In a closely watched decision, the California Supreme Court ruled that retailers may not collect zip codes from consumers who use their credit cards, as they are considered “personal identification information” under the state’s Song-Beverly Credit Card Act.

The plaintiff used her credit card to make a purchase at a Williams-Sonoma store and provided her zip code when asked by the cashier, thinking it was required to complete the purchase. She filed a class action suit, claiming that the company had used her name in combination with her zip code to find her home address and add her to a marketing database.

Under the Song-Beverly Act, companies may not request and record “personal identification information,” which is defined 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.” Reversing both the trial court and appellate court, the state Supreme Court said that a cardholder’s zip code is “certainly information that pertains to or regards the cardholder” and is protected by the statute. Although a zip code pertains to a group of individuals who all share the same five-digit number, the court said, it is part of an individual’s address and the legislature intended to protect all components of an address.

This interpretation most accurately reflects the “protective purpose” of the statute, the court said, and an opposite result would “vitiate” the effectiveness of the law. The court said its decision – despite prior contrary authority – did not violate the due process of Williams-Sonoma and that its interpretation should not be limited to prospective application. It remanded the case to the trial court for a determination of damages, noting that while the statute lays out a maximum penalty – $250 for the first violation and $1,000 for each subsequent violation – “the amount of the penalties awarded rests within the discretion of the trial court.”

To read the decision in Pineda v. Williams-Sonoma Stores, Inc., click here.

Why it matters: The decision will have a large impact on companies operating in California that have a practice of collecting consumers’ zip codes or other personal information. Those companies should be aware that the Court’s ruling that the statute may be applied retroactively may prompt additional litigation.