Where does it say that the numbers can only be 4 digits long?

If we look at numbers that are only 4 digits long, then yes, the number of possibilities would be

4 x 4 x 3 x 2 = 96.

But then we also have to look at 5 digit numbers, and the number of possibilities for those would be

5 x 4 x 3 x 2 x 1 = 120.

Add them together and you get 216.

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