To avoid risk of lawsuit terminals must truncate

There’s a new reason to make certain your credit card terminals or POS systems are in compliance with laws that require them to use truncation: expensive civil lawsuits against merchants who give non-truncated receipts.

Both federal and state law say that electronically printed receipts from credit card terminals or POS systems must truncate credit and debit card numbers—that is, they must show no more than the last four digits of the account number and must not include the card’s expiration date.

Recently, lawsuits have been filed against Michigan merchants whose credit card terminals were not in compliance with truncation laws.

Settlements may be as high as $1,250 per incident.

One East Lansing merchant is being sued for a total of $2,500 by a customer who has two receipts—both for purchases under $3.50 and both on the same day just minutes apart. The suit seeks damages for violations of federal law at $1,000 per incident and state law at $250 per incident.

“It appears that some ‘bottom feeders,’ exploiting the law for their own gain, have discovered this truncation issue and are preying on small retailers, who are more likely to use noncompliant terminals,” said John Mayleben, MRA’s vice president of sales and marketing.

“Despite MRA’s efforts to educate the retail community about the importance of truncation, some merchants may not have heard about the law,” he added.

Both Visa and MasterCard have made truncation a requirement in their merchant agreements since 2003. Federal and state laws began to mandate truncation in 2005; all machines—new and existing—were expected to be in compliance by July 1, 2006, according to the federal Fair and Accurate Credit Transactions Act of 2005.

In the past, penalties for printing untruncated receipts might have come from Visa/MasterCard, as a violation of the merchant agreement, or from state or federal fines.

Such fines have been uncommon thus far because of the impracticality of discovering and pursuing noncompliant businesses. Instead, civil lawsuits may become the primary means of enforcing these laws.

Civil lawsuits as a remedy to protect consumers are nothing new, but the fact that consumers may seek remedies for each incident or sale compounds the problem retailers may face, allowing unscrupulous people to use the law to trap unaware retailers into having to pay large sums.

Mayleben urges merchants who have not yet updated their terminals for truncation to begin the process immediately.

Retailers who use MRA merchant processing services are not charged for reprogramming. They can contact their MRA account representative for assistance.

“In most cases, the process of upgrading terminals is fairly simple, a matter of activating the truncation capability. A few older terminals may need to be replaced with newer ones that support truncation,” said Mayleben.

“Regardless, retailers should check their printed receipts to verify that their terminals comply. No business should risk the exposure to costly civil lawsuits.”