In a case with major implications for retailers and marketers, the Supreme Court of California ruled on February 10, 2011, that the state’s Song-Beverly Credit Card Act of 1971 (“Song-Beverly Act”) prohibits businesses from requesting and recording ZIP codes from consumers prior to credit card transactions, including requests for use in marketing. Pineda v. Williams-Sonoma Stores, Inc., S178241 (Cal., Feb. 10, 2011). Numerous other states have laws similar to California’s that regulate merchant practices with respect to collecting and recording personal information in connection with a credit card purchase.
The Court held that its interpretation of the statute applies retroactively, opening the door to class action consumer lawsuits based on businesses’ prior practices. The Song-Beverly Act provides for statutory damages of up to $1,000 per violation of the law. In the weeks since the Court’s decision, numerous cases have already been filed in California against major retailers.
Plaintiff Jessica Pineda claimed that Williams-Sonoma violated the Song-Beverly Act by requesting and recording her ZIP code during a credit card transaction. The Song-Beverly Act generally prohibits merchants that accept credit cards from requesting, or requiring as a condition of accepting the credit card payment, “personal identification information” (“PII”) that the merchant then records. The central question in the Pineda case was whether a ZIP code alone constitutes PII. The Song-Beverly Act defines PII 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.” Cal. Civ. Code § 1747.08(b).
Williams-Sonoma prevailed at the trial court and intermediate appellate levels. The California Supreme Court reversed, concluding that “requesting and recording a cardholder’s ZIP code, without more, violates the [Song-Beverly] Credit Card Act.” Pineda, S178241 at 2. In part, the Court reasoned that interpreting the ban to include ZIP codes is more consistent with the principle that remedial statutes should be construed broadly to effectuate their purpose of protecting the public. The Court also expressed concern that retailers might use ZIP codes to “end run” around the statute’s prohibition on requesting addresses.
The Court’s ruling will not only guide future business practices, but creates the possibility of significant liability arising from past practices. The Court ruled that its new interpretation of the statute applies retroactively to past conduct, rejecting the defendant’s argument that this interpretation renders the law unconstitutionally vague. As a result, plaintiffs may bring cases against businesses challenging requests for ZIP codes that occurred before the Supreme Court decision announcing that such requests are prohibited. The Court also did not agree with the defendant that the new legal interpretation makes the statute unconstitutionally oppressive, despite the Song-Beverly Act’s statutory penalties of up to $250 for the first violation and $1,000 for each subsequent violation.