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California Retailers Banned from Asking for ZIP Codes


By Karen L. Stevenson, Litigation News Associate Editor – April 11, 2011

Is a ZIP code, without more, “personal identification information”? The California Supreme Court thinks so. In Pineda v. Williams Sonoma Stores, Inc.[PDF], California’s highest court unanimously held that retailers who ask for ZIP code information in connection with in-store credit card purchases violate California’s Song-Beverly Credit Card Act of 1971 (the Credit Card Act). Although the decision applies only to California residents shopping at stores in California, it has already sparked a spate of class action lawsuits.


ZIP Codes—The New Frontier in Personal Identification Information?
In June 2008, Jessica Pineda filed a putative class action lawsuit against Williams-Sonoma Stores. A Williams-Sonoma cashier asked Pineda for her ZIP code when Pineda presented her credit card to make a purchase. The store entered the ZIP code information into its database and, using specialized software to perform reverse searches, could match the purchaser’s name with her previously undisclosed address. The store used the information for marketing and could sell the information to other businesses.


Pineda’s complaint alleged that the store violated the Credit Card Act because section 1747.08(b) of the statute prohibits businesses from asking or requiring customers as a condition of completing a credit card transaction to provide “personal identification information” and from writing down or otherwise recording such information.


“Personal identification information” is defined in the statute as “information concerning the cardholder, other than information set forth on the credit card, and including, but not limited to, the cardholder’s address and telephone number.”


Unless a business’s use of ZIP codes falls within one of the act’s enumerated exceptions, any retailer that has collected cardholder ZIP codes may be subject to fines of up to $250 for a first violation and $1,000 for each subsequent violation.


Court Says ZIP Code Ban Fits Statute’s Purpose to Protect Consumer Privacy
Justice Carlos Moreno, writing for the court, analyzed the plain language of the Credit Card Act, the statute’s “protective purpose” as a means of preventing fraud and protecting privacy, and its legislative history. Focusing first on the plain language of the statute, the court concluded that the prohibition against requesting information concerning a cardholder’s “address” should be construed as encompassing not only complete addresses but also five-digit ZIP codes as a component part of a consumer’s address.


Next, the court underscored the statute’s clear purpose to prevent retailers from misusing personal identification information for marketing purposes. Finally, the court pointed to the statute’s legislative history as evidence of an overriding purpose to protect the personal privacy of consumers who pay with credit cards. The opinion, however, offered no analysis of possible distinctions between in-person, card-in-hand transactions and telephone or Internet sales.


“Based on the court’s rationale in the Williams-Sonoma case,” says Bart L. Greenwald, Louisville, KY, cochair of the ABA Section of Litigation’s Commercial and Business Litigation Committee, “there does not appear to be a difference between in-person purchases and online purchases. The court seems to be saying, personal information is personal information, regardless of how the retailer gets it.”


A Benefit for California Consumers?
Section of Litigation leaders view Pineda as a decision highlighting very real litigation risks for retailers. “For retailers, this decision creates almost a ‘gotcha’ situation,” says Angelo A. Stio III, Princeton, NJ, cochair of the Section’s Commercial and Business Litigation Committee. “Whether or not the plaintiff can establish that he or she suffered any damages, the retailer may be subject to statutory penalties, without any evidence of actual identity theft or marketing use of the consumer’s information,” he notes.


“Consumers will most likely benefit somewhat from the flurry of class action lawsuits because businesses will be more keen on making sure they don’t ask for even marginally protected information, regardless of whether it is used for fraud purposes, or, like here, marketing purposes,” Greenwald observes.


The question remains whether other courts may interpret state consumer protection statutes to similarly safeguard personal information like a customer’s ZIP code.


Keywords: litigation, California retailers, class actions, personal identification information, Pineda v. Williams Sonoma Stores, Inc.


 
Related Resources

  • » Pineda v. Williams, 246 P. 3d 612 (Cal. 2011).
  • » California Civil Code, Title 1.3 Credit Cards, §§ 1747–1748.7.

 

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