What Made News?

Urban Outfitters is facing yet another putative class action lawsuit over its practice of collecting customers’ ZIP codes in connection with credit card purchases at its retail locations. Last June, Urban Outfitters faced a similar suit regarding this practice in its Urban Outfitters and Anthropologie stores. This time, Free People, an Urban Outfitters subsidiary, is the subject of the suit.

The Details of the Case

Many states have point-of-sale data collection laws that restrict retailers from collecting certain types of personal information from customers in connection with a credit or debit card purchase. Massachusetts is one such state. Its laws prohibit retailers from requiring or recording a customer’s address, ZIP code, or phone number, among other things, as a condition of accepting a credit card or debit card as payment. According to the complaint, when customers make a purchase with a credit card at Free People stores in Massachusetts, store employees ask those customers for their ZIP codes and then record the customers’ ZIP codes during checkout. That said, this information is not required in order for Free People to process credit card transactions. Thus, the plaintiff argues that this practice violates Massachusetts’ point-of-sale data collection law.

In addition, the plaintiff has asserted a claim of unjust enrichment against Free People based on the company’s data collection practices. Specifically, the plaintiff alleges that Free People used the misappropriated ZIP codes for their own marketing and promotional purposes, combining the customers’ names with their ZIP codes to find their exact addresses and mail them marketing information. Based on this, the plaintiff argues that the personal information Free People has collected from its customers is commercially valuable, and thus she and others like her have conferred a benefit upon Free People for which they should be paid. With regard to both claims, the plaintiff seeks to represent a class of individuals who have similarly had their ZIP codes collected by Free People stores in Massachusetts.

What is the Takeaway?

This case highlights the need for retailers to be cognizant of the point-of-sale data collection laws of every state in which they have stores. In addition, retailers should be careful how and when they collect information from their customers. Ideally, retailers should only request and record personal information (e.g., a customer’s name, e-mail, mailing address, ZIP code, or telephone number) for marketing purposes after a purchase by credit or debit card is consummated and after the customer’s payment card and the receipt have been returned. Additionally, retailers should make clear that providing post-sale information for marketing purposes is purely voluntary.