Every day, hundreds of thousands of consumers use credit cards to pay for goods and services in California. In connection with these transactions, it has become almost routine for retailers to ask consumers to provide their ZIP code. A recent California Supreme Court decision, however, Pineda v. Williams-Sonoma, has captured the attention of the California business community by calling this practice into question.
In Pineda, decided on February 10, 2011, a unanimous California Supreme Court held that collecting ZIP codes from cardholders during a credit card transaction violates California’s Song-Beverly Credit Card Act of 1971 (“the Credit Card Act”). The Credit Card Act prohibits companies from requesting and recording “personal identification information” during a credit card transaction, with certain limited exceptions. The Supreme Court’s ruling broadly impacts all businesses in California that accept credit cards and request personal identification information during a consumer transaction. Nonetheless, the Court’s sweeping announcement is narrowed by four statutory exceptions, which were not at issue in Pineda. This alert summarizes the Pineda opinion and analyzes some of the open questions surrounding credit card transactions given the Credit Card Act’s statutory exceptions.