Retailers Face Lawsuits Over ZIP Code Collecting
A recent ruling by the California Supreme Court has unleashed a rash of lawsuits against big retailers that ask their customers to provide zip codes when making purchases with a credit card.
Lawyers representing store customers filed lawsuits last week against Best Buy Co., Coach Inc., Nordstrom Inc. and Macy's Inc., among other retailers.
The lawsuits come on the heels of a Feb. 10 ruling by California's highest court that found Williams-Sonoma Inc. violated the state's credit-card law by asking a customer for her zip code when making a purchase in 2008. The customer sued the home-goods retailer, contending that it used the zip code to determine her address, which is now contained in the company's database.
Stores regularly mine customer data as a way to measure buying habits and target promotions. They also sometimes sell the information to other companies.
Companies that violate the state law face fines of $250 for the first violation and as much as $1,000 for each subsequent violation. Plaintiffs in the cases are seeking those penalty fees.
The case was based on the state's 1971 credit-card law that prohibits merchants from requesting or requiring a cardholder's "personal identification information" as a condition of accepting the card for payment. The court determined that a zip code qualifies as that type of information because it is part of the cardholder's address.
Retailers routinely ask customers for their zip codes as a security measure to guard against fraudulent transactions. The practice is particularly common at gas stations, where customers often must enter their zip codes when filling up their own tanks.
After handing down its ruling, the California Supreme Court sent the Williams-Sonoma case back to a lower court, which will rule on a motion for class-action status. The lower court will also determine potential civil penalties in the case.
More information on lawsuits over zip code question can be found here and here.
