In a decision that impacts retailers and marketers alike, the California Supreme Court ruled today that merchants can no longer ask for a customer's ZIP code and record it when processing a credit card transaction. The intent of the decision is to protect the personal privacy of consumers and prevent the use of protected personal identification information for marketing purposes.
The decision prevents companies from using the information to build mailing and telephone lists which can then be used for in-house marketing efforts or sold to third party companies. However, the practice of asking for ZIP codes at gas station pumps is exempt from the ruling because the information isn't recorded as part of the transaction, but rather is used by banks and credit card companies for security purposes.
The case Pineda v. Williams-Sonoma Inc., was filed in San Diego after Plaintiff Jessica Pineda realized her personal information had been misappropriated and was being used for marketing purposes. The plaintiff alleged that the cashier at Williams-Sonoma asked for her ZIP code while she was paying for a purchase with her credit card. She assumed at the time that her ZIP code was required to complete the transaction. She later discovered that the store had used her ZIP code to locate her home address.
The case raises this issue:
Does a retailer violate the Song-Beverly Credit Card Act of 1971 (Civ. Code, § 1747 et seq.), which prohibits retailers from recording a customer's "personal identification information" when the customer uses a credit card in a transaction, by recording a customer's ZIP code for the purpose of later using it and the customer's name to obtain the customer's address through a reverse search database?
The ruling reverses previous decisions by the San Diego Superior Court and the State Court of Appeal. Supreme Court Justice Carlos Moreno explained that the ZIP code is part of a customer's address, which California law explicitly categorizes as off-limits.
The counsel for The Gap, who participated as a "friend of the court," explained that the company routinely collects ZIP codes from customers for market analysis, but not for the purpose of harvesting addresses.
The case now goes back to the Court of Appeals for further action, which may include damage assessment. Merchants can be fined up to $250 for a first offense, and as much as $1,000 for each additional violation.
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