Consumer Finance Litigation

An Alabama federal court recently rejected an attempt by certain merchant defendants to dismiss claims brought under the Fair and Accurate Credit Transactions Act ("FACTA"), 15 U.S.C. § 1681, et seq., on the basis of the plaintiffs' failure to allege actual damages. In the case, Amason v. Kangaroo Express, the plaintiffs sued merchants with whom they had transacted business, alleging that the defendants willfully violated FACTA by printing more than the last five digits of the plaintiffs' credit and debit card numbers on receipts. No. 7:09-2117-RDP, 2013 WL 987935, at 3 (N.D. Ala. Mar. 11, 2013). The plaintiffs sought statutory damages, punitive damages, costs and attorneys' fees.

The defendants moved to dismiss, arguing that the plaintiffs lacked standing because they admitted that they had suffered no actual damages. The defendants argued, therefore, that the plaintiffs lacked the requisite injury in fact necessary to confer Article III standing. In response, the plaintiffs contended that the defendants' violation of a statutorily created right was itself an injury in fact suffered by the plaintiffs and, therefore, proof of actual damages was not required.

The court rejected the defendants' argument that a statutory cause of action cannot confer standing without an allegation of actual damages. The court found that "the invasion of a legally protected right" created by Congress "is sufficient to confer Plaintiffs' standing." The court elaborated, stating that "decades of case law have made clear that where Congress creates a substantive legal right, even a right that did not previously exist, that right constitutes a legally protected interest, the invasion of which creates an injury in fact."

The court explained that FACTA provided the plaintiffs with a substantive right to have their financial information protected as well as a procedural right to enforce that protection. Because the plaintiffs had transacted business directly with the defendants and the alleged violation had already occurred, the court found that the injury was concrete, particularized, and actual, not speculative, as required for Article III standing. Finally, the court found that the plaintiffs' injury was one that could be redressed through litigation by way of FACTA's statutory damages provision.

The defendants next asserted an argument based on Congressional intent, arguing that Congress did not intend to confer a cause of action to consumers who had not suffered actual damages. The defendants relied on the 2008 amendments to FACTA, in which Congress absolved liability for merchants who failed to truncate the expiration dates on customers' receipts, so long as the other requirements of the statute were met. The legislative history indicated that Congress was concerned about a wave of litigation by plaintiffs who had not suffered any actual damages.

The court was not convinced by this argument, noting that Congress could easily have also amended FACTA to absolve merchants from liability for failure to truncate credit card numbers where the customer did not suffer actual damages. The court concluded, "To judicially insert additional exemptions into the statute based on hunches about what Congress would (or should) have done, or may eventually do, requires the court to engage in a game of legislative reconstruction. The court declines that invitation." Accordingly, the court denied the defendants' motion to dismiss for lack of standing.

Amason provides an important reminder of the risk of statutory damages in the consumer finance arena and the powerful ammunition statutory damages can provide plaintiffs who have not suffered any actual damages.

For more information on consumer finance litigation topics, please contact one of the Burr & Forman team members for assistance. We are happy to answer any questions or concerns you may have.