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.
“We care a great deal about our customers’ privacy and take many measures to safeguard any private information they voluntarily provide us,” said Nordstrom spokeswoman Tara Darrow in an emailed statement.
A spokesman for Macy’s declined to comment on the case or the company’s policy about requesting zip codes from customers. Representatives of the other retailers had no immediate comment on the California Supreme Court ruling or the following lawsuits. The lawsuits have been filed in superior courts in San Diego County and Contra Costa County.
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.
“Plaintiff’s lawyers will now be lining up to file cases against every major retailer,” said Thomas Brown, a partner at law firm O’Melveny & Myers LLP in San Francisco.
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.
Merchants can be eligible to pay lower processing fees from credit-card networks if they ask customers for a zip code. Visa Inc. offers a fraud-prevention service to merchants that can result in lower rates on certain types of transactions if the customer provides a zip code.
It isn’t clear whether retailers will change their policies in California or across the country as a result of the ruling. In a note to clients issued Friday, law firm Ballard Spahr LLP said the decision could trigger litigation in other states that have credit-card laws, including Kansas, Rhode Island and Oregon.
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