Canada: Focus on Privacy - Asking Customers for Personal I.D.

Last Updated: March 29 2006
Article by Anneli LeGault

Canadian Tire stores, and in fact Canadian retailers in general, lose significant amounts of money every year due to fraudulent returns of merchandise. For example, stolen goods may be returned, netting a 100% profit to the thief. Retailers have found that requesting personal information and proof of identity can help to reduce fraud. However, customers in British Columbia and Alberta seeking to return goods for a refund have filed complaints under the Personal Information Protection Acts of the two provinces concerning the amount of personal information collected during the refund transaction.

In British Columbia, a customer provided the sales receipt involved in the original purchase and was then asked for her name, telephone number and date of birth. She filed a complaint concerning the amount of personal information requested, although Canadian Tire did provide her with a refund.

The B.C. Information and Privacy Commissioner investigated the complaint and carefully reviewed the Canadian Tire store’s procedures. The Commissioner concluded that the Canadian Tire store provided notice of the purpose for its collection of personal information through the notice of collection posted at cashier stations, the written notice on the front and back of the sales receipt, through its privacy policy and through the oral notice that store employees gave to the customer when the return transaction was initiated. He found that the notice was just barely adequate, as he felt that identifying the purpose as "to prevent fraud" should actually be clarified further.

He also concluded that the personal information being required was necessary to conclude the transaction.

However, the Commissioner objected to the fact that the personal information was retained on the computer system indefinitely. While the personal information collected was not of a sensitive nature, there appeared to be no legal purpose to require indefinite retention. Customers were also told that the information may be used to contact them in case of an error in the refund and to inquire whether they have experienced any problems in relation to the refund. He did not find that the use of personal information for customer satisfaction followup was necessary for the supply of a product or service. He required Canadian Tire stores to make it clear that a customer is not required to provide personal information for the purpose of determining customer satisfaction. He also found that the store in some cases asked for photo identification to confirm identity but the store does not record the personal information from that identification. He required the retailer to destroy the personal information which has been collected as soon as it is reasonable to conclude that the purpose for which it was collected is no longer being served. He also required the store to prepare a retention schedule respecting personal information.

Two Canadian Tire stores in Alberta also received complaints about their refund practices. However, these investigations focused on the collection of drivers’ licence numbers. The practices of the two stores varied. The Calgary store asked for name, address and telephone number and asked the individual to confirm identity with photo identification. This personal information was retained in some cases. The practice at the Sherwood Park store was to collect name, address and telephone number from the customer and then to ask for picture identification such as a driver’s licence to confirm identity. However, this information was not stored in the store’s system.

Both stores agreed that simply authenticating and confirming the identity of the individual returning goods is sufficient for their loss prevention purposes. The Office of the Alberta Information and Privacy Commissioner concluded that this was a concession by the stores that collection and retention of drivers’ licence numbers is not necessary for the business purpose of deterring fraud. The Office concluded that the Calgary store had contravened the Personal Information Protection Act by requiring customers to consent to collection of personal information that was not necessary.

The Calgary store agreed to stop collecting and recording drivers’ licence numbers. The store agreed to record only that the name and address had been confirmed with photo ID, recording the type of photo ID reviewed by the staff but not recording the driver’s licence or other particulars of the ID itself.


A lot of practices we follow are simply followed for historical reasons. Go back and examine the type of personal data your company requests from consumers, suppliers, customers and clients. Examine the purpose for the collection and then re-evaluate the type of data being collected. Is it directly linked to the goal and is it truly necessary? Employees and members of the public are understandably far more sensitive than previously about protecting their personal information.

Storing Data In The United States

The Office of the Privacy Commissioner of Canada has received many complaints from Canadians concerned that their personal information resides on servers in the United States or is otherwise stored in that country. Due to the terms of the U.S. PATRIOT Act, this means that the personal information is subject to access by the FBI under the Foreign Intelligence Surveillance Act. The FISA Court can issue secret orders allowing disclosure of personal data to the FBI. The organization subject to the order is prohibited from disclosing that the FBI has sought or obtained the personal information.

The Privacy Commissioner has issued its first ruling on the U.S. PATRIOT Act: Case Summary #313.

Since 1994, CIBC has had a contract with a U.S. based data processing company, which provides services relating to authorization of payment transactions, risk assessment and fraud monitoring. All of the personal information provided by VISA credit card holders is entered into the U.S. company’s software system.

In late 2004, CIBC VISA customers received a Notice of Change to their CIBC VISA cardholder agreement. The agreement notifies the cardholders that their information may be processed and stored in the United States, and U.S. governments, courts, law enforcement or regulatory agencies may be able to obtain disclosure of the cardholders’ information through the laws of the United States. The agreement goes on to state:

"I acknowledge and agree that the…paragraphs above constitute prior written notice to me of, and my consent to the collection, use and disclosure of my personal information as described above."

There was no right to opt out provided to cardholders.

The Privacy Commissioner’s office reviewed the Bank’s contract with the U.S. based third party.

The agreement set out detailed requirements regarding the safeguarding, confidentiality and security of customer account information. The contract affirmed that the Bank owned the data that is processed by the service provider, that the service provider is to maintain safeguards to protect that data and that the Bank retains a right of access and audit. The third party service provider’s security policy included administrative, technical and physical protections to safeguard against unauthorized use, modification, copying, access or other unauthorized processing of the data. All information and data transmitted between the Bank and the service provider was encrypted and transmitted through a dedicated transmission line.

The Privacy Commissioner did not find any of the complaints to be founded. The Privacy Commissioner concluded:

  • A Canadian organization that outsources the processing of personal information to a U.S. company cannot prevent its customers’ personal information from being lawfully accessed by U.S. authorities.
  • At a minimum, a Canadian company that outsources information processing to the United States should notify its customers that the information may be available to the U.S. government or its agencies. The Canadian organization must have provisions in place to ensure a level of protection of personal data that is comparable to the level of protection required by PIPEDA.
  • The Bank had complied with the legislation by informing its customers about its policies and practices and by entering into a contract with the U.S. company that provides guarantees of confidentiality and security of personal information.
  • Companies are not required to provide customers with a choice of opting out where the third party service provider is offering services directly related to the primary purposes for which the personal information was collected.

In this case, CIBC had used contractual means to provide a comparable level of protection while the information was being processed by a third party. As well, CIBC had made readily available to customers specificinformation about its policies and practices relating to the management of personal information. The Privacy Commissioner’s office has made it clear that it cannot prevent outsourcing to the United States where the principles of PIPEDA are met. However, great care needs to be taken by any organization storing data in the United States, whether with an outsource partner or affiliate. It also appears from this ruling that where the services being provided by the American company are not directly related to the primary purpose for which the information was originally collected, the Canadian organization will probably have a duty to allow customers to opt out of the arrangement.

Further rulings on point are pending at the Office of the Privacy Commissioner. We will report on further developments in this area as they arise. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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