California courts have been inundated with consumer class actions filed after a February California Supreme Court decision which held that the state's Song-Beverly credit card statute prohibits retailers from requesting a customer's ZIP code in connection with credit card transactions. Pineda v. Williams-Sonoma Stores, Inc., 51 Cal. 4th 524 (2011) has been widely criticized and was contrary to previous appellate court rulings which stated that ZIP codes were not "personal identification information" under the statute. Song-Beverly provides for a civil penalty of up to $250 for a first violation and penalties of up to $1,000 for each subsequent violation. This, along with the retroactive effect of Pineda, means that retailers in California who had engaged in this practice in the last year (the statute has a one-year limitation period) suddenly became attractive targets for the plaintiffs' class action bar.
It has been reported that, to date, over 100 class actions have been filed since Pineda, alleging that retailers wrongfully requested customers' ZIP codes. Not surprisingly, this has included retailers who, like Williams-Sonoma, allegedly had their sales personnel ask credit card paying customers for their ZIP codes while at the checkout. Plaintiffs' lawyers, however, are seeking to exploit Pineda's broad holding by challenging practices believed to be beyond the reach of Song-Beverly. One class action has been filed against California gas stations that simply had customers type in their ZIP codes when swiping their credit cards to pay at the pump, despite the fact that requesting personal identification information for identity verification purposes that is not otherwise retained by the retailer is permitted under the statute.
One other key exemption particularly of note to online retailers, is that personal identification information may be collected in a credit card transaction when it is needed for the delivery of merchandise. A federal district court in 2009 held that online transactions were entirely beyond the scope of Song-Beverly. However, online transactions were not discussed in Pineda.
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