dealers Need Not Provide ECOA or FCRA Adverse Action Notices. A federal district court held that automobile dealerships that sent a plaintiff’s credit applications to lenders were not “creditors” for the purpose of adverse action notification under the Equal Credit Opportunity Act (ECOA). Fultz v. Lasco Ford, Inc., No. 06-CV-11687, 2007 WL 3379684 (E.D. Mich. Nov. 13, 2007), reconsideration denied, 2007 WL 4547739 (Dec. 19, 2007). In this case, the plaintiff Fultz completed credit applications at two dealerships and the dealerships sent the applications to a variety of lenders. The lenders either rejected the applications or counter-offered with less favorable terms than what the plaintiff sought. The dealerships’ only participation in the credit process was in sending the applications to the lenders, and the dealerships did not provide notices of adverse action to Fultz. The plaintiff sued the dealerships, claiming ECOA and Fair Credit Reporting Act (FCRA) violations for negligent and willful failures to issue adverse action notices and to properly maintain records. The court held that, while the dealerships may have been “creditors” under the substantive anti-discrimination provisions of ECOA because they participated in the credit application process, they were not “creditors” for purposes of adverse action. Relying on the holding in Treadway v. Gateway Chevrolet Oldsmobile, Inc., 362 F.3d 971 (7th Cir. 2004), the court held that “neither Lasco Ford nor Joseph Pontiac took ‘adverse action’ on Fultz's credit applications, and therefore neither Lasco Ford nor Joseph Pontiac were required by the ECOA or FCRA to send Fultz a written adverse action notice.” For a copy of the opinion, please contact .
Court Holds Malicious Violation of State Libel Law Not Preempted by FCRA. On December 17, a federal district court in South Carolina refused to grant a telephone company summary judgment on a state law libel claim based upon preemption by the Fair Credit Reporting Act (FCRA), because it could not “definitively” determine if the inaccurate report to a credit bureau was malicious (which would overcome preemption under FCRA). Williams v. Equifax Credit Information Services, 2007 WL 4458914 (D.S.C. Dec. 17, 2007). In this case, the consumer alleged that a delinquent cellular telephone account wrongfully appeared on his credit report, and the telephone company failed to investigate or request the credit reporting agency to remove the item. The court held that an internal telephone company memorandum, produced during discovery, that arguably indicated that the consumer’s matter was transferred to the company’s fraud department, was sufficient evidence of a willful violation of FCRA to withstand summary judgment and pursue statutory damages under FCRA. But the court ruled in favor of the company on claims of FCRA actual damages, reasoning that it could not admit unsworn, unauthenticated letters from a third party provided by the consumer as evidence when considering summary judgment. Finally, when considering arguments by the telephone company that state law libel claims were preempted by FCRA, the court, citing Beattie v. NationsCredit Financial Services Corp., 69 Fed. Appx. 585, 590-91 (4th Cir. 2003), held that the claims were not preempted because the consumer might have been able to show malice under the FCRA. The court nevertheless granted the telephone company summary judgment on the libel claim because the consumer had not rebutted the company’s argument that there was not adequate evidence of a causal link between the alleged violation and any claim of damages. For a full copy of this decision, please contact .
Court Holds That Massachusetts Claim of Conversion Requires Tangible Property. In a recent decision, a Massachusetts federal district court ruled that the tort of conversion in Massachusetts must involve tangible property. In so ruling, the court found that because the property interest at issue was cardholder information and data, the property was not tangible and the claim not appropriate. In re TJX Companies Retail Security Breach Lit., No. 07-10162 (D. Mass. Dec. 18, 2007). In this action, various banks and bank associations moved for leave to amend a consolidated class action complaint against Fifth Third Bank and TJX Companies to include the Massachusetts state law claim of conversion. The plaintiffs argue that they have a protectable property interest in the cardholder information and data, and that the failure to safeguard the data and by storing it, the defendants exceeded their authorized use and wrongfully exercised control over that property. The plaintiffs relied heavily on a recent case from New York, Thyroff v. Nationwide Mutual Insurance Co., 864 N.E. 2d 1272 (N.Y. 2007), in which the Court of Appeals of New York found a property interest to exist in personal information (including correspondence and other personal documents) that was stored on a business computer, and allowed a claim for conversion of electronic data to stand. The court in this case was unpursuaded; instead, it followed significant state common law precedent that required the property in a conversion claim to be tangible, and held that the property at issue in the case did not qualify. Consequently, the court denied the motion for leave to amend and transferred the case to the Massachusetts Superior Court. For more information, please contact .
Private Action for Failure to Truncate Credit Card Expiration Date Proceeds. A federal court in Illinois refused to dismiss a putative class action lawsuit alleging violations of the credit-card truncation requirements of the Fair and Accurate Credit Transactions Act (FACTA) amendment to the Fair Credit Reporting Act (FCRA). Follman v. Village Squire, Inc., No. 07-C-3767 (N.D. Ill., Dec. 18, 2007). The consumer alleged that the merchant printed a credit card receipt that contained the expiration date of his card, violating FCRA’s prohibition on the willful printing of “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 the sale or transaction.” 15 U.S.C. § 1681c(g). In its motion to dismiss, the merchant argued that: (i) FACTA does not confer a private right of action for willful noncompliance with the truncation requirement; (ii) the truncation requirement is too vague to make a willful violation possible; and (iii) the consumer’s demand for statutory damages of $100-$1000 per violation (i.e., per noncompliant receipt) – where no actual damages are alleged – violates due process. The court rejected each of defendant’s arguments. Specifically, the court found that FACTA clearly and unambiguously provides a private right of action to consumers – like the consumer – for willful violations of the truncation requirement. Likewise, the court found that the truncation requirement clearly and unambiguously prohibits merchants from printing more than the last five digits of a credit card number and prohibits them from printing the expiration date of the card. The court also found the merchant’s damages argument unpersuasive, as FACTA clearly allowed for statutory damages even in the absence of actual damages. Finally, the court held that any argument that classwide statutory relief would be grossly excessive was premature as class certification had yet to be argued. For a copy of this opinion, please contact .
District Court: Auto Dealers Need Not Provide ECOA or FCRA Adverse Action Notices. A federal district court held that automobile dealerships that sent a plaintiff’s credit applications to lenders were not “creditors” for the purpose of adverse action notification under the Equal Credit Opportunity Act (ECOA). Fultz v. Lasco Ford, Inc., No. 06-CV-11687, 2007 WL 3379684 (E.D. Mich. Nov. 13, 2007), reconsideration denied, 2007 WL 4547739 (Dec. 19, 2007). In this case, the plaintiff Fultz completed credit applications at two dealerships and the dealerships sent the applications to a variety of lenders. The lenders either rejected the applications or counter-offered with less favorable terms than what the plaintiff sought. The dealerships’ only participation in the credit process was in sending the applications to the lenders, and the dealerships did not provide notices of adverse action to Fultz. The plaintiff sued the dealerships, claiming ECOA and Fair Credit Reporting Act (FCRA) violations for negligent and willful failures to issue adverse action notices and to properly maintain records. The court held that, while the dealerships may have been “creditors” under the substantive anti-discrimination provisions of ECOA because they participated in the credit application process, they were not “creditors” for purposes of adverse action. Relying on the holding in Treadway v. Gateway Chevrolet Oldsmobile, Inc., 362 F.3d 971 (7th Cir. 2004), the court held that “neither Lasco Ford nor Joseph Pontiac took ‘adverse action’ on Fultz's credit applications, and therefore neither Lasco Ford nor Joseph Pontiac were required by the ECOA or FCRA to send Fultz a written adverse action notice.” For a copy of the opinion, please contact .
Court Holds Malicious Violation of State Libel Law Not Preempted by FCRA. On December 17, a federal district court in South Carolina refused to grant a telephone company summary judgment on a state law libel claim based upon preemption by the Fair Credit Reporting Act (FCRA), because it could not “definitively” determine if the inaccurate report to a credit bureau was malicious (which would overcome preemption under FCRA). Williams v. Equifax Credit Information Services, 2007 WL 4458914 (D.S.C. Dec. 17, 2007). In this case, the consumer alleged that a delinquent cellular telephone account wrongfully appeared on his credit report, and the telephone company failed to investigate or request the credit reporting agency to remove the item. The court held that an internal telephone company memorandum, produced during discovery, that arguably indicated that the consumer’s matter was transferred to the company’s fraud department, was sufficient evidence of a willful violation of FCRA to withstand summary judgment and pursue statutory damages under FCRA. But the court ruled in favor of the company on claims of FCRA actual damages, reasoning that it could not admit unsworn, unauthenticated letters from a third party provided by the consumer as evidence when considering summary judgment. Finally, when considering arguments by the telephone company that state law libel claims were preempted by FCRA, the court, citing Beattie v. NationsCredit Financial Services Corp., 69 Fed. Appx. 585, 590-91 (4th Cir. 2003), held that the claims were not preempted because the consumer might have been able to show malice under the FCRA. The court nevertheless granted the telephone company summary judgment on the libel claim because the consumer had not rebutted the company’s argument that there was not adequate evidence of a causal link between the alleged violation and any claim of damages. For a full copy of this decision, please contact .
FDIC Releases FILs on FACTA, Flood Insurance, and the PATRIOT Act. On December 21, 2007, the Federal Deposit Insurance Corporation (FDIC) released three Financial Institution Letters (FILs) on regarding (i) proposed rules implementing the FACTA “direct dispute” provisions (FIL-115-2007), (ii) flood insurance risk management (FIL-114-2007), and (iii) final rules implementing section 312 of the USA PATRIOT Act regarding due diligence for foreign accounts (FIL-113-2007). The “direct dispute” provisions of the Fair and Accurate Credit Transactions Act (FACTA) were most recently covered in the December 14, 2007 issue of InfoBytes. The final rule implementing section 312 of the USA PATRIOT Act was covered in the August 10, 2007 issue of InfoBytes. The remaining letter, on risk management in connection with flood insurance, encourages banks to implement controls such as (i) monitoring notices from insurance carriers regarding policy lapses, (ii) commencing “force placement” procedures when coverage has lapsed, and (iii) verifying that policies’ coverage corresponds to the “risk zone” in the flood determination. For these and all other 2007 FILs, please see http://www.fdic.gov/news/news/financial/2007/index.html.
Court Holds That Massachusetts Claim of Conversion Requires Tangible Property. In a recent decision, a Massachusetts federal district court ruled that the tort of conversion in Massachusetts must involve tangible property. In so ruling, the court found that because the property interest at issue was cardholder information and data, the property was not tangible and the claim not appropriate. In re TJX Companies Retail Security Breach Lit., No. 07-10162 (D. Mass. Dec. 18, 2007). In this action, various banks and bank associations moved for leave to amend a consolidated class action complaint against Fifth Third Bank and TJX Companies to include the Massachusetts state law claim of conversion. The plaintiffs argue that they have a protectable property interest in the cardholder information and data, and that the failure to safeguard the data and by storing it, the defendants exceeded their authorized use and wrongfully exercised control over that property. The plaintiffs relied heavily on a recent case from New York, Thyroff v. Nationwide Mutual Insurance Co., 864 N.E. 2d 1272 (N.Y. 2007), in which the Court of Appeals of New York found a property interest to exist in personal information (including correspondence and other personal documents) that was stored on a business computer, and allowed a claim for conversion of electronic data to stand. The court in this case was unpursuaded; instead, it followed significant state common law precedent that required the property in a conversion claim to be tangible, and held that the property at issue in the case did not qualify. Consequently, the court denied the motion for leave to amend and transferred the case to the Massachusetts Superior Court. For more information, please contact .
Private Action for Failure to Truncate Credit Card Expiration Date Proceeds. A federal court in Illinois refused to dismiss a putative class action lawsuit alleging violations of the credit-card truncation requirements of the Fair and Accurate Credit Transactions Act (FACTA) amendment to the Fair Credit Reporting Act (FCRA). Follman v. Village Squire, Inc., No. 07-C-3767 (N.D. Ill., Dec. 18, 2007). The consumer alleged that the merchant printed a credit card receipt that contained the expiration date of his card, violating FCRA’s prohibition on the willful printing of “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 the sale or transaction.” 15 U.S.C. § 1681c(g). In its motion to dismiss, the merchant argued that: (i) FACTA does not confer a private right of action for willful noncompliance with the truncation requirement; (ii) the truncation requirement is too vague to make a willful violation possible; and (iii) the consumer’s demand for statutory damages of $100-$1000 per violation (i.e., per noncompliant receipt) – where no actual damages are alleged – violates due process. The court rejected each of defendant’s arguments. Specifically, the court found that FACTA clearly and unambiguously provides a private right of action to consumers – like the consumer – for willful violations of the truncation requirement. Likewise, the court found that the truncation requirement clearly and unambiguously prohibits merchants from printing more than the last five digits of a credit card number and prohibits them from printing the expiration date of the card. The court also found the merchant’s damages argument unpersuasive, as FACTA clearly allowed for statutory damages even in the absence of actual damages. Finally, the court held that any argument that classwide statutory relief would be grossly excessive was premature as class certification had yet to be argued. For a copy of this opinion, please contact .
© Buckley Kolar, LLP 2005. INFOBYTES is not intended as legal advice to any person or firm. It is provided as a client service and information contained herein is drawn from various public sources, including other publications.
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