A recent spate of lawsuits filed in the U.S. has questioned the
practice of retailers collecting zip codes in order to complete
credit card transactions. The scenario is familiar: while a
customer is paying for a purchase with a credit card, the cashier
asks the customer for his or her zip code. The customer provides
the information thinking it is somehow necessary to complete the
transaction. The cashier types the zip code into the cash register
and the transaction is completed seconds later without further
mention of the zip code.
In the class action lawsuit Pineda v. Williams-Sonoma Stores
Inc. 51 Cal. 4th 524 (judgment issued February 10, 2011)
(Pineda), the Supreme Court of California held that this practice
was a violation of California's Song-Beverly Credit Card
Act of 1971 (Act), which in section 1747.08 prevents retail
merchants from requesting or requiring personal identification
information from cardholders and recording it upon the credit card
transaction form or otherwise. The Court reasoned that the zip code
was the customer's personal information, that collecting it was
unnecessary to complete the transaction and that the collection was
contrary to the Act's intent of providing robust consumer
protections by prohibiting retailers from soliciting and recording
information about the cardholder that is unnecessary to the credit
In the wake of Pineda, multiple class actions and
lawsuits against the practice have been filed in California and
elsewhere in the U.S. Could the practice of retailers collecting
postal codes (the Canadian equivalent of zip codes) at the point of
sale also be vulnerable to legal challenge in Canada? Under
Canada's federal Personal Information Protection and
Electronic Documents Act, S.C. 2000, c. 5 (PIPEDA), "[a]n
organization shall not, as a condition of the supply of a product
or service, require an individual to consent to the collection,
use, or disclosure of information beyond that required to fulfil
the explicitly specified, and legitimate purposes" (Schedule
1, principle 4.3.3). PIPEDA applies to the collection, use and
disclosure of personal information of customers in the private
sector (i) by federal works, undertakings or businesses throughout
Canada, (ii) across provincial borders or internationally, and
(iii) by private sector organizations in those provinces which do
not have substantially similar private sector privacy legislation,
which are all provinces except B.C., Alberta and Quebec. However,
similar prohibitions as PIPEDA's also exist in the provincial
private sector privacy laws of B.C., Alberta and Quebec.
The analysis under the Canadian legislation would be the same as
in Pineda: the collection of the postal code would be
vulnerable to challenge unless the retailer could prove that the
collection of the postal code is reasonable and necessary to
complete the transaction. In Canada, most likely the challenge
would be made to one of the federal or provincial Privacy
Commissioners, as opposed to being made a lawsuit in the courts,
for breach of one of the Canadian privacy statutes. However, the
common law of privacy in Canada is also evolving, with the Ontario
Court of Appeal this year in Jones v. Tsige confirming a
common law action for breach of privacy for deliberate and
significant invasions of personal privacy. How far Jones v.
Tsige can be extended remains to be seen. Unnecessary or
over-collection of personal information by retailers and other
business, nonetheless, is likely to draw the ire of certain
consumers and, backed by Canadian privacy laws, may result in
complaints through one forum or the other.
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The recent decision of the Ontario Court of Appeal in BMW Financial Services Canada, a Division of BMW Canada Inc. v. McLean provides some useful insight into the relationship between automobile dealers and the financing arms of the manufacturers for whom those dealers are franchisees.
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