Jim Porter: Businesses may not ask for your ZIP code as part of a credit card transaction
Special to the Sun
TRUCKEE/TAHOE, Calif. and#8212; A hugely significant new California Supreme Court case will generate dozens of class action lawsuits against businesses in California. Just what we need.
Jessica Pineda purchased some items at a Williams-Sonoma store using her credit card. She was asked to provide her ZIP code. (You all know of course that ZIP is an acronym for and#8220;Zone Improvement Planand#8221; of the U.S. Postal Service.)
Using her ZIP code, Williams-Sonoma performed a and#8220;reverse searchand#8221; with their sophisticated software, learning Jessicaand#8217;s home address, which they could then use to market Williams-Sonoma products and mail their catalog. Think of how many times you have been required to give your ZIP code to process a credit card transaction.
Credit Card Act
Jessica sued claiming Williams-Sonoma violated the Song-Beverly Credit Card Act. The Act, modified in 1990, states that when a business accepts a credit card for the transaction of business it may not request or require the cardholder to provide and#8220;personal identification informationand#8221; which the company writes down or records.
The Act defines personal identification information as: and#8220;Information concerning the cardholder, other than information set forth on the credit card, and including, but not limited to, the cardholderand#8217;s address and telephone number.and#8221;
The legal question in the case was whether requesting a customerand#8217;s ZIP code is a request for personal identification information and a violation of the Credit Card Act.
The trial court found that a ZIP code is not personal identification information and the Court of Appeal agreed. Jessica appealed to the California Supreme Court.
The Supreme Court recited so-called statutory construction laws which say that to understand a statute/code you first look to the specific words. They further tipped their hand early in the decision reciting that as a general rule statutes for the protection of the public are broadly construed in favor of that protective purpose, in this case to and#8220;protect personal privacy of consumers who pay for transactions with credit cards.and#8221;
The Court focused on use of the broad term and#8220;concerning,and#8221; and then noted the phrase and#8220;including, but not limited to,and#8221; also pointing out that a ZIP code is part of a and#8220;cardholderand#8217;s address,and#8221; so covered by the Act.
The Court acknowledged the Credit Card Act allows businesses to ask for identification, like a driverand#8217;s license, as long as none of the information is written or recorded. Other cases and laws prohibit businesses from asking for social security numbers.
In the end, the California Supreme Court ruled unanimously that asking for and recording a ZIP code during a credit card transaction violates the Song-Beverly Credit Card Act.
Impact of Williams-Sonoma case
Williams-Sonoma asked the Court to make its ruling prospective only, not retroactive, but the Court declined and#8212; noting that the Credit Card Act does not mandate fixed penalties, but rather sets a maximum penalty of $250 for the first violation and $1,000 for each subsequent violation and#8212; suggesting that the trial courts will be fair to violating businesses when setting penalties. Iand#8217;m not sure about that.
What I am sure about is that every class action lawyer in the State is getting into the game with suits on behalf of millions of credit card customers seeking penalties for violation of the Credit Card Act going back to 1991. To date, the following businesses have been sued: Bed Bath and Beyond, Big 5, Michaels Stores, Target, Cost Plus, Trader Joeand#8217;s, The Gap, Walmart, Crate and Barrel and by the time you read this column there will be more.
It is not clear whether this decision applies to online credit card transactions under the California Online Privacy Protection Act.
One thing is for sure, this pro-consumer case will have a significant effect on retailers and businesses who have collected and kept ZIP codes as part of their credit card transactions. While that practice will stop, the lawsuits for past violations will not.
Jim Porter is an attorney with Porter Simon, with offices in Truckee, South Lake Tahoe and Reno. He is a mediator and was the Governor’s appointee to the Fair Political Practices Commission and McPherson Commission, both involving election law and the Political Reform Act. He may be reached at email@example.com or at the firmand#8217;s website http://www.portersimon.com.
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