Starting this month, a new consumer protection law could change the way you do business.
The law is called the Fair and Accurate Credit Transactions Act, also known as the FACT Act.
FACT requires that no more than the last five digits of a debit or credit card number can be printed on an electronic receipt. In addition, debit and credit card expiration dates must not be printed on electronic receipts.
Don’t panic if your small business isn’t in compliance with the new law.
If you currently use a machine that produces electronic receipts, you have until December 2006 to make alterations that will comply with the FACT requirements. But, beginning Jan. 1, 2005, any new machine you purchase must meet the FACT standards and limit the information printed on electronic receipts.
Note that the new law applies only to electronic receipts. It does not apply to small businesses that record debit or credit card transactions with only card imprints or handwritten receipts.
The FACT Act was passed in December 2003. It was implemented as another precaution against consumer identity theft. As instances of credit card fraud and identity theft have soared, many small businesses have already started to protect their customers by limiting the amount of information printed on electronic credit and debit card receipts.
But the cost of purchasing new machines or altering existing ones has deterred other small-business owners from making changes. For those owners, here are a few guidelines that can ease the transition to new machines:
Compare costs between purchasing a FACT compliant machine and altering your existing one
Evaluate offerings from different machine vendors, with an eye on cost
Be sure that any machine you purchase – be it new or used – is FACT compliant
If you decide to alter your existing machine, do so no later than December 2006
Don’t try to sidestep the FACT Act. The law holds your business liable for consumer losses that result from your failure to comply with FACT. That could open the door for defrauded customers to file civil lawsuits against your firm.
Lawsuits aren’t the only hazard awaiting if you fail to comply with FACT. The Federal Trade Commission (FTC) oversees compliance – and noncompliance – with the FACT Act. If the FTC finds that your small businesses violated FACT, you could get slapped with a $2,500 penalty. And the penalty could apply to every violation.
In addition to electronic receipt rules, the FACT Act also includes a new disposal rule that applies to consumer’s credit reports. The rule requires any company that possess or maintains such information to “take reasonable measures to protect against unauthorized access to or use of the information in connection with its disposal.”
What does that mean to your small business? If you acquire paper credit reports on your customers, you can’t simply dispose of them by throwing the papers in a dumpster. Similarly, you must destroy electronic credit report files before you dispose of your computer or hard drive.
“Shredding documents and properly destroying computer files and hard drives will help ensure that records containing sensitive personal and financial information don’t fall into the wrong hands,” says Robert Johnson, executive director of the National Association for Information Destruction. “It’s important for the business community to understand that this law applies to nearly every business and private employer in the U.S.”
The disposal rule requires businesses to come into compliance by June 1, 2005, by adopting and implementing document destruction policies or by contracting with a document shredding company or other data destruction company to do so. Penalties for violating the rule include actual damages, statutory damages up to $1,000 punitive damages per violation (with no cap on class action damages), attorneys’ fees and civil penalties up to $2,500.
(Posted January 2005)
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